Glossary Barrera & Company, Reserve Study

Glossary: Page 1

Cash Flow Method	Full Funding	Remaining Useful Life
Component	Fully Funded Balance	Replacement Cost
Component Inventory	Fund Status	Reserve Balance
Component Method	Funding Goals	Reserve Provider
Condition Assessment	Funding Plan	Reserve Study
Current Replacement Cost	Funding Principle	Responsible Charge
Deficit	Life and Valuation Estimates	Special Assessment
Effective Age	Percent Funded	Surplus
Financial Analysis	Physical Analysis	Useful Life

Cash Flow Method

A method of developing a Reserve Funding Plan where contributions to the Reserve fund are designed to offset the variable annual expenditures from the Reserve fund. Different Reserve Funding Plans are tested against the anticipated schedule of Reserve expenses until the desired Funding Goal is achieved. [back to the top]

Component

The individual line items in the Reserve Study, developed or updated in the Physical Analysis. These elements form the building blocks for the Reserve Study. Components typically are: 1) Association responsibility 2) with limited Useful Life expectancies 3) predictable Remaining Useful Life expectancies
4) above a minimum threshold cost 5) as required by local codes. [back to the top]

Component Inventory

The task of selecting and quantifying Reserve Components. This task can be accomplished through on-site visual observations, review of association design and organizational documents, a review of established association precedents, and discussion with appropriate association representative(s).[back to the top]

Component Method

A method of developing a Reserve Funding Plan where the total contribution is based on the sum of contributions for individual components. See "Cash Flow Method." [back to the top]

Condition Assessment

The task of evaluating the current condition of the component based on observed or reported characteristics. [back to the top]

Current Replacement Cost

See "Replacement Cost." [back to the top]

Deficit

An actual (or projected) Reserve Balance less than the Fully Funded Balance. The opposite would be a surplus. [back to the top]

Effective Age

The difference between Useful Life and Remaining Useful Life. Not always equivalent to chronological age, since some components age irregularly. Used primarily in computations. [back to the top]

Financial Analysis

The portion of a Reserve Study where current status of the Reserves (measured as cash or Percent Funded) and a recommended Reserve contribution rate (Reserve Funding Plan) are derived, and the projected Reserve income and expense over time is presented. The Financial Analysis is one of the two parts of a Reserve Study. [back to the top]