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Reserve Fund Analysis
A study is only the first step. Ongoing analysis keeps your forecast accurate and catches problems before they become special assessments.
Why analyze your reserve fund study?
Traditionally, reserve fund studies are static documents created to give the best picture of expenditures over a set forecast. As a study ages, the projected forecast begins to deviate from the reserve's actual financials. That deviation is caused by — but not limited to:
Unexpected expenditures
Unaccounted-for expenditures can leave the reserve underfunded, even when the work genuinely needed doing.
Changes to contributions
The study recommends annual contributions, but those may be ignored for a number of reasons.
Incorrect cost estimates
When a component is replaced, unforeseen damage (e.g. water damage from a leaking roof) can increase the cost.
Incorrect modeling
Interest and inflation rates have a large effect on projections; small early discrepancies compound into big issues.
There are no provincial rules dictating when a forecast must be recalculated, but it's in owners' best interest to keep it as accurate as possible. When analyzing a study, you generally want to confirm that contributions meet or exceed the recommended amount, expenditures are at or below projections, any deferred expenditures show up as a surplus, and inflation and returns are in line with what was projected.
The importance of analysis
An accurate study is only the first step in protecting your most important asset. Constant analysis is the second — it keeps you on top of the reserve's financials and reveals the impact of real-life changes a static study can't predict.
Asset protection
Account for any deviation from the original plan so adequate capital is available, reducing or eliminating the need for special assessments.
Peace of mind
Ongoing analysis reduces special-assessment risk and makes the property more attractive when selling.
Smarter decisions
A three-line comparison in the AGM notes isn't enough to truly understand the reserve. Taking time to understand the numbers leads to better decisions — and is evidence to buyers that the property is in control of its financial future.
Getting the most from your analysis
If time is going to be spent analyzing the reserve, target the right indicators and consider the property's future goals. The board should be able to add future expenditures they'd like included — with the understanding that major changes can create cash-flow issues. A financial analysis then projects the future closing balance, and an updated contribution schedule may be required. We recommend providing multiple contribution schedules so the property understands what's required and how to get there. The key questions are always: where are you, where are you going, and how will you get there?
How Reserve Plus saves you money
Corporations and stratas use Reserve Plus to analyze the study after it's generated, through myRPlanner (powered by StelorPM). myRPlanner supports analysis through two products:
5-Year Plan
Adjust the expected cost and replacement/maintenance year of expenditures. Using the current balance and the study's contribution schedule, myRPlanner updates the forecast. If deficiencies appear, two recommended funding scenarios help the property avoid a special assessment. Update it annually to continually refine the forecast.
Annual Report
Track actual expenditures and financials, and compare the original forecast with an adjusted one based on real inputs. Share it with owners at the AGM, and use the special-assessment risk score to know whether to stay the course or revisit the 5-year plan. myRPlanner also hosts key documents, lets you request quotations for upcoming work, and provides ongoing support interpreting your results.
Keep your study accurate, year over year.
Ask us how reserve fund analysis works with myRPlanner.
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