That experience generally benefits the association in several ways; the reserve pro-fessional has more experience than others in the reserve study process, is less likely to overlook any significant components, is generally better able to evaluate condi-tion and obtain objective pricing for components. The result for the association can be a more complete and more accurate reserve study.
The Community Associations Institute has developed national reserve study stand-ards that are applicable to all individuals holding the RS credential. Those standards provide for three different levels of service; Level 1 – Full Reserve Study, Level 2 – Update of Reserve Study with On-Site review, and Level 3 – Update of Reserve Study without an On-Site Review.
Level 1 – Full Reserve Study
The reserve professional performs an on-site visual observation, obtaining or veri-fying measurements and counts of common area components. This also includes an evaluation of condition and generally a photo inventory of most compo-nents. This data is then compiled into the reserve study report. The five tasks inte-gral to this service level are: Component Inventory Condition Assessment (based upon on-site visual observations) Life and Valuation Estimates Fund Status Funding Plan
Level 2 – Update of Reserve Study with On-Site Review
The level 2 site inspection is less comprehensive than a level 1 site inspection in that the reserve professional does not obtain or verify measurements and counts unless it appears that there have been changes since the prior study or mistakes in the prior study. The reserve professional does evaluate condition and update the photo inven-tory where necessary. The data is then compiled into the reserve study report. The five tasks integral to this service level are: Component Inventory Condition Assessment (based upon on-site visual observations) Life and Valuation Estimates Fund Status Funding Plan
Level 3 – Update of Reserve Study without an On-Site Review
An annual update to the reserve study is simply good planning. This allows you to “refresh” the funding plan and account for minor variations form the original funding plan. Since no site observation is performed, it is necessary to inquire about expenditures made, changes in pricing of replacement costs, and variations in funding from the original plan. This is a valuable planning tool at a very reasonable cost when compared to the cost of a full study. However, it must be supplemented by periodic on-site visual observations. The three tasks integral to this service level are: Life and Valuation Estimates Fund Status Funding Plan
The different levels of service are based upon the fact that there are two separate parts of a reserve study; the physi-cal analysis and the financial analysis. The physical analysis is described above. The financial analysis consists of the report generated.
The contents of the reserve study report should generally include: A descriptive summary of the association, including type and physical description of the association, number of units, and a snapshot of the financial condition of the reserve fund The projected reserve beginning balance, recommended reserve contributions, projected reserve expenses, and the projected ending reserve fund balance for a projection period of 20 – 30 years A listing of the component inventory with quantity or identifying descriptions, useful and remaining useful life, and current or future replacement cost A description of the methods and economic factors considered calculating the fund status and the funding plan Sources of component repair or replacement cost estimates A description of the level of service by which the reserve study was prepared Identification of the fiscal year and projection period for which the reserve study was prepared
Now that you know the basics, get your reserve study prepared or updated in time for your budget cycle.
