Figure 2: Creating Funding Plans — A living document allows boards to create funding plans that are responsive to changes like assessment increases, extending useful life of components, or accelerating capital improvement projects.
efforts that extend the useful life of your components. Such efforts include implementing regular inspections, preventive maintenance plans, and adding project phases to your capital improvements schedule. These efforts, when reflected in a living document, provide a better understanding of the current state of your components, thus buying time for the association to save for capital projects. (See Figure 1)
Preventing Hidden Surprises and Potential Liability
A reserve study, according to CAI standards, is a budget and capital planning tool designed to aid in planning for the forthcoming fiscal year. It addresses current conditions, historical projects, near-future projects, current financial details, current evaluations from professionals, etc., and then models the current snapshot in time over 30 years. Keep in mind, multiple unforeseen factors can quickly positively or negatively impact this information.
Rising labor costs, supply chain shortages, and ballooning inflation can be a recipe for financial disaster.
When components break down before your association is prepared to replace them, the surprise can be costly. Add to that the challenges communities face today, such as rising labor costs, supply chain shortages, and ballooning
inflation, and you have a recipe for financial disaster. Only proper planning with real-time updates to the state of your components can prevent hidden surprises that may lead to unpopular consequences such as high interest loans, special assessments, insurance loss, and unexpected fee increases.
Ignoring the breakdown of components is not an option.
Your community’s aging infrastructure will not go away and ignoring the breakdown of components is not an option. To protect your association from liability as a result of deferred maintenance or mismanaged funds, directors must perform their fiduciary duty and prepare for component replacements in a timely manner, and in a way that does not negatively impact the association or its membership. (See Figure 2)
Making Better Decisions Backed by Data
Board members are made up of everyday people; school teachers, office workers, nurses. Many board volunteers are not people with experience running multimillion dollar corporations. Yet, that is exactly what they are expected to do as a board member for their community association.
It’s no wonder that when confronted with major decisions that will directly impact the members of the association,
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