Percent funded is the ratio of what an association has set aside for reserves vs. the total depreciation of all their components (fully funded balance). Percent funded is one of the most important numbers to look at when reviewing an associations reserve study. The higher the percent funded the better off your homeowner’s association is. As the percent funded increases the risk of a special assessments and deferred maintenance decreases. Many people ask what is the average percent funded for associations. The answer is that every homeowner’s association is different and we see associations in all situations from 0% funded to well over 100% funded. Some also have the misconception that associations must always be 100% funded. While it is ideal for associations to be 100% funded, with a current accurate reserve study associations can plan for future expenses using a cash flow funding plan and still be fiscally responsible at a level below 100% funded. In general it is thought that the following describes an association when it comes to percent funded:
0-30% Funded = Poorly Funded
30-70% Funded = Fairly Funded
>70% Funded = Well Funded