Fully Funded Balance (FFB)

The fully funded balance is the reserve balance that matches the worn-out share of every component: for each one, its current replacement cost multiplied by the fraction of its useful life already used.

Take a roof that costs $100,000 to replace and lasts 20 years. After 5 years, one quarter of its life is gone, so its share of the fully funded balance is $25,000. Add that figure up for every component in the inventory and you have the association's fully funded balance.

The fully funded balance is a benchmark, not a bill. It is the yardstick that percent funded is measured against. An association at its fully funded balance has set aside money at the same pace its components have aged.

It is not the same as the total replacement cost of everything the association owns. A brand new community has a fully funded balance near zero, because very little life has been used. The figure rises as components age and drops when one is replaced and its age resets.

Because it depends on current costs, useful lives and remaining lives, the fully funded balance should be recalculated in every study and update.

Source: this definition follows the National Reserve Study Standards, published by Community Associations Institute (CAI), explained in our own words. State law can define the term differently for its own purposes.