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But how does a board efficiently and effectively navigate the long-term success of their association when replacement needs and reserve contributions are ever changing? The answer..…a dynamic reserve study that is easy-to-use and, ideally, cloud-based.


Although a long-term roadmap, a reserve study is a snapshot in time. It predicts replacement schedules based on conditions observed during the site inspection. Recommended reserve contributions are established to offset the pooled expenditures for each year. When a reserve study recommendation is not followed, a board needs to be able to weigh the result of not following such recommendations to ensure the decision made is in the best interest of the association.


Recommended Reserve Funding Table


One might suggest that not following the reserve study to a “T” is detrimental to a board’s ability to fulfill its fiduciary responsibility. In reality, working with a reserve study that can be changed over time enhances a board’s ability to successfully fulfill its fiduciary obligations. Having a dynamic reserve study allows one to actively manage a replacement schedule and annual reserve contributions over time. This is most easily accomplished by conducting ‘what if’ scenarios with dynamic, cloud-based applications.


There are many reasons why a board may alter the reserve study. A few examples include: • Deferring replacement as the result of a component being in acceptable condition • Accelerating replacement for the purpose of improving curb appeal • Phasing replacement to spread total cost across multiple years • Adding or deleting components to the component inventory of reserve items • Increasing or decreasing reserve contributions due to economic conditions


All of the above examples and more can be built into a dynamic reserve study, allowing the board to create alternate scenarios and ensuring they make informed decisions based on their association’s long-term needs. Another benefit of cloud-based applications is that board members and managers can easily share their ‘what if’ scenarios with each other. Thus, any changes can be made in ‘real time’ and more efficiently distributed than communicating changes via email with key stakeholders.


22 | COMMON INTEREST®


• Winter 2018 • A Publication of CAI-Illinois Chapter


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