Re: Homeowner's Association - Reserve Audit
From: Sharon Villines (
Date: Sat, 3 Jan 2009 12:18:01 -0800 (PST)

On Jan 3, 2009, at 1:52 PM, Douglas G. Larson wrote:

I've included my responses below but also wanted to remind people that there is a Yahoo Group set up to discuss reserve studies and there is a sample study in the files there. To subscribe send a blank message to:

ReserveStudies-subscribe [at]

1) When did you last hire a professional audit firm to conduct the audit?

We hired a firm three years ago and are just beginning a new study this spring. We find them valuable not just to determine how much money to save but to evaluate the condition and maintenance of our facilities.

Unlike a lot development model in which only the CH is common responsibility, all our building exteriors and infrastructures like pipes, basements, electrical systems, geothermal ground loops, etc, are Association responsibility. We were grossly under-informed about the maintenance of all these systems when we took over the buildings so we need this information.

 2)  Were you happy with the product and service they provided?

Our first study that was finished 2 years after move-in, 2002, and was very incomplete. It included only those elements that lasted less than 30 years and did not include all components. It assumed the use of special assessments to replace many systems, but affordability involves good budgeting with no surprises for households that do not have economic cushions. Not everyone has an extra $1000 lying around unused.

In 2006, we had a study done by another firm that had consulted with us on green materials and architectural design during our construction. They did a study that covers 100 years of expected replacements and we also asked for a maintenance study. Now we maintain two reserve funds, one for replacement and one for maintenance. This means we don't have to figure out where to find the $40,000 to pay for exterior painting or wood floor refinishing. We have it saved.

We will be redoing this same study this spring. We have added many maintenance items and done a lot of replacement work in the CH. Some major items have lasted less than the projected 20 years.

We were very happy with the last study.

 3)  How did you go about choosing the firm?

The last firm was known to us (see above). I'm not sure how the first firm was chosen. The first firm also did our engineering study after we moved in and helped us through the process of getting the developer to correct deficiencies. There were several non-code installations, for example.

 4)  Was the information they provided clear and understandable?

Very much so. We also interacted with them extensively by having a member of the facilities team accompany them whenever they visited the property and we had them discuss their written reports and financial assumptions with members of the financial and facilities teams.

We also asked for their data in a spreadsheet so we could manipulate it internally. The formulas are proprietary and could not be shared but having all the data in a spreadsheet allowed us to keep a record of improvements and replacements with the same data, in the same format. When we have the study updated, it will be very easy to give them all the update information and for them to see how this information relates to their last study.

The next study will be less expensive than their first study because they have all the measurements and equipment information in their computer. Their first study was $5,000 and the current one $2,800.

We have also found their measurements of various facilities very helpful in calculating costs. We were able to provide measurements when asking for bids much more easily than going out and measuring ourselves and wondering if we had done it right. And were able to determine that the asphalt rejuvenators, for example, had measured incorrectly. In one instance having the measurements helped us figure out the difference between one bid and another -- one had mis-measured.

Some information can be obtained over the phone because we have the measurements and the materials descriptions. Who knows what wood is actually, not probably, used in deck construction?

We were also able to use the measurements and other equipment information to estimate the costs of new installations.

5) Were there any lessons learned from the experience of hiring an audit
and receiving it?

As above. The financial information is only one, and perhaps not the most important, component.

The company we use has construction engineers, architects, and materials and equipment experts on staff that we would not have the time or the money to consult with individually.

The Community Association Institute is a good place to start to find a reserve specialist but I would recommend looking at them carefully. A more than "by the book" financial estimate will be much more helpful.

The difference of opinion between studies that cover 30 years and those that cover 100 years stem from one basic assumption -- that major renovations are financed differently than by reserves funds. Large condominiums finance large renovations like roof replacements or heating system upgrades -- they borrow the money when needed and add the payments to condo fees.

As we can all see in the current economic crisis, living on debt is not the panacea that it has been assumed to be and future owners will not necessarily be able to pay more than current residents. In cohousing we hope the current residents will be the future residents.

Our reserve study specialist considers the 100 year span to be more appropriate for smaller residential communities because it does not depend on leveraging money and taking risks based on assumed future earnings.

Sharon Villines
Takoma Village Cohousing,Washington DC

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