Percent Funded

A measure of the financial health of an association's reserve fund, calculated as the ratio of the current reserve balance to the fully funded balance (also called the ideal balance). The fully funded balance represents the total accumulated depreciation of all reserve components at a given point in time — in other words, how much money the association should have set aside based on the age and deterioration of its components. For example, if the total fully funded balance is $2,000,000 and the association currently has $1,400,000 in reserves, the percent funded level is 70%. Industry benchmarks categorize reserve funding strength as follows: above 70% is considered strong, 30% to 70% is fair (with increasing risk of special assessments), and below 30% is considered weak or critical. California Civil Code Section 5300 requires the annual budget report to disclose the current percent funded level to all members, making this one of the most visible financial metrics in community association management. Percent funded is also a key factor for lenders when evaluating whether to approve FHA or conventional mortgages in the community — Fannie Mae guidelines generally look for at least 10% of the budget allocated to reserves, and FHA certification often requires demonstrated funding adequacy. Boards should track percent funded over time and use it as a primary input when selecting a reserve funding strategy (fully funded, threshold, or baseline).