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Using A Reserve Study As A Budget Tool

BudgetingWith the budget season fast approaching, it’s time to seriously consider your association’s near and long-term financial needs, goals, and ultimately, its future. Capital planning is no easy feat, but having a continuous blueprint for the future is the key to a thriving community. 

The primary purpose of a reserve study is to do just this. By conveying your community’s capital planning needs to current and future boards, reserve studies support the Board’s fiduciary responsibility to maintain and enhance the community’s value. Following a reserve study’s recommendations helps minimize the risk of additional assessments and bank loans to complete necessary capital projects for community components. 

As recent economic events have and continue to force community leaders to focus on immediate business needs, there is an inherent risk of overlooking longer-term activities such as managing capital projects and reserve planning. If neglected for an extended period, failure to address critical projects and insufficient reserves can be catastrophic to a community’s long-term health. 

A current reserve study provides expert guidance on prioritizing capital projects and ensures community leaders allocate reserve funds for those of utmost importance, which is critical in today’s economic climate. When conducted by a professional firm, a reserve study will account for environmental conditions that affect component useful lives and also utilize current local project costs to ensure the most realistic projection of near-term expenditures. Accuracy of expenditures is critical to ensuring that the supporting funding plan backs your long-term financial needs, and this accuracy is increasingly important during budgeting season. 

Associations suffering from inadequate reserve funds and those struggling to prioritize capital projects will benefit most from a current reserve study. The expertise and guidance received offer immediate support and alleviate many challenges associated with evaluating common property repair and replacement. There is always an element of unpredictability when managing a community, and having a current reserve study and adequately funded reserves helps associations weather increasingly challenging times. 

When it comes to budgeting for your community association, you never have to go it alone. With an up-to-date reserve study in hand, you’ll know exactly when to expect major capital projects, and how best to save reserve funds to complete them in a timely manner without deferring necessary maintenance. Put simply, reserve studies simplify budget season and budgeting in general for both the near and long-term future of your community. If your community needs a little extra support this budgeting season, don’t delay commissioning a reserve study!

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