Created by Joel L Tax - Professional Reserve Analyst - 06/11/2016
RESERVE STUDY DEFINITIONS
FULLY FUNDED BALANCE
The fully funded balance represents the ideal amount in the reserve account at
a particular point in time. Having a reserve account balance that is the same as
the fully funded balance means the community is on track to cover their future
obligations for replacement expenses.
**The fully funded balance is NOT the total cost to replace the components.
Percent Funded is a measurement of a community's financial position
versus how much it should ideal have at a particular point in time with
relation to the reserve account balance. 100% percent funded means the
community is on track to meet future obligations; anything less indicates a
possible shortfall. The lower the percent funded calculation the higher the
risk for reliance on loans or special assessments to meet future obligations.
The useful life pertains to the life expectancy of a component in the reserve
study. Each component is assigned a useful life which is obtained from
vendors, cost manuals, in house records and historical records of the
community. Useful life expectancies are projections into the future which may
or may not be accurate to any specific community. These useful life
projections are averages which will be updated to reflect actual site
conditions in updates to the study.
PERCENT FUNDED LEVELS
70-100% - Good funding level with low risk
30-70% - Fair funding level with moderate risk
0-30% - Poor funding level with high risk
Additional resources: National Reserve Study Standards
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