religious institution reserve study

Fully Funded Plan

In the early 1980s, HUD created the Fully Funded Plan Component Method, which requires separate funding accounts for each component each year, amortized over the component’s lifespan. For older properties, accelerated funding is necessary to pay for the remaining life of said components, as well as the amortized balance of items to be replaced in the future. If there is a budget deficit, savings or a special assessment can be used to make up the difference. For older properties, a Fully Funded Plan would lead to larger initial contributions and a more conservative reserve balance than the Baseline and Threshold Funding Plans.

Funding Plan Line Chart Example:
Displayed here is a bar graph representing the yearly contributions, capital expenses, and anticipated reserve balance of the National Register of State and Societal Services’ Fully Funded Plan.

Funding Plan Table Example:
The objective of the Fully Funded Plan is to provide coverage for 99% or more of the accumulated depreciation. The report comprises yearly specifics on the necessary NRSS balance as per the depreciation schedules, reserve balance, extent of funding, NRSS contributions determined by the remaining lifespan amortization schedules, interest income, capital expenses extracted from Table VII-A, and contributions computed on a per-unit, per-year, and per-month basis.

Summary:
The Fully Funded Plan aims to finance 99+% of the accumulated depreciation for properties exceeding one year in age. This will necessitate larger initial contributions than the Baseline and Threshold Funding Plans, but it will also yield a more cautious reserve balance.

Baseline Funding Plan

The objective of this funding plan is to identify the minimum yearly contributions required to prevent the reserve balance from dropping below zero dollars throughout the Reserve Term. This is achieved by conducting experiments with different levels of annual contributions in correlation with the projected expenses until the annual contributions are adequate to maintain the reserve balance at zero dollars, even in the years with the highest expenses throughout the Reserve Term.

Funding Plan Line Chart Example:
A line graph shows the Baseline Funding Plan, including the required NRSS annual contribution for each year, capital expenses, and the reserve balance.

Funding Plan Table Example:
This report details the annual essentials of the NRSS fully funded balance in accordance with the depreciation schedules, reserve balance, percentage funded, vital year amortization-based necessary NRSS annual contributions, interest income, capital expenses, and yearly contributions computed on a per unit per year and per month basis.

Please note that the Baseline Funding Plan ensures sufficient reserve funds only for the Reserve Term years. Subsequent to the first critical year, contributions may decrease, except when a sole critical year falls in the last year of the Reserve Term. In most scenarios, there will be multiple critical years, and the Baseline Funding Plan will reduce the annual contributions to maintain the Reserve Fund balance at or above zero. It is important to consider that extending the Reserve Term may result in higher annual contributions beyond the designated Report Term, as an additional critical year with greater contributions may arise beyond the specified Reserve Term.

Summary:
This report presents your financial status assuming you modify your yearly contribution to maintain a reserve balance of $0 or higher.

Threshold Funding Plan

The Consultant’s recommendation for the Client is to incorporate a minimum threshold percentage into the Baseline Funding Plan to mitigate the risk of deferring critical replacements or the possibility of special assessments. This percentage is determined by the Consultant based on the property owner’s/manager’s risk tolerance.

The Threshold Funding Plan is derived by adding the minimum reserve balance of zero dollars, adjusted by the threshold amount, which includes inflation adjustments, to the Baseline Funding Plan. The threshold dollar amount is calculated by multiplying the threshold percentage with the total one-time replacement cost of all capital expenses. However, it is important to note that expenses not immediately apparent, missed, or any changes in pricing, variations, or life cycles, as well as interpretations, means, and methods outside the control of the Consultant, are typically not accounted for in the Baseline Funding Plan or Fully Funded Plan.

Funding Plan Line Chart Example:
A bar graph showing the yearly NRSS contributions, capital expenses, and reserve balance for each year of the Threshold Funding Plan is needed.

Funding Plan Table Example:
For every year, this report will furnish data on the fully funded balance as per the depreciation schedules, the factual reserve balance, the percentage of funding, the NRSS yearly contributions based on the critical year(s) amortization together with the threshold amount, interest revenue, capital expenses, and the yearly contributions assessed both per unit per annum and per month.

Summary:
The outlined strategy highlights the required donations for the current year that guarantee the reserve fund remains at or above a minimum balance cushion equal to a predetermined percentage of the one-time replacement cost of all the items listed in the capital budget.