Estate Living Magazine The Slow Movement - Issue 39 March 2019 | Page 41

C O M M U N I T Y
L I V I N G
Establishing a preventive maintenance schedule
Preventive maintenance is done for two primary reasons:
• If associations do not maintain the components on the reserve schedule, they will not
attain their full useful life. Consequently, the components will need to be replaced earlier
and the replacement cost will need to be collected over a shorter period of time. This
could result in special levies being imposed.
• If associations do not maintain the components that are not included in the reserve
schedule, they may require replacement, whereas if they were maintained, they would not.
The flowchart below describes a preventive maintenance schedule.
FLOWCHART FOR PREVENTIVE MAINTENANCE SCHEDULE
Yes Step 1 - Review community documents to
determine: Is the component part of the
common elements? No
No Step 2 - Is the component covered under a
maintenance contract? Yes
No Step 3 - Is the component included in another
part of the budget? Yes
Yes Step 4 - Is the component a piece of
mechanical equipment? No
Yes Step 5 - Is the useful life of the component
within the selected time window? No
No Step 6 - Is the replacement cost below the
operating budget threshold? Yes
This item is a reserve item
This item is not a reserve item
Selecting a funding plan
I
Once your association has established its funding goals, the association can select an
appropriate funding plan. You should consult a professional for help in choosing between the
three basic strategies:
• The full funding strategy is to attain and maintain the reserves at or near 100%.
• Baseline funding involves keeping the reserve cash balance above zero. This means that
while each individual component may not be fully funded, the reserve balance does not
drop below zero during the projected period.
• Threshold funding is based on the baseline funding concept, but the minimum reserve
cash balance is set at a predetermined rand amount.
Developing an investment policy
Developing a policy for investing reserve funds allows boards to make consistent choices, and
brings structure and continuity to investment decisions.
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