The management of condominium owners’ associations and property owners’ associations requires expertise in the development of a maintenance and reserve fund which is of sufficient size to cover the anticipated repairs/replacements of various system and components during the next 30 years. Where the association is self-managed or has a third party management company, the capital reserve study is designed to satisfy the requirements of the audit guidelines for Common Interest Realty Associations developed by the American Institute of Certified Public Accountants, May 1992. Since 2003, the Dormady Consulting Group, Inc. has completed over 120 reserve study projects for condominium owners and property owners associations, on projects as small as a single building with four units to projects with over 50 buildings and over 750 units.
A Reserve Study is based on an on-site evaluation of the structures, systems and amenities of the building(s) or property, a review of available plans provided by the client, review of the current association budget and discussions with the property manager, board members and property owners. The information collected is entered into a proprietary computer program to determine the proper amount of reserves that should be collected and maintained by the association during the 30-year evaluation period to address the anticipated capital expenses. As part of the written report on the property, the following reserve study outputs are provided in conjunction with the report:
An input table that defines the criteria used for the financial analysis, including the number of units, the assumed inflation rate and rate of return on deposited reserve funds.
A table that lists anticipated replacement/repair items complete with estimated remaining life expectancies, projected repair/replacement costs, frequency (in years) when these items require repair/replacement, and a projection, based on this frequency, of the year in which these items will require repair/replacement.
A table that shows the annual expense listing per year with subtotals of anticipated repair/replacement costs for each of the 30 years. The table also presents these costs as adjusted for an assumed rate of inflation.
A table and graph that represent end of year cash flow balances versus capital expenditures based on the required reserve fund contributions.