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Fully Funded Model

One of four funding models to provide a sensitivity analysis of the impact of different funding levels for the assets so that the owners can make an informed decision based on their tolerance for risk.

The goal of the full funding strategy is to attain and maintain the reserve balance at or near 100%.  This is achieved by placing a sufficient amount into the reserve fund to ensure that no special levies/assessments are needed in the future.


Purpose
The models are typically presented as part of the financial analysis in a reserve study and answer the question: "How much money will we have?".

Funding models help the owners conduct a sensitivity analysis to determine how to pay for future projects. Reinvestment models are used to determine the size of the expenditures.


 
Attributes
Listed below are some of the key attributes of a fully funded model:
  • In relatively young buildings (childhood life stage), where the capital projects do not yet have proximity, the fully funded model is somewhat akin to a linear trajectory.
  • In middle aged and older buildings (adulthood life stage), the capital projects have proximity and the fully funded model represents a lumpy trajectory.
  • Generally, a "good" or "strong" funding level is considered to be between 70% and 100%.


Evaluation
Listed below are some of the merits and advantages of a fully funded model:

Listed below are some of the limitations and problems associated with a fully funded model:

  • There is no industry consensus on how to calculate the fully funded balance.
  • The full funded level is onerous for most owners and is seldom achieved.
  • Depending on the age of a building, the fully funded model will likely seek a lumpy trajectory.


Management Principles
A fully funded model is often included in a reserve study to signal an ideal target for the owners. It serves as a benchmark to determine the variances to the status quo funding level.

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Fig. A cash flow that is fully funded over the entire strategic horizon. The reserve fund maintains a positive balance without any special assessments.


Workflow to illustrate how lumpy funding models form part of a sensitivity analysis.
Fig. Workflow to illustrate how a fully funded model would form part of a sensitivity analysis in a reserve study
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The Funding Models:
Related Concepts:
Compare with:


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