FAQ's 2 Barrera & Company

At Barrera and Company, in each Reserve Study, we provide three different funding options, which allows you the option of determining which funding option is appropriate for your Association:
Funding Option 1: Current Funding
This option projects the Reserve Fund over the next 30 years based on a funding level equal to the Association’s current assessments for the reserve assets. Using the current annual funding level, it is then determined if this method will meet all projected reserve disbursement requirements as they occur over the next 30 year period, and if the current funding method will ever reach the 100% funded level. If one of these requirements is not met, this option should be reviewed annually and adjusted accordingly to ensure all future funding requirements will be met.
Funding Option 2: 100% Funding
This option projects the Annual Funding for the Accumulated Reserve and is a method for funding the current annual requirement while allocating any existing deficit over the remaining lives of each of the individual components. This funding option is considered ideal, compensating for any past funding deficiencies, and providing the full replacement cost of each component at the end of its projected useful life.
Funding Option 3: Minimum Funding
This option projects the lowest annual funding feasible over the next 30 years, which will meet all the reserve requirements as they occur. This funding requirement is calculated by achieving the minimum annual contribution, while ensuring the ending reserve balance for each year (1 through 30) must be greater than or equal to five percent (5%) of the current of the current replacement cost. The calculation takes into consideration only the immediate total annual requirements, as opposed to projected requirements by component in Option 2. Due to this fact, annual allocations may fluctuate widely from year to year. This option does not provide any contingency for unanticipated emergency expenditures. If implemented, funding and required disbursements should be reviewed on an annual basis and adjusted as required to ensure current and future-funding requirements will be met. [back to the top]

Are there any legal requirements for Reserve Studies?

Not every state has a statute pertaining to reserve funds, and of those states, which do have statutes, the law varies from state to state. The states that do have guidelines for maintaining a reserve fund include, Alaska, California, Florida, Hawaii, Illinois, Indiana, Massachusetts, Michigan, Minnesota, and Oregon. To find the statute specific to your state, please click here. For further questions, call 800-543-8670.[back to the top]

What are the minimum standards for a Reserve Study?

The Community Association Institute (click here), publishes the National Reserve Study Standards, which lists the minimum content required in an adequate Reserve Study. This includes:

A physical description of the property, the number of units involved, and the current reserve fund budget.
The projection of the reserve fund starting balance, projected reserve expenses, recommended contributions to the reserve fund, and the projected ending reserve fund balance for a minimum of 20 years.
A component sheet, listing each component individually, the quantity of each component with any necessary descriptions, the useful life, the remaining life, and the current replacement cost of the component.
A description describing the methodology of the various funding options and how each of these funding options is achieved.
What sources are used to estimate the replacement cost of each component.
The fiscal year for which the Reserve Study is prepared.
A description of the level of service for which the Reserve Study is prepared. [back to the top]