Understanding Percent Funded: Is Your HOA or Condo Association Underfunded?
- Kristen Hrabcsak
- Nov 14
- 4 min read
When HOA boards talk about reserve studies, one term comes up more than almost any other: Percent Funded. Many associations in Rhode Island aren’t entirely sure what it means or what it says about the financial health of their community.
In this guide, Hennessy Reserve Partners breaks down percent funded, why it matters, and how to determine if your HOA or condo association may be underfunded, at risk of special assessments, or in need of a refresh like an Update to Your Reserve Study in Rhode Island.
What Is Percent Funded?
Percent Funded is the industry standard metric used in Rhode Island Condo Association Reserve Studies to measure the financial strength of your reserve account.
It compares: Your current reserve balance vs. The "fully funded" balance (what you should have saved based on deterioration of components)
Percent Funded Formula
(Current Reserve Fund Balance ÷ Fully Funded Balance) × 100 = Percent Funded
Why Percent Funded Matters
A strong Percent Funded position helps:
Avoid emergency assessments
Reduce risk of deferred maintenance
Increase property values over time
Support long-term financial planning
Build owner confidence in board leadership
This ties directly to topics like:
Percent Funded Benchmarks
0%–30%: Underfunded (High Risk)
This often indicates:
Aging components with insufficient savings
High likelihood of special assessments
Deferred maintenance
Difficulty securing loans or insurance
30%–70%: Fairly Funded (Moderate Risk)
Most associations fall here, especially:
Small associations (Do Small Associations Need a Reserve Study? Absolutely.)
Aging buildings (40+ years)
Communities that haven’t updated their study in 5+ years
70%–130%: Well-Funded (Low Risk)
A sign of strong long-term planning with help from the Right Partner for Your Reserve Study in Rhode Island.
130%+: Strong Surplus (Very Low Risk)
Usually results from:
Timely repairs
Proactive planning
A mature capital plan
Accurate Physical vs. financial analysis in reserve studies
Real-World Examples
Example 1: Underfunded HOA – 18% Funded
A Rhode Island condo association built in 1987 had never conducted a full reserve study. With a $50,000 roof replacement looming, they had only $9,000 saved.
Result: A $2,400 per-unit special assessment.
Example 2: Moderately Funded – 55% Funded
A Warwick, RI community updated its study every five years but underestimated inflation and labor costs.
Result: A gradual dues increase avoided larger assessments.
Example 3: Well-Funded – 90% Funded
A South County Rhode Island HOA with a strong 30-year capital plan reviewed its reserve study annually.
Result: Owners paid no special assessments for more than 15 years.
Why Many Rhode Island HOAs & Condo Associations Are Underfunded
Common causes include:
1. Confusion Between Budget Types
Understanding the Difference Between Reserve and Operating Budgets is essential. Operating = recurring expenses Reserves = long-term assets
2. Delayed or Missing Reserve Studies
RI associations often skip studies for too long. According to What Rhode Island Law Says About Reserve Studies, a reserve strategy is considered a fiduciary responsibility.
3. Aging Infrastructure
Especially in communities built before 2000, where roofs, siding, decks, and asphalt need major replacements.
4. Outdated Component Lists
Failure to review Reserve Studies Components leads to inaccurate projections.
5. Cost Increases
Material and labor inflation quickly change fully funded balances.
Is Your HOA or Condo Association Underfunded? Key Warning Signs
You haven’t updated your reserve study in 3–5 years
You have less than 70% funded reserves
The board relies on estimates instead of professional analysis
You’re deferring non-emergency maintenance
Unit owners are surprised by repairs
Rising frequency of special assessments
Lack of clarity around major component life cycles
If this sounds familiar, it’s time to Update Your Reserve Study in Rhode Island.
How Reserve Studies Improve Percent Funded
A professional reserve study provides:
A full physical and financial analysis
Accurate remaining useful life predictions
Updated cost estimates
A realistic funding plan
A clear, proactive path forward
An opportunity to revise dues before issues become crises
Good planning directly supports:
Condo association property management best practices
Long-term financial stability
How Percent Funded Connects to Your 30-Year Capital Plan
Your Percent Funded determines:
Future dues increases
Timing of large projects
Whether the association can avoid borrowing
Funding patterns through a 30-year capital plan
A healthy Percent Funded makes capital planning smoother and more predictable.
Common Reserve Study Mistakes That Hurt Percent Funded
Skipping updates because of cost concerns
Not reviewing component conditions in person
Using outdated cost estimates
Confusing operating vs. reserve expenses
Not planning for inflation
Relying on board members instead of professionals
A thorough reserve study protects your board from these pitfalls.
FAQ: What Boards Ask Most About Percent Funded
Is 100% funded required?
No. Most professionals consider 70-100% healthy.
Does percent funded affect property values?
Yes, buyers and lenders both evaluate whether Reserve Studies Protect Property Values.
How often should we update our study?
Every 3-5 years, depending on property age and conditions.
Does percent funded affect my dues?
It defines how much your dues need to increase to avoid assessments.
Choosing the Right Partner for Your Reserve Study in Rhode Island
Hennessy Reserve Partners specializes in:
Rhode Island HOA and condo communities
Associations of all sizes (yes, even small ones)
Coastal property considerations
Commercial and residential properties
Aging building system
Long-term capital planning tailored to RI construction costs
We provide:
Full reserve studies
Reserve study updates
Percent funded analysis
30-year capital planning
Coordination with your property management company
Final Thoughts: Is Your HOA or Condo Association Underfunded?
Understanding your percent funded is a snapshot of your community’s financial health.
We'll answer the question “Is your HOA or Condo Association Underfunded?” when we complete or update your reserve study.
A proactive approach helps protect owner investments, maintain curb appeal, avoid emergency assessments, and strengthen the long-term sustainability of your community.
Ready to Understand Your Percent Funded?
Hennessy Reserve Partners can assess your current financial position and create a clear, actionable plan for a stable future.
Contact our team to begin your reserve study or schedule an update.
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