Full Funding

Full Funding / Fully Funded

The reserve balance in the reserve account (and the ongoing annual contributions) is sufficient to fund an appropriate portion of all the asset renewal projects that are forecast over the planning horizon.

The fully funded reserve includes both the progressive reserve and any backlog that may have accumulated.

A fully funded reserve is equivalent to the progressive reserve but only if there is no catch-up reserve (ie., reserve backlog).

For a young building, the fully funded reserve is exactly the same as the progressive reserve because there has not been any time to accumulate a reserve backlog.
For older buildings, the fully funded reserve must account for the years of underfunding and must bring the reserve to a balanced level. The owners must first make up for lost time before the fully funded reserve once again will match the progressive reserve.

As an example:

If the reserve study indicates that the owners need to replace the roof in 10 years at a cost of $100,000, fully funded does not mean that there is $100,000 in the reserve account but rather $10,000 this year, $20,000 next year, and so on until there is $100,000 on the 10th year when the roof is scheduled for replacement.

Fig 1. Funding spectrum extending from underfunded (red zone)

to full funding (green zone).

Fig. Illustration of full funding relative to a single project

Fig. A cash flow that is fully funded over the entire strategic planning horizon. The reserve fund maintains a positive balance in all fiscal years.