THE RESERVE STUDY Reserve studies are typically prepared by a Professional Engineer (P.E.) or Reserve Specialist (R.S.). The process entails a site visit to examine/evaluate common components and a financial plan to repair/replace components as they wear. The study report is typically lengthy and detailed. I t needs to be detailed enough to provide information to the trustee boards, accountants, property managers, and attorneys. However, it must also be understandable for homeowners. RESERVE STUDY KEY ATTRIBUTES A comprehensive reserve study should provide four key attributes: 1 Reserve Fund Budget The reserve budget, also described as a funding plan, is a list of the recommended annual contributions to the association reserve fund and annual expenditures to cover reserve components over the course of the 30year study. Typically, the recommended contribution increases at a rate approximately equal to the anticipated rate of inflation over the course of the study. More than one funding plan option may be presented. Option differences should be clearly understood by the various association constituencies before being implemented. Funding goals can vary from fully funded (most conservative) to baseline (minimum cash flow to keep the fund above zero) funding. Associations typically target funding somewhere in between these extremes. Currently, there are no specific statutory funding requirements in New England states. 2 Reserve Fund Percent Funded The reserve fund percent funded is a measure of the health of the association's reserve fund. Expressed as a percentage, it is calculated at the beginning of the fiscal year and is the ratio of the actual reserve balance to the calculated theoretical fully-funded reserve balance. One-hundred-percent funded means the association has a proportionally correct balance to date for common components maintained. FIGURE 1: Sample Community Association Projections 42 CONDOMEDIA