Preparing the annual budget and overseeing association finances are perhaps the most important responsibilities of board members. The annual operating and reserve budgets reflect the planning and goals of the association and set the level and quality of service for all of the association’s activities.

What is a Reserve Study?

A Reserve Study is a financial planning tool that anticipates major capital asset replacement expenses.  By preparing a reserve study for your organization, we can help your organization maintain its long-term financial health and provide:

• An inventory of components and remaining useful life

• An estimate of current and future replacement cost

• A funding strategy designed to cover future expenditures

We provide a two-part study that examines both the physical and the financial. In our physical analysis we identify the capital assets of the property and compute their estimated life expectancy and future cost to replace. The financial analysis is a study that calculates reserve funding and contributions.

Reserve Components

These are major expenses that occur other than annually, and which must be budgeted for in advance in order to ensure the availability of the necessary funds in time for their use. Reserve expenses are reasonably predictable both in terms of frequency and cost. However, they may include significant assets that have an indeterminable but potential liability that may be demonstrated as a likely occurrence. They are expenses that, when incurred, would have a significant effect on the smooth operation of the budgetary process from one year to the next, if they were not reserved for in advance.

Funding Strategies

Your LCAM Resources reserve study contains a 30-Year cash flow funding plan as well as a straight-line reserve schedule.  The cash flow plan utilizes the pooling method and combines all reserve funds into a single general account, taking into account inflation and interest over the next thirty years.  The straight-line method is a traditional approach based on straight-line depreciation and can be used for budgets with restricted funds.

Our associates would be happy to consult with your association to discuss your funding goals and select a funding plan that is right for you.  You may request a free proposal at any time by selecting the button to the left.

We invite you to discover the LCAM Resources difference.