Association Reserve Studies


Reserve Studies

A reserve study is broken down into two basic parts, the needs analysis and the financial analysis. All studies start with input from the association in which we detail their fiduciary responsibilities and compliance of State of Florida statutes.

The needs analysis is completed during the field inspection of the association property and provides for the identification and quantification of the components to be reserved for such as roofing, painting, interiors, elevators, restoration, mechanical systems, paving, and recreation facilities. During the inspection we estimate the useful lives and the remaining useful lives for each of the components in all of the reserve categories. We complete a pricing procedure either by unit cost or cost in place to determine estimated replacement cost for each component. We use all this information to establish the ideal 100% financial need of each component in each category.

The financial analysis is the second part of the reserve study. We analyze the differences between the financial needs established during the needs analysis and the current funds available to determine future funding requirements. Calculations are completed for each reserve category and each component within that category. A cash flow procedure for each category details the anticipated reserve repair or replacement along with the estimated replacement cost amount. The report lists the anticipated repairs and replacements over the next twenty years along with the total anticipated annual reserve expenditure. The annual cash balances increase with the Normal Annual Reserve Contribution dollars as established in the needs analysis and are supplemented by additional funding dollars if needed in order to maintain a positive yearly cash flow.

We use threshold funding methodology with a twenty year cash flow analysis to determine future funding. This method uses all funds in each reserve category making all funds available at any time for any of the individual components in that individual reserve category. We find this method allows some flexibility for funding future unanticipated reserve expenditures.

Some associations use the Restricted Reserve Category funding as outlined above but there is an alternative method which was approved in Florida where reserve funds are pooled together. This method is a non-restrictive reserve fund which allows all funds to be used for any category or any component within a category for any reason within the overall reserve categories. This method to Pool Reserve Funds provides the greatest flexibility and can reduce the overall annual reserve financial need and yearly contributions.

Our reports meet all State of Florida statute requirements in an easily understood format. We recommend reserve studies be updated annually, with a physical field inspection of all of the components every third year, in order to keep pace with inflation and reserve expenditures that have taken place.