Tutorial – Financial Analysis
The second part of the Reserve Study is really a lot of number crunching and estimating of costs. The financial analysis section of a Reserve Study uses the cost and life estimate information gained from the physical analysis to come up with a funding plan that provides for each component’s reserve funding needs. In many cases when we did our onsite inspection, the life and costs were readily apparent so we will have to determine the best estimate of costs and when replacements will be needed. The Financial Analysis evaluates the associations reserve fund balance and income. The financial analysis calculates a associations percent funded by comparing the actual reserve balance to a fully funded balance. The reserve study then estimates the total annual contribution necessary to defray the future costs.