Frost, Christenson & Associates

ENGINEERING PLANNING & LANDSCAPE ARCHITECTURE COMMUNITY ASSOCIATION SERVICES Pavement Maintenance ENVIRONMENTAL SERVICES DIRECTIONS

Reserve Analysis Reserve Studies Reserves provide a Community Association with the necessary financial resources to ensure that the community can be maintained to retain property values. Adequately funded Reserves allows a Community Association to: Replace aged common elements on a timely basis without concern over the source of the necessary funds. Avoid the necessity for special assessments to finance the cost of common element replacement, which can cause serious financial hardship on the Association members. Be confident that resales are not impacted by a lending institution determining that underfunded Reserves will place potential buyers in financial risk. Finally, adequately funded Reserves provides an Association with a tangible asset, and is judged to be an indicator of a Community Association's financial condition. With the maturing of Community Associations, the adequacy of the Reserve Fund has become as important to a prospective buyer as the physical condition of the dwelling. Preparation of a Reserve Study is unique to each Community Association. At a minimum, it requires an inventory of the items to be Reserved (Component Inventory), an assessment of their physical conditions, an analysis of the replacement cost, and the determination of the Annual Funded Amount. The frequency of conducting a Reserve Analysis differs from community to community, but is frequently dependent on the age of the community. Initially, the analysis can be conducted every three years. As the community ages, however, Frost, Christenson and Associates recommends more frequent analysis (preparation of a Reserve Update). Older communities should consider an inspection of the common elements, by a qualified professional, on an annual basis. Historically, only a few states established, by law, requirements for Reserves. Elsewhere, the content of a Reserve Study and Report were established by the Reserve Professional. To address this issue, and establish some uniformity in the procedures and content, the Community Association Institute has recently adopted Reserve Standards CAI Initiates RESERVE SPECIALIST Designation In 1998, the Community Association Institute adopted National Reserve Standards. These standards were the culmination of four years of effort by the CAI's National Reserve Standards Committee, and establish minimum requirements for the procedures and content of a Reserve Analysis and Report. In addition, the CAI established a new professional designation, Reserve Specialist. Qualifications: As stated by the CAI, a Reserve Specialist (RS®): Must have prepared or was in responsible charge for the preparation of 50 Reserve Studies for community associations within the latest three calendar year period. Must have a college bachelor level degree in construction management, architecture, or engineering; or four years prior related experience in a field servicing community associations; or trade school diploma and two years prior related experience. Must hold a CAI professional membership in good standing. Reserve Studies: The CAI Reserve Standards establish both requirements for the various levels of investigation necessary to prepare Reserve Studies and minimum content of Reserve Reports. Three Levels of Service were defined for describe the various types of Reserve Studies: "Full" Reserve Study which must include a Component Inventory, Condition Assessment (based on on-site visual observations), Life and Valuation Estimates, Fund Status, and a Funding Plan. "Update, With-Site-Visit/On-Site Review" consisting of a Component Inventory (verification only, not quantification), Condition Assessment (based on on-site visual observations), Life and Valuation Estimates, Fund Status, and a Funding Plan. "Update, No-Site Visit/Off-Site Review" limited to Life and Valuation Estimates, Funding Status and a Funding Plan. The minimum content of a Reserve Report includes: A summary of the association's number of units, physical description, and Reserve Fund financial condition. A projection of Reserve Starting Balance, recommended Reserve contributions, projected Reserve expenses, and projected ending Reserve Fund Balance for a minimum of 20 years. A tabular listing of the Component Inventory, component quantity or identifying descriptions, Useful Life, Remaining Useful Life, and Current Replacement Cost. A description of the methods and objectives utilized in computing the Fund Status and development of the Funding Plan. Source(s) utilized to obtain component Repair and Replacement cost estimates. A description of the Level of Service by which the Reserve Study was prepared. Fiscal year for which the Reserve Study is prepared. To learn more about the Community Association Institute, visit www.caionline.org. Frost, Christenson and Associates Frost, Christenson and Associates has been preparing Reserve Studies for Community Associations for over 20 years. We are pleased that during this time period, we have consistently complied with the core requirements of the new CAI standards. Further, we are pleased that Frost, Christenson and Associates has never agreed to prepare a Reserve Study without an on-site inspection to determine the condition of the reserved components. Members of Frost, Christenson and Associates have spoken on the preparation of Reserve Studies at various CAI sponsored programs starting in 1978. Marshall Frost is a member of CAI's Reserve Professional Committee, and and as Committee Member, was actively involved in the preparation of the Standards adopted by the Community Association Institute. Frost, Christenson and Associates remains committed to ensuring that Community Associations establish a Reserve Fund sufficient to protect Association members from special assessments, having adequate funds available to provide for the timely replacement of common elements, and ensuring that the funded Reserves are satisfactory to lending institutions. If Frost, Christenson & Associates can assist you, e-mail us at Engineering@FCAConsultants.com