STEP FOUR – MATH VIEW
Whew, almost there……. After you’ve entered all of the information in the Component Data view it is time to set up your Math features.
Some of the important information you will need for your Math:
Beginning balance for your reserve account(s) as of the date you entered in the Account Info view and the Beginning Date of Study (Math) field. Depending on how your reserve balance is structured you may have several types of accounts that make up your reserve balance. You might have a checking account, CD’s, Money Market accounts and various other investment instruments. You will need to know the balances of each of these instruments on that magic date you entered in the Account Info view. Reserve Analyst© has the ability to either use a ‘lump’ sum for your reserve balance or a table that includes each investment instrument/account individually in order to make the complete reserve beginning balance.
If you have CD’s or other instruments that ‘mature’ you will need to know the maturity date, interest rate and how the interest is compounded (daily, quarterly, annually, etc.).
You’ll need to know the Interest Income Rate for your reserve balance account(s).
You need to know the Income Tax Rate for your community.
You should know what your current annual contribution to your reserve balance(s) is.
You need to know the funding goals for your community association. This could get sticky if you discover through this process that you are woefully under funded and need to make some key decisions going forward. Your CC&R’s and/or state statutes may give guidance on this subject.
Basic information about the Math Models:
Current Assessment Funding Model (AFM): The Current Assessment Funding Model (AFM) is just about that. If you put in all of the pertinent information about what you are currently doing and then continue to do the same down the path for the next 30 years the software will show you where you will be. This may or may not be acceptable and is generally the first ‘shock’ you’ll discover about your current level of funding. Sometimes this is a pleasant ‘shock’. The Current Assessment Funding Model (CFM) is completely driven by the user, you, with the settings you choose. There are many features included with this model, including the ability to change your contribution in dollars or percentage increase every single year through your report.
This analysis is based on the current annual assessment, parameters and reserve fund balance. Because it is calculated using the current annual assessment it will give an accurate projection of how well the association is funded for the next 30 years of planned reserve expenditures.
Threshold Funding Model (TFM): This model is designed to adequately fund all of your components in your reserve budget that need to be replaced in each year. This gives you a ‘threshold’ for your funding that could be described as ‘just in time’. It is quite adequate in funding your components as long as you don’t encounter some sort of disaster and would need to replace items sooner than expected. You can choose to control the level of the ‘threshold’ of your funding with both dollar minimums as well as minimum and maximum percentage of funding.
This model calculates the minimum reserve assessments, with the restriction that the reserve balance is not allowed to fall below $0 or other predetermined threshold, during the period of time examines. All funds for the planned reserve expenditures will be available on the first day of each fiscal year. The Threshold Funding Model allows you to choose the level of conservative funding by choosing the threshold dollar amount.
Component Funding Model (CFM): This funding model's long-term objective is to provide a plan for a fully funded reserve position. This model performs an annuity calculation on the future of each component. The contribution for this annuity balances the depreciation of all the components to maintain a reserve and property value that approaches 100% of the new component value.
The ‘normal’ progression that occurs with the Math view is that each of the Math Models is set up with all of the pertinent information and the results are reviewed within the Math view. The Current Assessment Funding Model (AFM) is generally the ‘shocker’ then the Threshold Funding Model (TFM) is reviewed and compared with the Component Funding Model (CFM) and then the Current Assessment Funding Model (AFM) numbers are ‘massaged’ until a happy medium is reached. I’m not going to suggest that will be your personal experience, I’m just saying that is what we’ve experienced as ‘normal’.
There are many special Math features to help you through the funding maze and reach your funding goals. For more information on the use of the features in the Math view refer to Help > Open Help > How To Instructions > Math View > specific feature page. You are also encouraged to call our toll free number 800-561-0173 for individual assistance.