REPORT FY 2013 SCHOOL OF THE INNOCENT

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REPLACEMENT RESERVE REPORT, FY 2013

SCHOOL OF THE INNOCENT

Management by:

ARCHDIOCESE

Ms. Jane Doe

929 West Street, Suite 310 Annapolis, MD 21401

410.268.0479 www.mdareserves.com

Consultant:

929 West Street, Suite 310 Annapolis, MD 21401

Tel: 800.850.2835 Fax: 410.268.8483

www.mdareserves.com

AUGUST 20, 2012

SAMPLE REPORT Note: This sample report is based on an actual Replacement Reserve Study conducted for a real facility. Please note, however, that the name, location, results, and other identifying features of this report have been intentionally altered to suit the purpose of a

sample and protect the confidentiality of the Client.

Sample

INTENTIONALLY LEFT BLANK

Sample

REPLACEMENT RESERVE REPORT SCHOOL OF THE INNOCENT

CALIFORNIA, MARYLAND

Description. The School of the Innocent is an Archdiocesan elementary and middle school located in California, Maryland. The school built in 1999 and 2003, and consists of a single story building. The survey examined the common elements of the property, including:

Paved access drives and parking areas. Concrete curbs, sidewalks, and other slabs. Sports areas, tot lot, pond, and storm water management. Building exterior, including roofing, masonry, windows, and

doors. Interior spaces and building mechanical and other systems.

Current Funding. This reserve study has been prepared for Fiscal Year 2013 covering the period from July 1, 2012 to June 30, 2013. Based on the previous reserve study performed by Reserve Advisors the projected year-end balance for 2012 was anticipated to be $600,000 with an anticipated contribution to reserves of $200,000.

The balance and contribution figures have been supplied by the previous study, and confirmation or audit of these figures is beyond the scope of this Study. For the purposes of this Study, it is assumed that the annual contribution will be deposited at the end of each month.

Analysis Summary. As shown on Graph 2 on Page A3 of the Replacement Reserve Analysis, the Current Funding underfunds the reserves, falling short by the year 2023. An aggressive increase in the reserve contribution is recommended over the near-term years.

In addition, to offset inflation, annual increases to the reserves are recommended until an update to the Study is performed in three to five years. For this recommendation, Miller-Dodson uses the Producer Price Index (PPI), which gauges inflation in manufacturing and construction. Please see Pages A6 and A7 for further details.

To aid in the understanding of this report and its concepts and practices, on our web site, we have developed videos addressing frequently asked topics. In addition, there are a variety of posted links covering a variety of subjects under the resources page of our site at mdareserves.com.

Section A

Replacement Reserve Analysis

Executive Summary Reserve Status and Funding Plan - A1

General Information - A2 Cash Flow Method - A4

Cash Flow Inflation Adjusted Funding - A5 Current Funding and Analysis Comments - A6

Section B

Replacement Reserve Inventory

Replacement Reserve Inventory General information - B1

Replacement Reserve Inventory Comments - B2

Schedule of Projected Replacements and Exclusions - B3

Section C

Projected Annual Replacements

Projected Annual Replacements General Information - C1

Reserve Analysis and Inventory Policies, Procedures, and Administration - C1

Calendar of Projected Annual Replacements - C2

Section D

Condition Assessment

Section E

Attachments

Accounting Summary Appendix, including links to

Video Answers to Frequently Asked Questions

Sample

http://mdareserves.com/video-library

http://mdareserves.com/resources/links

http://mdareserves.com/resources/links

Level of Service. This study has been performed as a Level II Update, With Site Visit/On-Site Review as defined under the National Reserve Study Standards that have been adopted by the Community Associations Institute. As such, the component inventory is based on the study that was performed by Reserve Advisors, Inc. in January of 2007. This information was adjusted to reflect changes to the inventory that were provided by the community manager, and the quantities were adjusted accordingly from field measurement and/or quantity takeoffs from to-scale drawings. The condition of all commonly-owned components was ascertained from a site visit and the visual inspection of each component by the Analyst. The life expectancy and the value of components are provided based in part on these observations. The fund status and funding plan have been derived from analysis of this data.

Purpose. The purpose of this Replacement Reserve Study is to provide the School of the Innocent (hereinafter called the School or Association) with an inventory of the common community facilities and infrastructure components that require periodic replacement. The Study includes a general view of the condition of these items and an effective financial plan to fund projected periodic replacements.

Inventory of Items Owned by the School. Section B Replacement Reserve Inventory lists the Projected Replacements of the commonly owned items that require periodic replacement using funding from Replacement Reserves. The Replacement Reserve Inventory also provides information about excluded items, which are items whose replacements are not scheduled for funding from Replacement Reserves.

Condition of Items Owned by the School. Section B Replacement Reserve Inventory includes our estimates of the normal economic life and the remaining economic life for the projected replacements. Section C Calendar of Projected Annual Replacements provides a year-by-year listing of the projected replacements. Section D Condition Assessment provides additional detail for items that are unique or deserving of attention because of their condition or the manner in which they have been treated in this Study.

Financial Plan. The School has a fiduciary responsibility to protect the appearance, value, and safety of the property and it is therefore essential the School have a financial plan that provides funding for the projected replacements. In conformance with American Institute of Certified Public Accountant guidelines, Section A Replacement Reserve Analysis evaluates the current funding of Replacement Reserves as reported by the School and recommends annual funding of Replacement Reserves by two generally accepted accounting methods; the Cash Flow Method and the Component Method. Section A Replacement Reserve Analysis includes graphic and tabular presentations of the Cash Flow Method only. An Executive Summary of these calculations is provided on Page A1.

Basis. The data contained in this Replacement Reserve Study is based upon the following:

The Request for Proposal submitted and executed by the School.

Our visual evaluation and measurements were performed on August 20, 2012. Miller-Dodson Associates visually inspected the common elements of the property in order to ascertain the remaining useful life and the replacement costs of these components.

Drawings were not used in the development of this Study.

Acknowledgement. Miller-Dodson Associates would like to acknowledge the assistance and input of Ms. Jane Doe who provided helpful insight into the current operations at the property.

Analyst’s Credentials. Mr. William I. Scrivens holds a Bachelors of Science Degree in Civil Engineering, with an emphasis in structures, from the Pennsylvania State University. Mr. Scrivens, with 20 years of experience in structural design and inspection, has personally performed well over 1,800 inspections on wide variety of private, municipal, and military facilities throughout the United States. Bill is currently a Reserve Specialist and author lecturer on the subject of Capital Reserve Funding for Miller-Dodson Associates. Respectfully submitted,

millerdodson C a p i t a l R e s e r v e C o n s u l t a n t s

William I. Scrivens, RS Reserve Specialist

Sample

Miller + Dodson Associates, Inc. Replacement Reserve Analysis - Page A1School of the Innocent August 20, 2012

1112303SCHOOL O13

EXECUTIVE SUMMARY

The School of the Innocent Replacement Reserve Inventory identifies 144 Projected Replacements forfunding from Replacement Reserves, with an estimated one-time replacement cost of $5,111,410.

The Replacement Reserve Analysis calculates recommended funding of Replacement Reserves by the Cash FlowMethod. The Analysis also evaluates current funding of Replacement Reserves, as reported by the School.The calculations and evaluation are summarized below:

$286,746CASH FLOW METHOD MINIMUM ANNUAL FUNDING OF REPLACEMENT RESERVES IN THE STUDY YEAR, 2013.

The Cash Flow Method (CFM) calculates Minimum Annual Funding of Replacement Reserves that will fund Projected Replacements identified in the Replacement Reserve Inventory from a common pool of ReplacementReserves and prevent Replacement Reserves from dropping below a Minimum Recommended Balance.

CFM - Minimum Annual Funding remains the same between peaks in cumulative expenditures called Peak Years.

The first Peak Year occurs in 2045 which is outside of the 30-year Study Period. The Cash FlowMethod - Minimum Annual Funding of Replacement Reserves remains constant at $286,746 throughout theentire 30-year Study Period.

$200,000CURRENT ANNUAL FUNDING OF REPLACEMENT RESERVES (as reported by the School).

The evaluation of Current Funding, as reported by the School, has calculated that if the Schoolcontinues to fund Replacement Reserves at the current level, there will NOT be adequate funds for ProjectedReplacements in 20 years of the 30-year Study Period, and a maximum shortfall of $-1,554,875 occurs in 2040.

Pages A2 and A3 explain the Study Year, Study Period, Adjustments (interest & inflation), Beginning Balance, and Projected Replacements. Pages A4 to A5explain in more detail the calculations associated with the Cash Flow Method and Current Funding.Sam

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1112303SCHOOL O13

REPLACEMENT RESERVE ANALYSIS - GENERAL INFORMATION

The School of the Innocent Replacement Reserve Analysis calculations of recommended funding ofReplacement Reserves by the Cash Flow Method and the evaluation of the Current Funding, are based upon theFunding, are based upon the same General Information; including the Study Year, Study Period, Beginning Balance, and Projected Replacements.

STUDY YEARThe School reports that their accounting year begins on July 1, and the Study Year, the first year evaluatedby the Replacement Reserve Analysis, begins on July 1, 2012.

STUDY PERIODThe Replacement Reserve Analysis evaluates the funding of Replacement Reserves over a 30-year Study Period that begins on July 1, 2012.

BEGINNING BALANCEThe School reports Replacement Reserves on Deposit totaling $600,000 at the start of the Study Year.

ADJUSTMENTS AND INFLATIONThe short term consequences of 4.50% inflation and no constant annual increase in Reserve funding on the Cash Flow Method, as calculated by a proprietary model developed by Miller + Dodson Associates. are shown onPages A6 and A7. Other calculations in this Analysis do not account for inflation or a constant annual increase.The calculations in this Analysis do not account for interest earned on Replacement Reserves.

Graph #1. Annual Expenditures for Projected Replacements This bar graph summarizes annual expenditures for the $7,984,375 of Projected Replacements identified in the Replacement Reserve Inventory over the30-year Study Period. The red line shows the average annual expenditure of $266,146.

30 YR AVERAGE

$266,146

$340

,150

$74,

900

$281

,675

$86,

260

$181

,100

$305

,040

$186

,475

$35,

650

$213

,100

$345

,120

$985

,515

$114

,900

$306

,050

$74,

150

$201

,100

$329

,540

$177

,100

$73,

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$952

,835

$12,

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$878

,365

$110

,860

$250

,025

$365

,470

$210

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$96,

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$201

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$366

,520

$177

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$52,

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$200,000

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$600,000

$800,000

$1,000,000

$1,200,000

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1112303SCHOOL O13

PROJECTED REPLACEMENTSThe School of the Innocent Replacement Reserve Inventory (Section B) identifies 144 ProjectedReplacements with a one-time Replacement Cost of $5,111,410 and replacements totaling $7,984,375 in the30-year Study Period. Projected Replacements are the replacement of commonly-owned items that:

require periodic replacement and whose replacement is to be funded from Replacement Reserves.

The accuracy of the School of the Innocent Replacement Reserve Analysis is dependent upon expenditures from Replacement Reserves being made ONLY for the 144 Projected Replacementsspecifically listed in the Replacement Reserve Inventory.

To further assist in the identification of items not appropriately funded from Replacement Reserves,the Replacement Reserve Inventory identifies 36 Excluded Items. The rationale behind the exclusion of items

The Section B - Replacement Reserve Inventory, contains Tables that list each Projected Replacement (and anyExcluded Items) broken down into 18 major categories (Pages B3 to B19). Tables are also included that list eachProjected Replacement by year for each of the 30 years of the Study Period beginning on Page C1.

Graph #2. Comparison of Cumulative Replacement Reserve Funding and ExpendituresThe line graph shows Replacement Reserves - Cumulative Receipts over the 30-year Study Period by the Cash Flow Method (red circles) and theCurrent Funding Plan as reported by the School (blue triangles). The bar graph shows the Cumulative Expenditures necessary to fundthe Project Replacements listed in the Replacement Reserve Inventory (Section B) and summarized in Graph #1.

$6,600,000

$7,984,375

$9,202,373

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$10,000,000

$12,000,000

Cash Flow Method - Cumulative Receipts

Current Funding - Cumulative Receipts Projected Replacements - CumulativeExpenditures

Sample


1112303SCHOOL O13

CASH FLOW METHOD

$286,746CASH FLOW METHOD MINIMUM ANNUAL FUNDING OF REPLACEMENT RESERVES IN THE STUDY YEAR, 2013.

General. The Cash Flow Method (also referred to as the Straight Line Method) is founded on the concept that theReplacement Reserve Account is solvent if cumulative receipts always exceed cumulative expenses. The Cash FlowMethod calculates a MINIMUM annual deposit to Replacement Reserves that will:

Fund all Projected Replacements listed in the Replacement Reserve Inventory (see Section B) Prevent Replacement Reserves from dropping below the Minimum Recommended Balance of $255,571,

which is 5.0 percent of the one-time replacement cost of the Projected Replacements listed in the Inventory Allow a constant annual funding level between peaks in cumulative expenditures

Graph #3. Cash Flow Method - Cumulative Receipts and Expenditures Graph

Table #1. Cash Flow Method Data - Years 1 through 30Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Starting balance $600,000 Annual deposit $286,746 $286,746 $286,746 $286,746 $286,746 $286,746 $286,746 $286,746 $286,746 $286,746

Expenditures $340,150 $74,900 $281,675 $86,260 $181,100 $305,040 $186,475 $35,650 $213,100 $345,120Year end balance $546,596 $758,442 $763,512 $963,998 $1,069,644 $1,051,350 $1,151,620 $1,402,716 $1,476,362 $1,417,988

Minimum rec. funding lvl. $255,571 $255,571 $255,571 $255,571 $255,571 $255,571 $255,571 $255,571 $255,571 $255,571Cumulative expenditures $340,150 $415,050 $696,725 $782,985 $964,085 $1,269,125 $1,455,600 $1,491,250 $1,704,350 $2,049,470

Cumulative receipts $886,746 $1,173,492 $1,460,237 $1,746,983 $2,033,729 $2,320,475 $2,607,220 $2,893,966 $3,180,712 $3,467,458

Year 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032Annual deposit $286,746 $286,746 $286,746 $286,746 $286,746 $286,746 $286,746 $286,746 $286,746 $286,746

Expenditures $985,515 $114,900 $306,050 $74,150 $201,100 $329,540 $177,100 $73,400 $952,835 $12,000Year end balance $719,218 $891,064 $871,760 $1,084,356 $1,170,002 $1,127,207 $1,236,853 $1,450,199 $784,110 $1,058,855

Minimum rec. funding lvl. $255,571 $255,571 $255,571 $255,571 $255,571 $255,571 $255,571 $255,571 $255,571 $255,571Cumulative expenditures $3,034,985 $3,149,885 $3,455,935 $3,530,085 $3,731,185 $4,060,725 $4,237,825 $4,311,225 $5,264,060 $5,276,060

Cumulative receipts $3,754,203 $4,040,949 $4,327,695 $4,614,441 $4,901,187 $5,187,932 $5,474,678 $5,761,424 $6,048,170 $6,334,915


Expenditures $878,365 $110,860 $250,025 $365,470 $210,475 $96,000 $201,100 $366,520 $177,500 $52,000Year end balance $467,236 $643,122 $679,843 $601,119 $677,389 $868,135 $953,781 $874,007 $983,252 $1,217,998

Minimum rec. funding lvl. $255,571 $255,571 $255,571 $255,571 $255,571 $255,571 $255,571 $255,571 $255,571 $255,571Cumulative expenditures $6,154,425 $6,265,285 $6,515,310 $6,880,780 $7,091,255 $7,187,255 $7,388,355 $7,754,875 $7,932,375 $7,984,375

Cumulative receipts $6,621,661 $6,908,407 $7,195,153 $7,481,899 $7,768,644 $8,055,390 $8,342,136 $8,628,882 $8,915,627 $9,202,373

$7,984,375

$1,217,998

$9,202,373

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$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

$9,000,000

$10,000,000

Cash Flow Method - Cumulative Receipts Cash Flow Method - Year End Balance Cumulative Expenditures

Sample


1112303SCHOOL O13

CASH FLOW METHOD ANNUAL FUNDING GRAPH

THREE-YEAR FUNDING RECOMMENDATIONS WITH INFLATIONADJUSTMENT

The bar graph below shows the Cash Flow Method Annual Funding calculated in today's dollars (lighter bars) and the Inflation Adjusted Cash Flow Method Annual Funding (dark bars)

2013 - STUDY YEAR

$286,746 MINIMUM ANNUAL FUNDING

The $286,746 funding of Replacement Reserves in the Study Year has been calculated using current construction costs (listed in Section B Inventory). The Analyst has adjusted the costs to account for any time lag between the preparation of the Study and the Study Year.

2014 - YEAR TWO

$300,418 INFLATION ADJUSTED MINIMUM ANNUAL FUNDING

The $300,418 inflation adjusted funding of Replacement Reserves in 2014 represents a 4.77 percent increase over the non-inflation adjusted fundingrecommendation of $286,746 in the Study Year.

The specific assumptions used to calculate the Year Two Inflation Adjusted Funding are listed below. If the assumptions are inaccurate, do not use the data and contact Miller Dodson Associates to arrange for a Replacement Reserve Study Update. The assumptions are:

Replacement Reserves on Deposit totaling $546,596 on July 1, 2013.

All 2013 Projected Replacements scheduled in the Replacement ReserveInventory and listed on Page C2, having been accomplished in 2013 ata cost of $340,150.

An average annual Construction Cost Inflation Rate of 4.50 percentover the previous 12 month period.

2015 - YEAR THREE

$315,053 INFLATION ADJUSTED MINIMUM ANNUAL FUNDING

The $315,053 inflation adjusted funding of Replacement Reserves in 2015 represents a 9.87 percent increase over the non-inflation adjusted fundingrecommendation of $286,746 in the Study Year.

The specific assumptions used to calculate the Year Two Inflation Adjusted Funding are listed below. If the assumptions are inaccurate, do not use the data and contact Miller Dodson Associates to arrange for a Replacement Reserve Study Update. The assumptions are:


All 2014 Projected Replacements scheduled in the Replacement ReserveInventory and listed on Page C2, having been accomplished in 2014 ata cost of $78,271.

An average annual Construction Cost Inflation Rate of 4.50 percentover the previous 24 month period.

$286

,746

$286

,746

$286

,746

$300

,418

$286

,746

$315

,053

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

Cash Flow Method Annual FundingInflation Adjusted Cash Flow Method Annual Funding

Sample


1112303SCHOOL O13

CURRENT FUNDING

$200,000CURRENT ANNUAL FUNDING OF REPLACEMENT RESERVES (as reported by the School).

Our evaluation of the Current School Funding assumes that the School will continue to fundReplacement Reserves at the current level of $200,000 per year in each of the 30 years of the Study Period.

Graph #5. Current School Funding - Cumulative Receipts and Expenditures Graph

Table #3. Current Funding Data - Years 1 through 30Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Starting balance $600,000 Annual deposit $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000

Expenditures $340,150 $74,900 $281,675 $86,260 $181,100 $305,040 $186,475 $35,650 $213,100 $345,120Year end balance $459,850 $584,950 $503,275 $617,015 $635,915 $530,875 $544,400 $708,750 $695,650 $550,530

Cumulative Expenditures $340,150 $415,050 $696,725 $782,985 $964,085 $1,269,125 $1,455,600 $1,491,250 $1,704,350 $2,049,470Cumulative Receipts $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000 $2,200,000 $2,400,000 $2,600,000


Expenditures $985,515 $114,900 $306,050 $74,150 $201,100 $329,540 $177,100 $73,400 $952,835 $12,000Year end balance ($234,985) ($149,885) ($255,935) ($130,085) ($131,185) ($260,725) ($237,825) ($111,225) ($864,060) ($676,060)

Cumulative expenditures $3,034,985 $3,149,885 $3,455,935 $3,530,085 $3,731,185 $4,060,725 $4,237,825 $4,311,225 $5,264,060 $5,276,060Cumulative receipts $2,800,000 $3,000,000 $3,200,000 $3,400,000 $3,600,000 $3,800,000 $4,000,000 $4,200,000 $4,400,000 $4,600,000


Expenditures $878,365 $110,860 $250,025 $365,470 $210,475 $96,000 $201,100 $366,520 $177,500 $52,000Year end balance ($1,354,425) ($1,265,285) ($1,315,310) ($1,480,780) ($1,491,255) ($1,387,255) ($1,388,355) ($1,554,875) ($1,532,375) ($1,384,375)

Cumulative Expenditures $6,154,425 $6,265,285 $6,515,310 $6,880,780 $7,091,255 $7,187,255 $7,388,355 $7,754,875 $7,932,375 $7,984,375Cumulative Receipts $4,800,000 $5,000,000 $5,200,000 $5,400,000 $5,600,000 $5,800,000 $6,000,000 $6,200,000 $6,400,000 $6,600,000

$7,984,375

($1,384,375)

$6,600,000

2013

2014

2015

2016

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2019

2020

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($4,000,000)

($2,000,000)

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

Current Funding - Cumulative Receipts Current Funding - Year End Balance Projected Replacements - CumulativeExpenditures

Sample


1112303SCHOOL O13

REPLACEMENT RESERVE STUDY - SUPPLEMENTAL COMMENTS

This Replacement Reserve Study has been developed in compliance with the Community Associations Institute,National Reserve Study Standards, for a Level One Study - Full Service.

School of the Innocent - the type of property is a School.

Our calculations assume that Replacement Reserves are not subject to tax.

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Miller + Dodson Associates, Inc. Replacement Reserve Inventory - Page B1School of the Innocent August 20, 2012

1112303SCHOOL O13

REPLACEMENT RESERVE INVENTORYGENERAL INFORMATION

School of the Innocent - Replacement Reserve Inventory identifies 180 items. Two types of items areidentified, Projected Replacements and Excluded Items:

PROJECTED REPLACEMENTS. 144 of the items are Projected Replacements and the periodicreplacements of these items are scheduled for funding from Replacement Reserves. The Projected Replacementshave an estimated one-time replacement cost of $5,111,410. Replacements totaling $7,984,375 are scheduledin the Replacement Reserve Inventory over the 30-year Study Period.

Projected Replacements are the replacement of commonly owned physical assets that require periodic replacement and whose replacement is to be funded from Replacement Reserves.

EXCLUDED ITEMS. 36 of the items are Excluded Items, and expenditures for these items are NOTscheduled for funding from Replacement Reserves. The accuracy of the calculations made in the ReplacementReserve Analysis is dependent on expenditures NOT being made for Excluded Items. The Excluded Itemsare listed in the Replacement Reserve Inventory to identify specific items and categories of items thatare not to be funded from Replacement Reserves. There are multiple categories of items that are typicallyexcluded from funding by Replacement Reserves, including but not limited to:

Tax Code. The United States Tax Code grants very favorable tax status to Replacement Reserves, conditionedon expenditures being made within certain guidelines. These guidelines typically exclude maintenanceactivities, minor repairs and capital improvements.

Value. Items with a replacement cost of less that $1,000 and/or a normal economic life of less than 3 years are typically excluded from funding from Replacement Reserves. This exclusion is made to accurately reflecthow Replacement Reserves are administered. If the School has selected an alternative levels, it will benoted in the Replacement Reserve Inventory - General Comments on Page B2.

Long-lived Items. Items that when properly maintained, can be assumed to have a life equal to the propertyas a whole, are typically excluded from the Replacement Reserve Inventory.

Unit improvements. Items located on property owned by a single unit and where the items serve a single unit are generally assumed to be the responsibility of that unit, not the School.

Other non-common improvements. Items owned by the local government, public and private utility companies, the United States Postal Service, Master Associations, state and local highway authorities, etc., may beinstalled on property that is owned by the School. These types of items are generally not the responsibility of the School and are excluded from the Replacement Reserve Inventory.

The rationale for the exclusion of an item from funding by Replacement Reserves is discussed in more detail inthe 'Comments' sections of the Section B - Replacement Reserve Inventory.

CATEGORIES. The 180 items included in the School of the Innocent Replacement Reserve Inventoryare divided into 18 major categories. Each category is printed on a separate page, Pages B3 to B19.

LEVEL OF SERVICE. This Replacement Reserve Inventory has been developed in compliance with the standardsestablished for a Level One Study - Full Service, as defined by the National Reserve StudyStandards, established in 1998 by Community Associations Institute, which states:

A Level I - Full Service Reserve Study includes the computation of complete component inventoryinformation regarding commonly owned components provided by the Association, quantities derived from field measurements and/or quantity takeoffs from to-scale engineering drawings thatmay be made available. The condition of all components is ascertained from a visual inspectionof each component by the analyst. The remaining economic life and the value of the componentsare provided based on these observations and the funding status and funding plan are then derived from analysis of this data.

Sample


1112303SCHOOL O13

REPLACEMENT RESERVE INVENTORY - GENERAL INFORMATION (cont'd)

INVENTORY DATA. Each of the 144 Projected Replacements listed in the Replacement Reserve Inventoryincludes the following data:

Item Number. The Item Number is assigned sequentially and is intended for identification purposes only.

Item Description. We have named each item included in the Inventory. Where the name of the itemand the category are not sufficient to specifically identify the item, we have included additional information in the Comments section at the bottom of the page.

Units. We have used standard abbreviations to identify the number of units including SF-square feet, LF-lineal feet, SY-square yard, LS-lump sum, EA-each, and PR-pair. Nonstandard abbreviations are noted in the Comments section on the page on which the abbreviation is used.

Number of Units. The methods used to develop the quantities are discussed in "Level of Service" above.

Unit Replacement Cost. We use three sources to develop the unit cost data shown in the Inventory; actualreplacement cost data provided by the client, industry standard estimating manuals, and a cost databasethat we have developed based upon our detailed interviews with contractors and service providers who arespecialists in their respective lines of work. In addition, trends in the Producers Price Index (PPI), laborrates, and transportation costs are monitored and considered. This cost database is reviewed and updated regularly by Miller Dodson and biannually by an independent professional cost estimating firm.

Normal Economic Life (Yrs). The number of years that a new and properly installed item should beexpected to remain in service.

Remaining Economic Life (Yrs). The estimated number of years before an item will need to be replaced. In "normal" conditions, this could be calculated by subtracting the age of the item from the Normal Economic Life of the item, but only rarely do physical assets age "normally". Some itemsmay have longer or shorter lives depending on many factors such as environment, initial quality of the item, maintenance, etc.

Total Replacement Cost. This is calculated by multiplying the Unit Replacement Cost by the Number of Units.

Each of the 36 Excluded Items includes the Item Description, Units, and Number of Units. Many of theExcluded Items are listed as a 'Lump Sum' with a quantity of 1. For the Excluded Items, this indicates thatall of the items identified by the 'Item Description' are excluded from funding by Replacement Reserves.

REVIEW OF EXPENDITURES. This Replacement Reserve Study should be reviewed by an accounting professional representing the School prior to implementation.

PARTIAL FUNDING. Items may have been included in the Replacement Reserve Inventory at less than 100 percent of their full quantity and/or replacement cost. This is done on items that will never be replacedin their entirety, but which may require periodic replacements over an extended period of time. The assumptions that provide the basis for any partial funding are noted on in the Comments section.

REMAINING ECONOMIC LIFE GREATER THAN 40 YEARS. The calculations do not include funding for initialreplacements beyond 40 years. These replacements are included in this Study for tracking and evaluation. Theyshould be included for funding in future Studies, when they enter the 40-year window.

Sample


1112303SCHOOL O13

SITE COMPONENTPROJECTED REPLACEMENTS

UNIT NORMAL REMAININGITEM ITEM NUMBER REPLACEMENT ECONOMIC ECONOMIC REPLACEMENT

# DESCRIPTION UNIT OF UNITS COST ($) LIFE (YRS) LIFE (YRS) COST ($)

1 Asphalt pavement, seal coat sf 154,800 $0.20 6 3 2 $30,9602 Asphalt pavement, mill & overlay sf 154,800 $1.70 18 9 2 $263,160

3 Concrete curb & gutter (20%) ft 1,000 $34.00 54 9 2 $34,0004 Concrete curb & gutter (20%) ft 1,000 $34.00 54 27 2 $34,0005 Concrete curb & gutter (20%) ft 1,000 $34.00 54 45 2 $34,000

6 Concrete sidewalk (6%) sf 750 $8.50 60 none 2 $6,3757 Concrete sidewalk (6%) sf 750 $8.50 60 6 2 $6,3758 Concrete sidewalk (6%) sf 750 $8.50 60 12 2 $6,3759 Concrete sidewalk (6%) sf 750 $8.50 60 18 2 $6,375

10 Concrete sidewalk (6%) sf 750 $8.50 60 24 2 $6,37511 Concrete sidewalk (6%) sf 750 $8.50 60 30 2 $6,37512 Concrete sidewalk (6%) sf 750 $8.50 60 36 2 $6,37513 Concrete sidewalk (6%) sf 750 $8.50 60 42 2 $6,37514 Concrete sidewalk (6%) sf 750 $8.50 60 48 2 $6,37515 Concrete sidewalk (6%) sf 750 $8.50 60 54 2 $6,375

16 Paver reset, sand (20% allowance) sf 700 $3.50 5 2 2 $2,45017 Reset garden wall (20% allowance) ft 35 $30.00 10 10 2 $1,050

18 Site light, heads ea 37 $450.00 20 10 2 $16,65019 Site light, poles ea 27 $1,800.00 40 30 2 $48,600

SITE COMPONENT - Replacement Costs - Subtotal $528,620

SITE COMPONENTCOMMENTS

We have assumed that the Association will replace the asphalt pavement by the installation of a 2 inch thick overlay. The pavement will need to be milled prior to the installation of the overlay. Milling and the cost of minor repairs (5 to 10 percent of the total area) to the base materials and bearing soils beneath the pavement are included in the cost shown above.

For concrete components and other roadway shoulder work, we have assumed that the Association will conduct concrete component replacement projects in conjunction with the asphalt pavement and other concrete or right-of-way replacement projects.

For asphalt paths and walkways, we assume that these will be addressed with other asphalt work.

Sample


1112303SCHOOL O13

SITE COMPONENT (cont.)PROJECTED REPLACEMENTS



20 Ramp, wood railing ft 90 $25.00 15 7 2 $2,25021 Ramp, synthetic deck sf 200 $10.50 30 22 2 $2,10022 Ramp, wood structure sf 200 $20.00 30 22 2 $4,000

23 Benches (1/3 allowance) ea 7 $450.00 5 2 2 $3,15024 Picnic tables ea 4 $900.00 15 8 2 $3,60025 Field equipment (allowance) ls 1 $5,000.00 10 5 2 $5,000

26 Tot lot, large play structure ea 1 $38,000.00 20 12 2 $38,00027 Tot lot, play structure (10% refurb) ea 1 $3,800.00 10 2 2 $3,80028 Tot lot, synthetic border ft 200 $12.00 20 10 2 $2,40029 Tot lot, wood fencing ft 330 $18.00 20 10 2 $5,940

30 Pond & entry, wood fencing ft 1,000 $18.00 20 2 2 $18,00031 Pond, dredging (1/3 allowance) sf 4,300 $65.00 30 18 2 $279,50032 Storm water, pipe & inlet (10% allow.) ls 1 $3,500.00 20 15 2 $3,500

33 Underground water & sanitary (allow.) ls 1 $21,000.00 30 23 2 $21,00034 Fire hydrant ea 3 $3,500.00 60 40 2 $10,500

35 Shed, lg ea 1 $12,000.00 20 16 2 $12,00036 Shed, sm ea 1 $7,000.00 20 12 2 $7,000

SITE COMPONENT (cont.) - Replacement Costs - Subtotal $421,740

SITE COMPONENT (cont.)COMMENTS

Comprehensive drawings detailing the components of the underground systems listed above were not available for our review. We have included the estimated cost allowance based upon our experience with other similar facilities. In the future, this assumption and the estimated costs should be adjusted based upon actual experience.

Fire hydrants can have a useful life of 60 years or more. This study is limited to 40 years, after 2020 the Remaining Economic Life of the Hydrant will begin to decline.

Sample


1112303SCHOOL O13

SITE COMPONENT (cont.)PROJECTED REPLACEMENTS



37 Entry monument ls 1 $6,000.00 10 2 2 $6,00038 Bollard & access gate (allowance) ls 1 $3,000.00 20 13 2 $3,00039 Flag pole ea 3 $1,800.00 30 18 2 $5,400

40 Foundation planting (allowance) ls 1 $8,000.00 25 13 2 $8,000

SITE COMPONENT (cont.) - Replacement Costs - Subtotal $22,400

SITE COMPONENT (cont.)COMMENTS

Foundation plantings such as trees and large shrubbery will eventually out grow their space or become problematic with respect to pruning and trimming. This study accounts for the replacement of foundation plantings every 25 years. Refinement of this cost should be discussed with an arborist or landscape expert. Annual plantings, and routine pruning and trimming are not included in this study.

Sample


1112303SCHOOL O13

BUILDING EXTERIORPROJECTED REPLACEMENTS



41 Shingle asphalt/fiberglass sf 80,500 $4.80 30 18 2 $386,40042 Gutter & downspout, 6" aluminum ft 2,800 $8.50 30 18 2 $23,800

43 Standing seam metal sf 1,300 $12.00 60 40 2 $15,600

44 Cupola, large, refurbish ea 1 $1,800.00 30 18 2 $1,80045 Cupola, small, refurbish ea 2 $1,200.00 30 18 2 $2,400

46 Soffit & fascia ft 2,400 $14.40 30 18 2 $34,560

47 Storefront, entry sf 460 $42.00 35 23 2 $19,32048 Doors, glazed ea 7 $1,200.00 25 13 2 $8,40049 Windows sf 5,110 $45.00 35 23 2 $229,95050 Doors, solid, per leaf ea 19 $850.00 25 13 2 $16,150

51 Repointing (10% allowance) sf 2,400 $9.50 10 23 2 $22,80052 Building caulking (allowance) ft 6,000 $2.00 10 3 2 $12,000

53 Small exterior lighting (1/3 allowance) ea 32 $125.00 8 none 2 $4,000

BUILDING EXTERIOR - Replacement Costs - Subtotal $777,180

BUILDING EXTERIORCOMMENTS

Standing seam metal roofs can have a useful life of 60 years or more. This study is limited to 40 years, after 2020 the Remaining Economic Life of these roofs will begin to decline.

Sample


1112303SCHOOL O13

BUILDING INTERIORPROJECTED REPLACEMENTS



54 Carpet & refinish, east wing & lobby sf 20,000 $2.50 10 10 2 $50,00055 Carpet & refinish, west wing & library sf 19,500 $2.75 10 none 2 $53,62556 Carpet & refinish, middle wing sf 16,200 $2.50 10 1 2 $40,50057 Carpet & refinish, office & church sf 6,500 $2.75 10 2 2 $17,875

58 Flooring, vinyl tile sf 17,100 $3.30 25 15 2 $56,43059 Flooring, ceramic (kitchen) sf 1,000 $32.60 25 15 2 $32,600

60 Flooring, gym (resurface) sf 6,900 $7.00 15 none 2 $48,30061 Flooring, gym (strip & replace) sf 6,900 $7.00 45 30 2 $48,30062 Flooring, gym (repair allowance) ls 1 $1,000.00 5 5 2 $1,000

63 Gym partition wall, general service sf 1,500 $3.00 2 none 2 $4,50064 Gym partition wall, recover sf 1,500 $9.00 10 2 2 $13,50065 Gym partition wall, hinge & track sf 1,500 $8.00 20 12 2 $12,00066 Gym partition wall, replace sf 1,500 $150.00 40 32 2 $225,000

67 Backstop, hoop, & pulley refurb ea 6 $1,200.00 30 20 2 $7,20068 Gym wall padding sf 1,000 $4.50 15 5 2 $4,50069 Motorized window shades sf 1,780 $38.00 15 5 2 $67,640

70 Ceiling tile (5% allowance) sf 3,000 $5.25 10 none 2 $15,75071 Interior lighting (allowance) sf 60,000 $2.25 20 10 2 $135,000

BUILDING INTERIOR - Replacement Costs - Subtotal $833,720

BUILDING INTERIORCOMMENTS

For the gymnasium floor, we understand that additional layers can be applied over the initial base floor, but after several cycles the base flooring will need to be removed and reinstalled. The 15 year resurfacing cycles are modeled to coincide with the 45 year strip & replace cycle to achieve a $14/ SF removal and reinstallation cost. In the interim, a $1,000 per year repair allowance is modeled for the upkeep of this flooring system.

Sample


1112303SCHOOL O13

BUILDING INTERIOR (cont.)PROJECTED REPLACEMENTS



72 Stage curtains sf 2,900 $4.00 15 5 2 $11,60073 Stage lighting (allowance) ls 1 $2,000.00 5 2 2 $2,00074 Stage/gym sound system (allowance) ls 1 $9,000.00 5 2 2 $9,00075 Stage screen ft 25 $180.00 15 5 2 $4,500

76 Cafeteria tables ea 18 $1,200.00 30 20 2 $21,60077 Round tables ea 30 $180.00 15 5 2 $5,40078 Rectangular tables ea 20 $120.00 10 5 2 $2,40079 Stack chairs ea 600 $60.00 10 5 2 $36,000

80 Class rm/office furnishing (10% allow) sf 5,000 $5.00 15 2 2 $25,00081 Class rm/office furnishing (10% allow) sf 5,000 $5.00 15 5 2 $25,00082 Class rm/office furnishing (10% allow) sf 5,000 $5.00 15 8 2 $25,00083 Class rm/office furnishing (10% allow) sf 5,000 $5.00 15 11 2 $25,00084 Class rm/office furnishing (10% allow) sf 5,000 $5.00 15 14 2 $25,000

85 Classroom, cabinet & counter ea 21 $5,000.00 30 20 2 $105,00086 Nurse, breakrm & lab, cab & counter ea 4 $8,000.00 30 20 2 $32,000

87 Library furnishing sf 3,200 $7.00 10 1 2 $22,400

88 Window treatment (10% allowance) sf 350 $8.00 5 2 2 $2,800

BUILDING INTERIOR (cont.) - Replacement Costs - Subtotal $379,700

BUILDING INTERIOR (cont.)COMMENTS Sam

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1112303SCHOOL O13




89 Server, data/file ea 1 $12,000.00 6 1 2 $12,000

90 Desktop computers (1/3) ea 85 $1,000.00 6 none 2 $85,00091 Desktop computers (1/3) ea 85 $1,000.00 6 2 2 $85,00092 Desktop computers (1/3) ea 85 $1,000.00 6 4 2 $85,000

93 Laptop computer (1/3) ea 42 $1,300.00 6 none 2 $54,60094 Laptop computer (1/3) ea 42 $1,300.00 6 2 2 $54,60095 Laptop computer (1/3) ea 42 $1,300.00 6 4 2 $54,600

96 Network (allowance) ls 1 $5,000.00 3 3 2 $5,00097 Peripheral & printer (allowance) ls 1 $5,000.00 3 none 2 $5,000

98 Smart board system ea 3 $4,000.00 6 4 2 $12,00099 Mimio system ea 14 $1,000.00 6 6 2 $14,000

100 Projector, audio/video (1/3 allowance) ea 15 $1,800.00 9 2 2 $27,000101 Projector, audio/video (1/3 allowance) ea 15 $1,800.00 9 5 2 $27,000102 Projector, audio/video (1/3 allowance) ea 15 $1,800.00 9 8 2 $27,000

103 Telephone system ea 1 $20,000.00 20 10 2 $20,000104 Entry/security system ea 1 $12,000.00 15 5 2 $12,000105 PA system ea 1 $8,000.00 20 10 2 $8,000106 Fire control/alarm (allowance) ea 1 $14,000.00 15 5 2 $14,000



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1112303SCHOOL O13




107 Hood & ventilation, cooking ea 1 $12,000.00 40 28 2 $12,000108 Fire suppression ea 1 $4,000.00 15 3 2 $4,000

109 Range/ovens ea 1 $9,800.00 25 13 2 $9,800110 Convection oven, double stack ea 1 $5,700.00 15 3 2 $5,700

111 Steam tables ea 2 $2,200.00 20 8 2 $4,400

112 Commercial refrigerator, pass thru ea 3 $2,400.00 15 3 2 $7,200113 Commercial, small refrig (50% allow.) ea 4 $1,200.00 10 3 2 $4,800

114 Cooler/freezer, box & door ea 1 $8,000.00 30 18 2 $8,000115 Cooler/freezer, condensing unit ea 2 $2,300.00 15 3 2 $4,600

116 Stainless work surface/sink (allow.) ft 40 $75.00 30 18 2 $3,000117 Small counter top appl (allowance) ls 1 $2,000.00 5 2 2 $2,000

118 Residential kitchen appl (allow) ls 1 $2,400.00 10 5 2 $2,400


BUILDING INTERIOR (cont.)COMMENTS

Residential kitchen appliances are those in the teachers breakroom, nurses station, science labs, and elsewhere.Sam

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1112303SCHOOL O13




119 Restroom, counter ea 6 $1,500.00 10 none 2 $9,000120 Restroom, partition ea 6 $6,000.00 20 10 2 $36,000121 Restroom, tile, floor & fixture ea 6 $8,000.00 40 30 2 $48,000

122 Powder room (refurbish) ea 5 $3,200.00 20 10 2 $16,000

123 Lockers ea 750 $65.00 25 15 2 $48,750

124 Piano/organ, replace ea 5 $4,000.00 20 4 2 $20,000125 Piano/organ, voice & repair (allowance) ea 5 $1,000.00 2 none 2 $5,000



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1112303SCHOOL O13

BUILDING SYSTEMPROJECTED REPLACEMENTS



126 Boiler, heating, (10% refit allowance) ea 2 $8,200.00 15 5 2 $16,400127 Boiler, heating, replace ea 2 $82,000.00 30 20 2 $164,000

128 Chiller, (10% refit allowance) ea 2 $13,000.00 5 none 2 $26,000129 Chiller, replace ea 2 $130,000.00 20 10 2 $260,000

130 Evaporators ea 2 $60,000.00 20 10 2 $120,000

131 Air handler (refit allowance) ls 1 $12,000.00 10 none 2 $12,000132 Air handler (rebuild/replace allowance) ls 1 $600,000.00 50 40 2 $600,000

133 Pump & motor, (20% allowance) ls 1 $7,000.00 3 none 2 $7,000

134 HVAC control system, refit ea 1 $4,000.00 5 none 2 $4,000135 HVAC control system, replace ea 1 $20,000.00 15 5 2 $20,000

136 Split HVAC system, 7.5 ton ea 1 $15,000.00 15 5 2 $15,000137 Split HVAC system, 1 ton ea 1 $6,000.00 15 10 2 $6,000

138 Transformer (allowance) ea 1 $5,000.00 20 10 2 $5,000

139 Building piping (allowance) ea 1 $14,000.00 25 15 2 $14,000140 Hot water heater ea 1 $10,000.00 20 10 2 $10,000141 Tank (allowance) ls 1 $8,000.00 20 10 2 $8,000

BUILDING SYSTEM - Replacement Costs - Subtotal $1,287,400

BUILDING SYSTEMCOMMENTS Sam

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1112303SCHOOL O13

BUILDING SYSTEMPROJECTED REPLACEMENTS



142 Snow blower ea 1 $1,200.00 10 5 2 $1,200

143 Floor cleaner ea 1 $4,000.00 15 5 2 $4,000144 Floor buffers ea 3 $1,000.00 20 10 2 $3,000

BUILDING SYSTEM - Replacement Costs - Subtotal $8,200

BUILDING SYSTEMCOMMENTS Sam

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1112303SCHOOL O13

VALUATION EXCLUSIONSEXCLUDED ITEMS



Miscellaneous signage ls 1 3 EXCLUDEDMailboxes ls 1 3 EXCLUDEDFire extinguisher cabinet ls 1 3 EXCLUDEDSprinkler head ls 1 3 EXCLUDEDInterior doors ls 1 3 EXCLUDEDWindow unit ls 1 3 EXCLUDEDElectric heaters ls 1 3 EXCLUDED

VALUATION EXCLUSIONSCOMMENTS

Valuation Exclusions. For ease of administration of the Replacement Reserves and to reflect accurately how Replacement Reserves are administered, items with a dollar value less than $1,000.00 have not been scheduled for funding from Replacement Reserves. Examples of items excluded from funding by Replacement Reserves by this standard are listed above.

The list above exemplifies exclusions by the cited standard(s) and is not intended to be comprehensive.

Sample


1112303SCHOOL O13

LONG-LIFE EXCLUSIONSEXCLUDED ITEMS



Exterior brick veneer ls 1 3 EXCLUDEDBuilding foundation(s) ls 1 3 EXCLUDEDConcrete floor slabs (interior) ls 1 3 EXCLUDEDWall, floor, & roof structure ls 1 3 EXCLUDEDElectrical wiring ls 1 3 EXCLUDED

LONG-LIFE EXCLUSIONSCOMMENTS

Long Life Exclusions. Components that when properly maintained, can be assumed to have a life equal to the property asa whole, are normally excluded from the Replacement Reserve Inventory. Examples of items excluded from funding by Replacement Reserves by this standard are listed above.

Exterior masonry is generally assumed to have an unlimited economic life but periodic repointing is required and we have included this for funding in the Replacement Reserve Inventory.


Sample


1112303SCHOOL O13

CHURCH EXCLUSIONSEXCLUDED ITEMS



Church furnishings & finishes ls 1 3 EXCLUDEDChurch office equipment ls 1 3 EXCLUDEDChurch computers & IT eqipment ls 1 3 EXCLUDED

CHURCH EXCLUSIONSCOMMENTS

The list above exemplifies exclusions by the cited standard(s) and is not intended to be comprehensive.Sam

ple


1112303SCHOOL O13

UTILITY EXCLUSIONSEXCLUDED ITEMS



Primary electric feeds ls 1 3 EXCLUDEDElectric transformers ls 1 3 EXCLUDEDCable TV systems and structures ls 1 3 EXCLUDEDTelephone cables and structures ls 1 3 EXCLUDEDGas mains and meters ls 1 3 EXCLUDEDWater mains and meters ls 1 3 EXCLUDEDSanitary sewers ls 1 3 EXCLUDED

UTILITY EXCLUSIONSCOMMENTS

Utility Exclusions. Many improvements owned by utility companies are on property owned by the Association. We have assumed that repair, maintenance, and replacements of these components will be done at the expense of the appropriate utility company. Examples of items excluded from funding Replacement Reserves by this standard are listed above.


Sample


1112303SCHOOL O13

MAINTENANCE AND REPAIR EXCLUSIONSEXCLUDED ITEMS



Cleaning of asphalt pavement ls 1 3 EXCLUDEDCrack sealing of asphalt pavement ls 1 3 EXCLUDEDPainting of curbs ls 1 3 EXCLUDEDStriping of parking spaces ls 1 3 EXCLUDEDNumbering of parking spaces ls 1 3 EXCLUDEDLandscaping and site grading ls 1 3 EXCLUDEDJanitorial service ls 1 3 EXCLUDEDRepair services ls 1 3 EXCLUDEDPartial replacements ls 1 3 EXCLUDEDCapital improvements ls 1 3 EXCLUDED

MAINTENANCE AND REPAIR EXCLUSIONSCOMMENTS

Maintenance activities, one-time-only repairs, and capital improvements. These activities are NOT appropriately funded from Replacement Reserves. The inclusion of such component in the Replacement Reserve Inventory could jeopardize the special tax status of ALL Replacement Reserves, exposing the Association to significant tax liabilities. We recommend that the Board of Directors discuss these exclusions and Revenue Ruling 75-370 with a Certified Public Accountant.

Examples of items excluded from funding by Replacement Reserves by this standard are listed above.


Sample


1112303SCHOOL O13

GOVERNMENT EXCLUSIONSEXCLUDED ITEMS



Government, roadways & parking ls 1 3 EXCLUDEDGovernment, sidewalks & curbs ls 1 3 EXCLUDEDGovernment, lighting ls 1 3 EXCLUDEDGovernment, stormwater mgmt. ls 1 3 EXCLUDED

GOVERNMENT EXCLUSIONSCOMMENTS

Government Exclusions. We have assumed that some of the improvements installed on property owned by the Association will be maintained by the state, county, or local government, or other association or other responsible entity. Examples of items excluded from funding by Replacement Reserves by this standard are listed above.

Excluded right-of-ways, including Symphony Lane, Waugh Chapel Road, and adjacent properties.


Sample

Intentionally Left Blank

Sample

Miller + Dodson Associates, Inc. Projected Annual Replacements - Page C1School of the Innocent August 20, 2012

1112303SCHOOL O13

PROJECTED ANNUAL REPLACEMENTSGENERAL INFORMATION

CALENDAR OF ANNUAL REPLACEMENTS. The 144 Projected Replacements in the School of the Innocent Replacement Reserve Inventory whose replacement is scheduled to be funded from Replacement Reserves are broken down on a year-by-year basis, beginning on Page C2.

REPLACEMENT RESERVE ANALYSIS AND INVENTORYPOLICIES, PROCEDURES, AND ADMINISTRATION

REVISIONS. Revisions will be made to the Replacement Reserve Analysis and Replacement Reserve Inventoryin accordance with the written instructions of the Board of Directors. No additional charge is incurred for the first revision, if requested in writing within three months of the date of the Replacement Reserve Study. It is ourpolicy to provide revisions in electronic (Adobe PDF) format only.

TAX CODE. The United States Tax Code grants favorable tax status to a common interest development (CID)meeting certain guidelines for their Replacement Reserve. If a CID files their taxes as a 'Corporation' onForm 1120 (IRC Section 277), these guidelines typically require maintenance activities, partial replacements, minor replacements, capital improvements, and one-time only replacements to be excluded from Reserves.A CID cannot commingle planning for maintenance activities with capital replacement activities in the Reserves(Revenue Ruling 75-370). Funds for maintenance activities and capital replacements activities must be held inseparate accounts. If a CID files taxes as an "Exempt Homeowners Association" using Form 1120H (IRCSection 528), the CID does not have to segregate these activities. However, because the CID may elect tochange their method of filing from year to year within the Study Period, we advise using the more restrictiveapproach. We further recommend that the CID consult with their Accountant and consider creating separateand independent accounts and reserves for large maintenance items, such as painting.

CONFLICT OF INTEREST. Neither Miller - Dodson Associates nor the Reserve Analyst has any prior or existingrelationship with this School which would represent a real or perceived conflict of interest.

RELIANCE ON DATA PROVIDED BY THE CLIENT. Information provided by an official representative of theSchool regarding financial, physical conditions, quality, or historical issues is deemed reliable.

INTENT. This Replacement Reserve Study is a reflection of the information provided by the School and the visual evaluations of the Analyst. It has been prepared for the sole use of the School and is not for thepurpose of performing an audit, quality/forensic analyses, or background checks of historical records.

PREVIOUS REPLACEMENTS. Information provided to Miller - Dodson Associates regarding prior replacementsis considered to be accurate and reliable. Our visual evaluation is not a project audit or quality inspection.

UPDATING. In the first two or possibly three years after the completion of a Level One Replacement ReserveStudy, we recommend the School review and revise the Replacement Reserve Analysis and Inventory

annually to take into account replacements which have occurred and known changes in replacement costs. This can frequently be handled as a Level Two or Level Three Study (as defined by the Community AssociationsInstitute), unless the School has completed major replacement projects. A full analysis (Level One) based on a comprehensive visual evaluation of the site should be accomplished every three to five years or after each major replacement project.

EXPERIENCE WITH FUTURE REPLACEMENTS. The Calendar of Annual Projected Replacements, listsreplacements we have projected to occur over the next thirty years, begins on Page C2. Actual experience inreplacing the items may differ significantly from the cost estimates and time frames shown because of conditionsbeyond our control. These differences may be caused by maintenance practices, inflation, variations in pricingand market conditions, future technological developments, regulatory actions, acts of God, and luck. Someitems may function normally during our visual evaluation and then fail without notice.

REVIEW OF THE REPLACEMENT RESERVE STUDY. For this study to be effective, it should be reviewed by the School of the Innocent Board of Directors, those responsible for the management of the itemsincluded in the Replacement Reserve Inventory, and the accounting professionals employed by the School.

Sample


1112303SCHOOL O13

PROJECTED REPLACEMENTS - YEARS 1 TO 3

Item 2013 $ Item 2014 $ Item 2015 $ 6 Concrete sidewalk (6%) $6,375 56 Carpet & refinish, middle win $40,500 16 Paver reset, sand (20% allow $2,450

53 Small exterior lighting (1/3 a $4,000 87 Library furnishing $22,400 23 Benches (1/3 allowance) $3,15055 Carpet & refinish, west wing $53,625 89 Server, data/file $12,000 27 Tot lot, play structure (10% r $3,80060 Flooring, gym (resurface) $48,300 30 Pond & entry, wood fencing $18,00063 Gym partition wall, general s $4,500 37 Entry monument $6,00070 Ceiling tile (5% allowance) $15,750 57 Carpet & refinish, office & ch $17,87590 Desktop computers (1/3) $85,000 63 Gym partition wall, general s $4,50093 Laptop computer (1/3) $54,600 64 Gym partition wall, recover $13,50097 Peripheral & printer (allowan $5,000 73 Stage lighting (allowance) $2,000119 Restroom, counter $9,000 74 Stage/gym sound system (al $9,000125 Piano/organ, voice & repair ( $5,000 80 Class rm/office furnishing (1 $25,000128 Chiller, (10% refit allowance $26,000 88 Window treatment (10% allo $2,800131 Air handler (refit allowance) $12,000 91 Desktop computers (1/3) $85,000133 Pump & motor, (20% allowa $7,000 94 Laptop computer (1/3) $54,600134 HVAC control system, refit $4,000 100 Projector, audio/video (1/3 a $27,000

117 Small counter top appl (allow $2,000125 Piano/organ, voice & repair ( $5,000

Total Scheduled Replacements $340,150 Total Scheduled Replacements $74,900 Total Scheduled Replacements $281,675

Sample


1112303SCHOOL O13


Item 2016 $ Item 2017 $ Item 2018 $ 1 Asphalt pavement, seal coat $30,960 63 Gym partition wall, general s $4,500 25 Field equipment (allowance) $5,000

52 Building caulking (allowance $12,000 92 Desktop computers (1/3) $85,000 62 Flooring, gym (repair allowan $1,00096 Network (allowance) $5,000 95 Laptop computer (1/3) $54,600 68 Gym wall padding $4,50097 Peripheral & printer (allowan $5,000 98 Smart board system $12,000 69 Motorized window shades $67,640108 Fire suppression $4,000 124 Piano/organ, replace $20,000 72 Stage curtains $11,600110 Convection oven, double sta $5,700 125 Piano/organ, voice & repair ( $5,000 75 Stage screen $4,500112 Commercial refrigerator, pas $7,200 77 Round tables $5,400113 Commercial, small refrig (50 $4,800 78 Rectangular tables $2,400115 Cooler/freezer, condensing u $4,600 79 Stack chairs $36,000133 Pump & motor, (20% allowa $7,000 81 Class rm/office furnishing (1 $25,000

101 Projector, audio/video (1/3 a $27,000104 Entry/security system $12,000106 Fire control/alarm (allowance $14,000118 Residential kitchen appl (allo $2,400126 Boiler, heating, (10% refit all $16,400128 Chiller, (10% refit allowance $26,000134 HVAC control system, refit $4,000135 HVAC control system, replac $20,000136 Split HVAC system, 7.5 ton $15,000142 Snow blower $1,200143 Floor cleaner $4,000


Sample


1112303SCHOOL O13


Item 2019 $ Item 2020 $ Item 2021 $ 7 Concrete sidewalk (6%) $6,375 16 Paver reset, sand (20% allow $2,450 24 Picnic tables $3,600

63 Gym partition wall, general s $4,500 20 Ramp, wood railing $2,250 53 Small exterior lighting (1/3 a $4,00090 Desktop computers (1/3) $85,000 23 Benches (1/3 allowance) $3,150 63 Gym partition wall, general s $4,50093 Laptop computer (1/3) $54,600 73 Stage lighting (allowance) $2,000 82 Class rm/office furnishing (1 $25,00096 Network (allowance) $5,000 74 Stage/gym sound system (al $9,000 91 Desktop computers (1/3) $85,00097 Peripheral & printer (allowan $5,000 88 Window treatment (10% allo $2,800 94 Laptop computer (1/3) $54,60099 Mimio system $14,000 89 Server, data/file $12,000 102 Projector, audio/video (1/3 a $27,000125 Piano/organ, voice & repair ( $5,000 117 Small counter top appl (allow $2,000 111 Steam tables $4,400133 Pump & motor, (20% allowa $7,000 125 Piano/organ, voice & repair ( $5,000


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Item 2022 $ Item 2023 $ Item 2024 $ 1 Asphalt pavement, seal coat $30,960 17 Reset garden wall (20% allo $1,050 56 Carpet & refinish, middle win $40,5002 Asphalt pavement, mill & ove $263,160 18 Site light, heads $16,650 83 Class rm/office furnishing (1 $25,0003 Concrete curb & gutter (20% $34,000 28 Tot lot, synthetic border $2,400 87 Library furnishing $22,400

96 Network (allowance) $5,000 29 Tot lot, wood fencing $5,940 100 Projector, audio/video (1/3 a $27,00097 Peripheral & printer (allowan $5,000 54 Carpet & refinish, east wing $50,000133 Pump & motor, (20% allowa $7,000 55 Carpet & refinish, west wing $53,625

62 Flooring, gym (repair allowan $1,00063 Gym partition wall, general s $4,50070 Ceiling tile (5% allowance) $15,75071 Interior lighting (allowance) $135,00092 Desktop computers (1/3) $85,00095 Laptop computer (1/3) $54,60098 Smart board system $12,000103 Telephone system $20,000105 PA system $8,000119 Restroom, counter $9,000120 Restroom, partition $36,000122 Powder room (refurbish) $16,000125 Piano/organ, voice & repair ( $5,000128 Chiller, (10% refit allowance $26,000129 Chiller, replace $260,000130 Evaporators $120,000131 Air handler (refit allowance) $12,000134 HVAC control system, refit $4,000137 Split HVAC system, 1 ton $6,000138 Transformer (allowance) $5,000140 Hot water heater $10,000141 Tank (allowance) $8,000144 Floor buffers $3,000


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1112303SCHOOL O13


Item 2025 $ Item 2026 $ Item 2027 $ 8 Concrete sidewalk (6%) $6,375 38 Bollard & access gate (allow $3,000 63 Gym partition wall, general s $4,500

16 Paver reset, sand (20% allow $2,450 40 Foundation planting (allowan $8,000 84 Class rm/office furnishing (1 $25,00023 Benches (1/3 allowance) $3,150 48 Doors, glazed $8,400 91 Desktop computers (1/3) $85,00026 Tot lot, large play structure $38,000 50 Doors, solid, per leaf $16,150 94 Laptop computer (1/3) $54,60027 Tot lot, play structure (10% r $3,800 52 Building caulking (allowance $12,000 101 Projector, audio/video (1/3 a $27,00036 Shed, sm $7,000 89 Server, data/file $12,000 125 Piano/organ, voice & repair ( $5,00037 Entry monument $6,000 109 Range/ovens $9,80057 Carpet & refinish, office & ch $17,875 113 Commercial, small refrig (50 $4,80063 Gym partition wall, general s $4,50064 Gym partition wall, recover $13,50065 Gym partition wall, hinge & t $12,00073 Stage lighting (allowance) $2,00074 Stage/gym sound system (al $9,00088 Window treatment (10% allo $2,80090 Desktop computers (1/3) $85,00093 Laptop computer (1/3) $54,60096 Network (allowance) $5,00097 Peripheral & printer (allowan $5,00099 Mimio system $14,000117 Small counter top appl (allow $2,000125 Piano/organ, voice & repair ( $5,000133 Pump & motor, (20% allowa $7,000


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Item 2028 $ Item 2029 $ Item 2030 $ 1 Asphalt pavement, seal coat $30,960 35 Shed, lg $12,000 16 Paver reset, sand (20% allow $2,450

25 Field equipment (allowance) $5,000 53 Small exterior lighting (1/3 a $4,000 23 Benches (1/3 allowance) $3,15032 Storm water, pipe & inlet (10 $3,500 63 Gym partition wall, general s $4,500 73 Stage lighting (allowance) $2,00058 Flooring, vinyl tile $56,430 92 Desktop computers (1/3) $85,000 74 Stage/gym sound system (al $9,00059 Flooring, ceramic (kitchen) $32,600 95 Laptop computer (1/3) $54,600 80 Class rm/office furnishing (1 $25,00060 Flooring, gym (resurface) $48,300 98 Smart board system $12,000 88 Window treatment (10% allo $2,80062 Flooring, gym (repair allowan $1,000 125 Piano/organ, voice & repair ( $5,000 102 Projector, audio/video (1/3 a $27,00078 Rectangular tables $2,400 117 Small counter top appl (allow $2,00079 Stack chairs $36,00096 Network (allowance) $5,00097 Peripheral & printer (allowan $5,000118 Residential kitchen appl (allo $2,400123 Lockers $48,750128 Chiller, (10% refit allowance $26,000133 Pump & motor, (20% allowa $7,000134 HVAC control system, refit $4,000139 Building piping (allowance) $14,000142 Snow blower $1,200


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Item 2031 $ Item 2032 $ Item 2033 $ 9 Concrete sidewalk (6%) $6,375 89 Server, data/file $12,000 17 Reset garden wall (20% allo $1,050

31 Pond, dredging (1/3 allowan $279,500 54 Carpet & refinish, east wing $50,00039 Flag pole $5,400 55 Carpet & refinish, west wing $53,62541 Shingle asphalt/fiberglass $386,400 62 Flooring, gym (repair allowan $1,00042 Gutter & downspout, 6" alum $23,800 63 Gym partition wall, general s $4,50044 Cupola, large, refurbish $1,800 67 Backstop, hoop, & pulley ref $7,20045 Cupola, small, refurbish $2,400 68 Gym wall padding $4,50046 Soffit & fascia $34,560 69 Motorized window shades $67,64063 Gym partition wall, general s $4,500 70 Ceiling tile (5% allowance) $15,75090 Desktop computers (1/3) $85,000 72 Stage curtains $11,60093 Laptop computer (1/3) $54,600 75 Stage screen $4,50096 Network (allowance) $5,000 76 Cafeteria tables $21,60097 Peripheral & printer (allowan $5,000 77 Round tables $5,40099 Mimio system $14,000 81 Class rm/office furnishing (1 $25,000108 Fire suppression $4,000 85 Classroom, cabinet & counte $105,000110 Convection oven, double sta $5,700 86 Nurse, breakrm & lab, cab & $32,000112 Commercial refrigerator, pas $7,200 91 Desktop computers (1/3) $85,000114 Cooler/freezer, box & door $8,000 94 Laptop computer (1/3) $54,600115 Cooler/freezer, condensing u $4,600 100 Projector, audio/video (1/3 a $27,000116 Stainless work surface/sink ( $3,000 104 Entry/security system $12,000125 Piano/organ, voice & repair ( $5,000 106 Fire control/alarm (allowance $14,000133 Pump & motor, (20% allowa $7,000 119 Restroom, counter $9,000

125 Piano/organ, voice & repair ( $5,000126 Boiler, heating, (10% refit all $16,400127 Boiler, heating, replace $164,000128 Chiller, (10% refit allowance $26,000131 Air handler (refit allowance) $12,000134 HVAC control system, refit $4,000135 HVAC control system, replac $20,000136 Split HVAC system, 7.5 ton $15,000143 Floor cleaner $4,000


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Item 2034 $ Item 2035 $ Item 2036 $

1 Asphalt pavement, seal coat $30,960 16 Paver reset, sand (20% allow $2,450 24 Picnic tables $3,60056 Carpet & refinish, middle win $40,500 20 Ramp, wood railing $2,250 33 Underground water & sanita $21,00087 Library furnishing $22,400 21 Ramp, synthetic deck $2,100 47 Storefront, entry $19,32096 Network (allowance) $5,000 22 Ramp, wood structure $4,000 49 Windows $229,95097 Peripheral & printer (allowan $5,000 23 Benches (1/3 allowance) $3,150 51 Repointing (10% allowance) $22,800133 Pump & motor, (20% allowa $7,000 27 Tot lot, play structure (10% r $3,800 52 Building caulking (allowance $12,000

30 Pond & entry, wood fencing $18,000 82 Class rm/office furnishing (1 $25,00037 Entry monument $6,000 101 Projector, audio/video (1/3 a $27,00057 Carpet & refinish, office & ch $17,875 113 Commercial, small refrig (50 $4,80063 Gym partition wall, general s $4,50064 Gym partition wall, recover $13,50073 Stage lighting (allowance) $2,00074 Stage/gym sound system (al $9,00088 Window treatment (10% allo $2,80092 Desktop computers (1/3) $85,00095 Laptop computer (1/3) $54,60098 Smart board system $12,000117 Small counter top appl (allow $2,000125 Piano/organ, voice & repair ( $5,000


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1112303SCHOOL O13


Item 2037 $ Item 2038 $ Item 2039 $

10 Concrete sidewalk (6%) $6,375 25 Field equipment (allowance) $5,000 63 Gym partition wall, general s $4,50053 Small exterior lighting (1/3 a $4,000 62 Flooring, gym (repair allowan $1,000 83 Class rm/office furnishing (1 $25,00063 Gym partition wall, general s $4,500 78 Rectangular tables $2,400 91 Desktop computers (1/3) $85,00090 Desktop computers (1/3) $85,000 79 Stack chairs $36,000 94 Laptop computer (1/3) $54,60093 Laptop computer (1/3) $54,600 89 Server, data/file $12,000 102 Projector, audio/video (1/3 a $27,00096 Network (allowance) $5,000 118 Residential kitchen appl (allo $2,400 125 Piano/organ, voice & repair ( $5,00097 Peripheral & printer (allowan $5,000 128 Chiller, (10% refit allowance $26,00099 Mimio system $14,000 134 HVAC control system, refit $4,000124 Piano/organ, replace $20,000 137 Split HVAC system, 1 ton $6,000125 Piano/organ, voice & repair ( $5,000 142 Snow blower $1,200133 Pump & motor, (20% allowa $7,000


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1112303SCHOOL O13


Item 2040 $ Item 2041 $ Item 2042 $

1 Asphalt pavement, seal coat $30,960 63 Gym partition wall, general s $4,500 84 Class rm/office furnishing (1 $25,0002 Asphalt pavement, mill & ove $263,160 92 Desktop computers (1/3) $85,000 100 Projector, audio/video (1/3 a $27,0004 Concrete curb & gutter (20% $34,000 95 Laptop computer (1/3) $54,600

16 Paver reset, sand (20% allow $2,450 98 Smart board system $12,00023 Benches (1/3 allowance) $3,150 107 Hood & ventilation, cooking $12,00073 Stage lighting (allowance) $2,000 111 Steam tables $4,40074 Stage/gym sound system (al $9,000 125 Piano/organ, voice & repair ( $5,00088 Window treatment (10% allo $2,80096 Network (allowance) $5,00097 Peripheral & printer (allowan $5,000117 Small counter top appl (allow $2,000133 Pump & motor, (20% allowa $7,000


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Miller-Dodson Associates, Inc. Condition Assessment - Page D1 School of the Innocent August 20, 2012

CONDITION ASSESSMENT General Comments. Miller-Dodson Associates conducted a Reserve Study at the School of the Innocent in August of 2012. The school is in good condition for a facility constructed between 1999 and 2003. A review of the Replacement Reserve Inventory will show that we are anticipating most of the components achieving their normal economic lives. The following comments pertain to the larger, more significant components in the Replacement Reserve Inventory and to those items that are unique or deserving of attention because of their condition or the manner in which they have been treated in the Replacement Reserve Analysis or Inventory. Asphalt Pavement. The School is responsible for the access drives and parking areas. Other roadways are maintained by the County or other municipality. In general, the School’s asphalt pavements are in good condition, with minor to moderate cracking. The School maintains an inventory of about 154,800 square feet (sf) of asphalt pavement.

In addition, the School maintains a small amount of asphalt path and walkways that are included in the general asphalt pavement work. The paths are in fair condition, with cracking and general deterioration in some areas. There are areas of settlement and displacement resulting in tripping hazards. Please see the concrete section below for more information on tripping hazards.

Asphalt paths are typically constructed on native soil. As a result, defects can begin to develop in a few years, leading to costly repairs or early replacement. Additionally, paths typically do not have proper edge confinement and support resulting in longitudinal cracking along the edges of the path. Compacted soil or gravel can mitigate this problem. Lastly, tree root damage is a common issue with asphalt paths, and some communities have had success with a process called root trimming.

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As a rule of thumb, asphalt should be overlaid when approximately 5% of the surface area is cracked or otherwise deteriorated. The normal service life of asphalt pavement is typically 18 to 20 years. In order to maintain the condition of the pavement throughout the community and to ensure the longest life of the asphalt, we recommend a systematic and comprehensive maintenance program that includes:

1. Cleaning. Long-term exposure to oil or gas breaks down asphalt. Because this asphalt pavement is generally not used for long-term parking, it is unlikely that frequent cleaning will be necessary. When necessary, spill areas should be cleaned, or patched if deterioration has penetrated the asphalt. This is a maintenance activity, and we have assumed that it will not be funded from Reserves.

2. Crack Repair. All cracks should be repaired with an appropriate compound to prevent water infiltration

through the asphalt into the base. This repair should be done annually. Crack repair is normally considered a maintenance activity and is not funded from Reserves. Areas of extensive cracking or deterioration that cannot be made watertight should be cut out and patched.

3. Seal Coating. The asphalt should be seal coated every three to five years. For this maintenance activity

to be effective in extending the life of the asphalt, cleaning and crack repair should be performed first. The pricing used is based on recent contracts for a two-inch overlay, which reflects the current local market for this work. For seal coating, several different products are available. The older more traditional seal coating products are simply paints. They coat the surface of the asphalt and they are minimally effective. However, the newer coating materials, such as those from Total Asphalt Management, Asphalt Restoration Technologies, Inc., and others, are penetrating. They are engineered, so to speak, to ‘remoisturize’ the pavement. Asphalt pavement is intended to be flexible. Over time, the volatile chemicals in the pavement dry, the pavement becomes brittle, and degradation follows in the forms of cracking and potholes. Remoisturizing the pavement can return its flexibility and extend the life of the pavement. Lastly, the resource links provided on our web site may provide insight into the general terms and concerns, including maintenance related advantages and disadvantages, which may help the School better manage the asphalt pavements throughout the community: http://mdareserves.com/resources/links/site-components. Concrete Work. The concrete work includes the curbs, sidewalks, and other flatwork. The School maintains an inventory of approximately 12,500 square feet (sf) of concrete flatwork and about 5,000 linear feet (ft) of concrete curb. We have modeled for curb replacement when the asphalt pavement is overlaid. The overall condition of the concrete work is fair to poor with a large number of tripping hazards primarily at the transitions between sidewalk and curb and between concrete sidewalks and other pedestrian pavements.

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The standards we used for recommending replacement are as follows:

1. Trip hazard, ½ inch height difference. 2. Severe cracking. 3. Severe spalling and scale. 4. Uneven riser heights on steps. 5. Steps with risers in excess of 8¼ inches.

Because it is highly unlikely that all of the concrete components will fail and require replacement in the period of the study, we have programmed funds for the replacement of these inventories and spread the funds over an extended timeframe to reflect the incremental nature of this work. This approach assumes an average failure rate of ½% to 1% per year. The relevant links on our web site may provide useful information related to concrete terminology, maintenance, and repair. Please see http://mdareserves.com/resources/links/site-components.

In addition, the school maintains other walkways and areas with brick or other pavers. These will require periodic resetting. Entry Monument and Signage. The School maintains an entry monument which is in need of repair. This study provides an allowance for the general repair and replacement of the monument every 10 years. The School may want to consider applying a coat of Siloxane or other appropriate breathable sealant to the masonry to mitigate water penetration and further degradation. In addition to the monument, the School is responsible for the signage including stop, speed, street, and other signs. These other small miscellaneous signs are not considered in this Study and should be replaced using other funds.

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Site Lighting. The School is responsible for the operation of the site lights, and there are pole street lights and building mounted lights. The lighting system was not on at the time of our site visit. We understand that the lighting system is in operating condition.

This study assumes replacement of the light fixtures every 20 years, and pole replacement every 40 years. When the light poles are replaced, we assume that the underground wiring will also be replaced. When a whole scale lighting replacement project is called for, we recommend consulting with a lighting design expert. Many municipalities have design codes, guidelines, and restrictions when it comes to exterior illumination. In addition, new technology such a LED and LIFI among others should be considered for replacement. Underground Utilities. The School is responsible for the maintenance of the underground utility lines, including the storm water management pipes, water lines, and sanitary lines. Engineering drawings were not used in the determination of these underground components. Instead, we have provided an estimate of the approximate replacement costs based on our experience with other facilities of similar size and configuration. The inspection and evaluation of underground lines and structures is beyond the scope of work for this study. Storm Water Pond. The School is served by a stormwater pond that has have an approximate total surface area of 480 square yards. The fencing around the pond was damaged or missing in several areas.

Ponds will accumulate silt and over time and lose the ability to store storm water at design levels, which could result in overflows and minor local flooding. In addition, water quality is usually negatively affected by increased siltation and debris accumulation. Accordingly, ponds require periodic dredging. Estimates of cost and the frequency of dredging ponds are a function of many variables, including the volume of the pond, the siltation rate, the nature of the material being removed, the method of removal, and the haul distance to a site that will accept the spoil material. Most of this information is unknown and must be assumed for

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the purpose of reserve study planning. The rate of siltation and the cost of periodically dredging the ponds to remove this material are very speculative and will vary greatly with local conditions. As a rule of thumb, dredging should be performed when approximately one-third of the volume of the pond has been filled with silt. In the absence of accurate information about the original depth of the pond and the local siltation rate, we have assumed that it will be necessary to remove one cubic yard of material over one-third of the pond area every 20 years. We have assumed that the material being removed is free of heavy metals and hydrocarbons, and that it will be accepted as fill at a local landfill. The cost to remove, haul and dispose of the material is estimated at $65/ cubic yard. A more accurate prediction will require a hydrologic analysis and testing, which is beyond the scope of our study. Because of the significant cost of this work and establishing the correct reserve contribution, it is recommended that the School undertake studies to refine the assumptions we have had to make with more information and estimates developed by a professional in this field. Based on our understanding, we recommend the following:

Periodically remove accumulated debris and vegetation growing in the ponds. Survey the ponds to establish the current profile of the bottom. After five years of operation, have the pond

re-surveyed to establish new depths to determine the local siltation rate. This will establish the frequency required for periodic dredging.

Periodically sample and test for contaminants. Consult with local contractors to determine the cost of removing and disposing of the spoil once its nature

is known. Firms that specialize in this work can be typically found by internet searching “Lake and Pond, Construction and Maintenance” for your state or area of the country. Some states provide short lists of companies that specialize in this type of work. Please note that the periodic removal of overgrown vegetation from the pond is considered to be a maintenance activity and has not been reserved for or included in this study. Tot Lots. The School maintains a play ground or tot lot. This tot lot includes a large play structure with synthetic borders, and wood chip stone surfacing. The facilities are in generally good condition. We noted that the playground may not have adequate protective surface under and around the equipment. The safety of each individual piece of playground equipment as well as the layout of the entire play area should be considered when evaluating a playground for safety. The installation and maintenance of the protective surfacing under and around all equipment is crucial. Please note that the evaluation of the equipment and these facilities for safety is beyond the scope of this work.

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Information for playground design and safety can be found in the "Public Playground Safety Handbook", U.S. Consumer Product Safety Commission (Pub. No. 325). For a link to this handbook please see our web site at http://mdareserves.com/resources/links/recreation Our estimates for playground equipment are based on comparing photos of the existing equipment with equipment of a similar size in manufacturer’s catalogs. We use the pricing that is quoted by the manufacturer or comparable equipment and add 30% for the disposal of the old equipment and installation of new equipment. Building Roofing. The facility is primarily roofed in asphalt shingles with a small amount standing seam metal roofing. These systems appear to be weathering normally. There are signs of repair and it is being reported that several different manufactures of shingles where used for these roofs.

Asphalt shingle roofs can have a useful life of 20 to 50 years depending on the weight and quality of the shingle. This facility’s roofing shingles are reported to have a warranty of 30 years. Weathered, curled, and missing shingles are all indications that the shingles may be nearing the end of their useful life. Metal roofing can be standing seam, rolled seam, or shingle with a normal economic life of 50 to 100 years. For the purposes of this study we have assumed 60 years and recommend recalibrating this assumption as the roofing ages. In some cases, recoating or repainting can extend the useful life further. Access to the roof was not provided at the time of inspection. As roofing systems age, periodic inspections are recommended and repair work may be required. In order to obtain the maximum useful life possible, we recommend performing routine inspections and cleanings at a decreasing interval as the roof ages. Access, inspection, and repair work should be performed by contractors and personnel who are experienced in the types of roofing used for the facility. For additional information on roofs and roof maintenance, please see the appropriate links on our web site at http://mdareserves.com/resources/links/building-exterior.

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Siding and Trim. The main exterior cladding of the building is brick and formed concrete masonry that is in good condition. Some of the joints are beginning to weather, primarily along the window sills.

As masonry weathers, the mortar joints will become damaged by water penetration. As additional water gains access to the joints, repeated freeze-thaw cycles gradually increase the damage to the mortar joints. If allowed to progress, even the masonry units such as brick, block, and stone can have their surfaces affected and masonry units can become loose. In general, masonry is considered to be a long life item and is therefore excluded from reserve funding. However, because weather and other conditions result in the slow deterioration of the mortar in masonry joints, we have included funding in this study for repointing. Repointing is the process of raking and cutting out damaged sections of mortar and replacing them with new mortar. Periodic repointing and local replacement of damaged masonry units will limit the damage done by moisture penetration. For this study, we assume that 10% of the masonry will require repointing every 10 years after approximately 30 years. For additional information about masonry and repointing, please view the relevant links at http://mdareserves.com/resources/links/building-exterior. Also the soffits are damaged and displaced in several areas.

Windows and Doors. The School is responsible for the windows and exterior doors of the facility. These units play an integral part in a facility’s overall comfort, efficiency, and energy use. The quality of the installed units, and the care taken in their installation and maintenance are major factors in their effectiveness and useful life. These units can have a useful life of 20 to 35 years or more depending on their use and other factors mentioned above. In general, we recommend coordinating the replacement of these units with other exterior work, such as siding and roof replacements. The weather tightness of the building envelope often requires transitional flashing and caulking that should be performed in coordination with each other. Warranties and advantages in ‘economy of scale’ can often result in lower overall replacement costs and a more reliable result. Lastly, coordinated

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replacements offer the opportunity to correct initial construction defects and improve the effectiveness of details with improved construction techniques and materials. For more information, please see our links at http://mdareserves.com/resources/links/building-exterior. Caulking. The caulking on the facility’s exteriors is beginning to age. Caulking and sealants play a primary role in the protection of the facility’s exterior components and the overall weather tightness of the facility. Caulking also provides a seal between dissimilar materials and changes in construction where movement is expected. We therefore recommend recaulking every 10 years or when painting, or when other exterior repairs and replacements are scheduled.

When recaulking, a simple overlay of the old caulk is improper. Rather, defective caulk joints should be completely cut out, cleaned, and prepped, with new backer materials installed as needed. New caulk can then be applied according to the manufacturer’s guidelines and recommendations. There are a significant number of sealants and caulks of varying quality and specialty. The proper specification, selection, preparation, and installation are critical to proper performance and longevity of the work. Environmental factors, including weather can play a significant role in the success of this work. For additional information on caulking and sealants, please see the appropriate links on the Miller-Dodson web site at http://mdareserves.com/resources/links/building-exterior. Sam

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Interiors. The School maintains the classrooms, library, lobby, halls, and offices. We have assumed that the School will want to maintain these areas in a commercially acceptable condition. Typically, replacement cycles for common interior spaces vary between 5 and 10 years depending on the aesthetic taste, usage, and construction. Material selection and aesthetic preferences are the major factors in setting the reserve components for items such as refurnishing and interior refurbishment. The School will need to establish these cycles as these facilities age. Maintaining historical records and incorporating these trends and preferences into a future Reserve Study update is the best way to adjust for these cycles.

We understand that the east wing of the school was recently recarpeted and refurbished and that the west wing and middle school wing are scheduled for similar work. We have accounted for this in the study.

We also note that damaged school furnishings and other finishes were found in several areas of the school and this study provides a funding plan for the incremental replacement of these over time.

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In addition to the interior finished and furnishings, the School maintains an extensive assortment of computer and other audio and video teaching aids and systems. This Study accounts for the incremental replacement of these systems over time. Typically these systems are replaced as advances in technology emerge, and are not replaced due to failure or breakdown.

Central Heating and Cooling System. This facility is fitted with a central heating and cooling system. Central heating and cooling plants are engineered systems that are limited based on the technology available at the time of their installation and their design. As an overall assessment of building efficiency and in preparation for replacement of the building’s heating and cooling system, we recommend performing an energy audit and building system evaluation that includes the replacement planning for the facility’s mechanical systems as well as the replacement and modification of the exterior envelope, including windows, doors, and insulation. HVAC Control System. The heating and cooling plant of this facility is managed and controlled by a computerized HVAC control system. Systems of this type have a useful life of 10 to 15 years.

Heating Boiler. Heating is supplied to the facility by a hot water boiler system. The boiler system is reported to be in working condition. Boiler systems typically have a service life of 20 to 40 years. When it becomes necessary to replace the central boiler system, we recommend that the community consider installing a bank of modular boilers. The use of multiple boilers will allow the operators to stage their use to match heating requirements in the building and increase the overall operating efficiency of the heating system. For additional information about modular boiler systems, please see the relevant link at http://mdareserves.com/resources/links/building-system.

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Chiller. The chiller system associated with the cooling tower is expected to have a service life of 20 to 25 years. The chiller system is reported to be in working condition. When it becomes necessary to replace the central cooling system, we recommend that the community consider installing a bank of smaller high efficiency modular chillers. The use of multiple chillers will allow the operators to stage their use to match cooling requirements in the building and increase the overall operating efficiency of the cooling system. Air Handlers. The School maintains air handlers throughout the facility, and these components can have a useful fife of 20 to 40 years. With fan, motor, and coil replacements performed as needed, the casings of these systems can last significantly longer.

Pumps, Fans and Motors. The School maintains an assortment of fans, motors, pumps, and valves that are part of the central heating and cooling plant. Rather than inventorying and listing these separately, we have assumed an incremental approach to their replacement and provided a partial replacement allowance every five years. Split and Package HVAC Systems. The School also maintains a few heating ventilation and air conditioning (HVAC) systems that use the refrigerant known as R22. This refrigerant will be phased out of production by the year 2020 and generally phased out of use in new systems by the year 2010. See the EPA, HCFC Phaseout Schedule from our web site at http://mdareserves.com/resources/links/building-system. Since most of the community’s AC systems rely on the old R22 refrigerant, we assume that the HVAC replacement will include upgrading to the new refrigerant, which is likely to require the replacement of the entire system, including the compressor, coil, and line-set.

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Even though manufacturers continue to predict 15 to 20-year life cycles for HVAC equipment that use these new refrigerants, this is not proven by historical data. We therefore recommend anticipating a normal economic life of 15 years for all HVAC equipment that uses pressurized refrigerants of these types. As is the case with most equipment, to achieve a maximum useful economic life, proper maintenance is essential. In some cases, proper and proactive maintenance can greatly extend the useful life of a component. Piping. It is assumed that copper water supply pipes have been used throughout the facility. As a result of changes in water chemistry, brought on by federal clean water legislation, piping has been developing pin-hole leaks, which can lead to higher maintenance costs and a shorter than normal service life. For further information about the problem and research that is being conducted, please see the WSSC link on our web site at http://mdareserves.com/resources/links/building-system. In addition, in some cases, the pipe and fitting materials are of poor quality, and pin-hole leaks have been reported in as little as three years. Water quality, in particular the Ph of the water, is critical to the longevity of these systems, and typically, the pressurized water supply lines are the most problematic followed by the central heating and cooling lines. As a result of these problems, the facility’s piping will require replacement at some point in time. As a less expensive alternative to the extremely costly work of re-piping a building, systems have been developed to clean and epoxy-line the interior surfaces of these and other types of pipes. Also, new pipe materials are on the market. Please note that the timeframe for repiping a facility can vary widely, and the estimation of the remaining economic life is highly speculative. Given the age of the facility, the School should be aware of the various technologies available for pipe replacement and pipe lining, including traditional pipe replacement, replacement with CPVC and other synthetic pipes, and linings from companies such as Ace Duraflo and Curaflo. However, Miller-Dodson does not endorse any specific process or company. For budgeting purposes, an allowance of $14,000 every 25 years is included in this study for repiping work. However, please note that this work has a high degree of variability depending on the layout of the facility and accessibility, and can vary significantly. To gain a better understanding of the condition of this facility’s pipes and water supply lines, we recommend having an expert evaluation of the piping performed. This evaluation should provide an estimation of remaining useful life of the piping systems, the condition of the water supply, and provide recommendations for replacement and to maximize the remaining useful life of this facility’s piping systems. To gain a better understanding of this issue, please see the Water Delivery Report on our web site at http://mdareserves.com/resources/links/building-system.

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Building Electrical Service. Other than transformers and meters and if protected from water damage or overloading, interior electrical systems within a building, including feed lines and switch gear, are considered long-life components and are therefore excluded from this study. In order to maintain this equipment properly, periodic tightening of all connections is recommended every three to five years. Insurance policies in some cases may have specific requirements regarding the tightening of electrical connections. It is also recommended that outlets, sockets, switches, and minor fixtures be replaced at a maximum of every 30 years. Replacement of these smaller components, unless otherwise identified, is considered incidental to the refurbishment of a wing or classroom or is considered a Valuation Exclusion. Fire Safety Systems. The building is fitted with a fire safety system that includes sprinklers and alarms. Wet and dry pipe sprinkler systems have a wide variety of configurations and requirements depending on their age, condition, and jurisdictional location. Specific county and municipal codes can make a significant difference on what your community’s specific requirements may be. Building fire alarm systems have a service life of 15 to 25 years. While the panels may continue to operate past this point, changes in fire safety technology and building fire safety codes tend to render them obsolete. In addition, manufacturers only support their systems for a limited period, typically about 15 years. After this time, it may be increasingly difficult to obtain replacement parts and service. When it becomes necessary to upgrade the fire alarm system, differences in the technologies and new code requirements are likely to require upgrades in lighting, sensors, alarms, and other system and sub components. For wet and dry pipe systems, we have assumed that these are long life components and will not require whole scale replacement. It is imperative however for these pipes to be properly drained or for the water to be properly conditioned. Other components such as heads, gauges, and valves are assumed to be normal maintenance items and are therefore excluded from the study.

We recommend having your entire fire safety system inspected and evaluated, by a professional in this field who is familiar with your area of the country. In addition, a comprehensive preventative maintenance program will ensure the maximum possible useful life from these components, and a qualified professional will be able to help in setting up and implementing such a program. As a preliminary estimate, we have provided a $14,000 allowance every 15 years for the major repair and upgrade of the fire safety systems. A detailed evaluation of the community’s fire safety system should include an estimate of reserve funding for these components and this funding estimate should be incorporated in the next reserve study update. Inspections and annual maintenance work are not accounted for or included in this study.

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This Condition Assessment is based upon our visual survey of the property. The sole purpose of the visual survey was an evaluation of the common elements of the property to ascertain the remaining useful life and the replacement costs of these common elements. Our evaluation assumed that all components met building code requirements in force at the time of construction. Our visual survey was conducted with care by experienced persons, but no warranty or guarantee is expressed or implied.

End of Condition Assessment

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Miller-Dodson Associates, Inc. Attachments - Page E1 Appendix

1. COMMON INTEREST DEVELOPMENTS - AN OVERVIEW Over the past 40 years, the responsibility for community facilities and infrastructure around many of our homes has shifted from the local government to Community Associations. Thirty years ago, a typical new town house abutted a public street on the front and a public alley on the rear. Open space was provided by a nearby public park and recreational facilities were purchased ala carte from privately owned country clubs, swim clubs, tennis clubs, and gymnasiums. Today, 60% of all new residential construction, i.e. townhouses, single family homes, condominiums, and cooperatives, is in Common Interest Developments (CID). In a CID, a home owner is bound to a Community Association that owns, maintains, and is responsible for periodic replacements of various components that may include the roads, curbs, sidewalks, playgrounds, street lights, recreational facilities, and other community facilities and infrastructure. The growth of Community Associations has been explosive. In 1965 there were only 500 Community Associations in the United States. According to the U.S. Census, there were 130,000 Community Associations in 1990. Community Associations Institute (CAI), a national trade association, estimates there were more than 200,000 Community Associations in the year 2000, and that the number of Community Associations will continue to multiply. The shift of responsibility for billions of dollars of community facilities and infrastructure from the local government and private sector to Community Associations has generated new and unanticipated problems. Although Community Associations have succeeded in solving many short term problems, many Associations have failed to properly plan for the tremendous expenses of replacing community facilities and infrastructure components. When inadequate replacement reserve funding results in less than timely replacements of failing components, home owners are exposed to the burden of special assessments, major increases in Association fees, and a decline in property values.

2. REPLACEMENT RESERVE STUDY The purpose of a Replacement Reserve Study is to provide the Association with an inventory of the common community facilities and infrastructure components that require periodic replacement, a general view of the condition of these components, and an effective financial plan to fund projected periodic replacements. The Replacement Reserve Study consists of the following:

Replacement Reserve Study Introduction. The introduction provides a description of the property, reviews the intent of the Replacement Reserve Study, and lists documents and site evaluations upon which the Replacement Reserve Study is based.

Section A Replacement Reserve Analysis. Many components owned by the Association have a limited life and require

periodic replacement. Therefore it is essential the Association have a financial plan that provides funding for the timely replacement of these components in order to protect the safety, appearance, and value of the community. In conformance with American Institute of Certified Public Accountant guidelines, Section A Replacement Reserve Analysis evaluates the current funding of Replacement Reserves as reported by the Association and recommends annual funding of Replacement Reserves by two generally accepted accounting methods; the Cash Flow Method and the Component Method. Section A Replacement Reserve Analysis includes graphic and tabular presentations of these methods and current Association funding.

Section B Replacement Reserve Inventory. The Replacement Reserve Inventory lists the commonly-owned

components within the community that require periodic replacement using funding from Replacement Reserves. The Replacement Reserve Inventory also provides information about components excluded from the Replacement Reserve Inventory whose replacement is not scheduled for funding from Replacement Reserves.

Replacement Reserve Inventory includes estimates of the normal economic life and the remaining economic life for

those components whose replacement is scheduled for funding from Replacement Reserves.

Section C Projected Annual Replacements. The Calendar of Projected Annual Replacements provides a year-by-year listing of the Projected Replacements based on the data in the Replacement Reserve Inventory.

Section D Condition Assessment. Several of the items listed in the Replacement Reserve Inventory are discussed in

more detail. The Condition Assessment includes a narrative and photographs that document conditions at the property observed during our visual evaluation.

Section E Attachments. The Appendix is provided as an attachment to the Replacement Reserve Study. Additional

attachments may include supplemental photographs to document conditions at the property and additional information specific to the property cited in the Conditions Assessment (i.e. Consumer Product Safety Commission, Handbook for Public Playground Safety, information on segmental retaining walls, manufacturer recommendations for asphalt shingles or siding, etc).

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3. METHODS OF ANALYSIS The Replacement Reserve industry generally recognizes two different methods of accounting for Replacement Reserve Analysis. Due to the difference in accounting methodologies, these methods lead to different calculated values for the Minimum Annual Contribution to the Reserves. The results of both methods are presented in this report. The Association should obtain the advice of its accounting professional as to which method is more appropriate for the Association. The two methods are:

Component Method. This method is a time tested mathematical model developed by HUD in the early 1980s. It treats each item in the replacement schedule as an individual line item budget. Generally, the Minimum Annual Contribution to Reserves is higher when calculated by the Component Method. The mathematical model for this method works as follows:

First, the total Current Objective is calculated, which is the reserve amount that would have accumulated had all of the items on the schedule been funded from initial construction at their current replacement costs. Next, the Reserves Currently on Deposit (as reported by the Association) are distributed to the components in the schedule in proportion to the Current Objective. The Minimum Annual Deposit for each component is equal to the Estimated Replacement Cost, minus the Reserves on Hand, divided by the years of life remaining.

Cash Flow Method. The Cash Flow Method is sometimes referred to as the "Pooling Method." It calculates the

minimum constant annual contribution to reserves (Minimum Annual Deposit) required to meet projected expenditures without allowing total reserves on hand to fall below the specified minimum level in any year. This method usually results in a calculated requirement for annual contribution somewhat less than that arrived at by the Component Method of analysis.

First, the Minimum Recommended Reserve Level to be Held on Account is determined based on the age, condition, and replacement cost of the individual components. The mathematical model then allocates the estimated replacement costs to the future years in which they are projected to occur. Based on these expenditures, it then calculates the minimum constant yearly contribution (Minimum Annual Deposit) to the reserves necessary to keep the reserve balance at the end of each year above the Minimum Recommended Reserve Level to be Held on Account. The Cash Flow Analysis assumes that the Association will have authority to use all of the reserves on hand for replacements as the need occurs. This method usually results in a Minimum Annual Deposit which is less than that arrived at by the Component Method.

Adjusted Cash Flow Analysis. This program has the ability to modify the Cash Flow Method to take into account

forecasted inflation and interest rates, thereby producing an Adjusted Cash Flow Analysis. Attempting to forecast future inflation and interest rates and the impact of changing technology is highly tenuous. Therefore, in most cases it is preferable to make a new schedule periodically rather than attempt to project far into the future. We will provide more information on this type of analysis upon request.

4. REPLACEMENT RESERVE STUDY DATA

Identification of Reserve Components. The Reserve Analyst has only two methods of identifying Reserve Components;

1) information provided by the Association and 2) observations made at the site. It is important that the Reserve Analyst be provided with all available information detailing the components owned by the Association. It is our policy to request such information prior to bidding on a project and to meet with the individuals responsible for maintaining the community after acceptance of our proposal. After completion of the Study, the Study should be reviewed by the Board of Directors, individuals responsible for maintaining the community, and the Association’s accounting professionals. We are dependent upon the Association for correct information, documentation, and drawings.

Unit Costs. Unit costs are developed using nationally published standards and estimating guides and are adjusted by

state or region. In some instances, recent data received in the course of our work is used to modify these figures.

Contractor proposals or actual cost experience may be available as part of the Association records. This is useful information which should be incorporated into your report. Please bring any such available data to our attention, preferably before the report is commenced.

Replacement vs. Repair and Maintenance. A Replacement Reserve Study addresses the required funding for Capital

Replacement Expenditures. This should not be confused with operational costs or cost of repairs or maintenance.

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5. DEFINITIONS Adjusted Cash Flow Analysis. Cash flow analysis adjusted to take into account annual cost increases due to inflation and interest earned on invested reserves. In this method, the annual contribution is assumed to grow annually at the inflation rate. Annual Deposit if Reserves Were Fully Funded. Shown on the Summary Sheet A1 in the Component Method summary, this would be the amount of the Annual Deposit needed if the Reserves Currently on Deposit were equal to the Total Current Objective. Cash Flow Analysis. See Cash Flow Method, above. Component Analysis. See Component Method, above. Contingency. An allowance for unexpected requirements. Roughly the same as the Minimum Recommended Reserve Level to be Held on Account used in the Cash Flow Method of analysis. Critical Year. In the Cash Flow Method, a year in which the reserves on hand are projected to fall to the established minimum level. See Minimum Recommended Reserve Level to be Held on Account. Current Objective. This is the reserve amount that would have accumulated had the item been funded from initial construction at its current replacement cost. It is equal to the estimated replacement cost divided by the estimated economic life, times the number of years expended (the difference between the Estimated Economic Life and the Estimated Life Left). The Total Current Objective can be thought of as the amount of reserves the Association should now have on hand based on the sum of all of the Current Objectives. Cyclic Replacement Item. A component item that typically begins to fail after an initial period (Estimated Initial Replacement), but which will be replaced in increments over a number of years (the Estimated Replacement Cycle). The Reserve Analysis program divides the number of years in the Estimated Replacement Cycle into five equal increments. It then allocates the Estimated Replacement Cost equally over those five increments. (As distinguished from Normal Replacement Items, see below) Estimated Economic Life. Used in the Normal Replacement Schedules. This represents the industry average number of years that a new item should be expected to last until it has to be replaced. This figure is sometimes modified by climate, region, or original construction conditions. Estimated Economic Life Left. Used in the Normal Replacement Schedules. Number of years until the item is expected to need replacement. Normally, this number would be considered to be the difference between the Estimated Economic Life and the age of the item. However, this number must be modified to reflect maintenance practice, climate, original construction and quality, or other conditions. For the purpose of this report, this number is determined by the Reserve Analyst based on the present condition of the item relative to the actual age. Estimated Initial Replacement. For a Cyclic Replacement Item (see above), the number of years until the replacement cycle is expected to begin. Estimated Replacement Cycle. For a Cyclic Replacement Item, the number of years over which the remainder of the component's replacement occurs. Minimum Annual Deposit. Shown on the Summary Sheet A1. The calculated requirement for annual contribution to reserves as calculated by the Cash Flow Method (see above). Minimum Deposit in the Study Year. Shown on the Summary Sheet A1. The calculated requirement for contribution to reserves in the study year as calculated by the Component Method (see above). Minimum Recommended Reserve Level to be Held on Account. Shown on the Summary Sheet A1, this number is used in the Cash Flow Method only. This is the prescribed level below which the reserves will not be allowed to fall in any year. This amount is determined based on the age, condition, and replacement cost of the individual components. This number is normally given as a percentage of the total Estimated Replacement Cost of all reserve components. Normal Replacement Item. A component of the property that, after an expected economic life, is replaced in its entirety. (As distinguished from Cyclic Replacement Items, see above.) Normal Replacement Schedules. The list of Normal Replacement Items by category or location. These items appear on pages designated. Number of Years of the Study. The number of years into the future for which expenditures are projected and reserve levels calculated. This number should be large enough to include the projected replacement of every item on the schedule, at least once. This study covers a 40-year period. One Time Deposit Required to Fully Fund Reserves. Shown on the Summary Sheet A1 in the Component Method summary, this is the difference between the Total Current Objective and the Reserves Currently on Deposit.

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Reserves Currently on Deposit. Shown on the Summary Sheet A1, this is the amount of accumulated reserves as reported by the Association in the current year. Reserves on Hand. Shown in the Cyclic Replacement and Normal Replacement Schedules, this is the amount of reserves allocated to each component item in the Cyclic or Normal Replacement schedules. This figure is based on the ratio of Reserves Currently on Deposit divided by the total Current Objective. Replacement Reserve Study. An analysis of all of the components of the common property of the Association for which a need for replacement should be anticipated within the economic life of the property as a whole. The analysis involves estimation for each component of its estimated Replacement Cost, Estimated Economic Life, and Estimated Life Left. The objective of the study is to calculate a recommended annual contribution to the Association's Replacement Reserve Fund. Total Replacement Cost. Shown on the Summary Sheet A1, this is total of the Estimated Replacement Costs for all items on the schedule if they were to be replaced once. Unit Replacement Cost. Estimated replacement cost for a single unit of a given item on the schedule. Unit (of Measure). Non-standard abbreviations are defined on the page of the Replacement Reserve Inventory where the item appears. The following standard abbreviations are used in this report: EA: each FT: linear feet LS: lump sum PR: pair SF: square feet SY: square yard

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Miller + Dodson Associates, Inc. Cash Flow Method Accounting Summary - Page CF-1School of the Innocent August 20, 2012

1112303SCHOOL O13

CASH FLOW METHOD ACCOUNTING SUMMARYThis School of the Innocent - Cash Flow Method Accounting Summary is an attachment to theSchool of the Innocent - Replacement Reserve Study dated August 20, 2012 and is for use byaccounting and reserve professionals experienced in School funding and accounting principles.This Summary consists of four reports, the 2013, 2014, and 2015 Cash Flow Method Category FundingReports (3) and a Three-Year Replacement Funding Report.

CASH FLOW METHOD CATEGORY FUNDING REPORT, 2013, 2014, and 2015. Each of the 144 ProjectedReplacements listed in the School of the Innocent Replacement Reserve Inventory has beenassigned to one of 11 categories. The following information is summarized by category in each report:

Normal Economic Life and Remaining Economic Life of the Projected Replacements.

Cost of all Scheduled Replacements in each category.

Replacement Reserves on Deposit allocated to the category at the beginning and end of the report period.

Cost of Projected Replacements in the report period.

Recommended Replacement Reserve Funding allocated to the category during the report period as calculated by the Cash Flow Method.

THREE-YEAR REPLACEMENT FUNDING REPORT. This report details the allocation of the $600,000Beginning Balance (at the start of the Study Year) and the $860,237 of additional Replacement ReserveFunding in 2013 through 2015 (as calculated in the Replacement Reserve Analysis) to each of the 144Projected Replacements listed in the Replacement Reserve Inventory. These allocations have been made using Chronological Allocation, a method developed by Miller Dodson Associates, Inc., and discussed below.The calculated data includes:

Identification and estimated cost of each Projected Replacement schedule in years 2013 through 2015.

Allocation of the $600,000 Beginning Balance to the Projected Replacements by Chronological Allocation.

Allocation of the $860,237 of additional Replacement Reserve Funding recommended in the Replacement Reserve Analysis in years 2013 through 2015, by Chronological Allocation.

CHRONOLOGICAL ALLOCATION. Chronological Allocation assigns Replacement Reserves to ProjectedReplacements on a "first come, first serve" basis in keeping with the basic philosophy of the Cash Flow Method.The Chronological Allocation methodology is outlined below.

The first step is the allocation of the $600,000 Beginning Balance to the Projected Replacements in theStudy Year. Remaining unallocated funds are next allocated to the Projected Replacements in subsequentyears in chronological order until the total of Projected Replacements in the next year is greater than the unallocated funds. Projected Replacements in this year are partially funded with each replacementreceiving percentage funding. The percentage of funding is calculated by dividing the unallocated funds by the total of Projected Replacements in the partially funded year.

At School of the Innocent the Beginning Balance funds all Scheduled Replacements inthe Study Year through 2014 and provides partial funding (66%) of replacements scheduled in 2015.

The next step is the allocation of the $286,746 of 2013 Cash Flow Method Reserve Funding calculatedin the Replacement Reserve Analysis. These funds are first allocated to fund the partially fundedProjected Replacements and then to subsequent years in chronological order as outlined above.

At School of the Innocent the Beginning Balance and the 2013 Replacement ReserveFunding, funds replacements through 2016 and partial funds (57.3%) replacements in 2017.

Allocations of the 2014 and 2015 Reserve Funding are done using the same methodology.

The Three-Year Replacement Funding Report details component by component allocations made by Chronological Allocation.

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1112303SCHOOL O13

2013 - CASH FLOW METHOD CATEGORY FUNDING REPORT

Each of the 144 Projected Replacements included in the School of the Innocent Replacement ReserveInventory has been assigned to one of the 11 categories listed in TABLE CF-1 below. This calculated data is asummary of data provided in the Three-Year Replacement Funding Report and Replacement Reserve Inventory.The accuracy of this data is dependent upon many factors including the following critical financial data:

A Beginning Balance of $600,000 as of the first day of the Study Year, July 1, 2012.

Total reserve funding (including the Beginning Balance) of $886,746 in the Study Year.

No expenditures from Replacement Reserves other than those specifically listed in theReplacement Reserve Inventory.

All Projected Replacements scheduled in the Replacement Reserve Inventory in 2013 beingaccomplished in 2013 at a cost of $340,150.

If any of these critical factors are inaccurate, do not use the data and please contact Miller Dodson Associatesto arrange for an update of the Replacement Reserve Study.

2013 - CASH FLOW METHOD CATEGORY FUNDING - TABLE CF-1NORMAL REMAINING ESTIMATED 2013 2013 2013 2013

ECONOMIC ECONOMIC REPLACEMENT BEGINNING RESERVE PROJECTED END OF YEARCATEGORY LIFE LIFE COST BALANCE FUNDING REPLACEMENTS BALANCE

SITE COMPONENT 5 to 60 years 0 to 54 years $528,620 $7,984 $31,801 ($6,375) $33,410

SITE COMPONENT (cont.) 5 to 60 years 2 to 40 years $421,740 $16,382 $8,568 $24,950


BUILDING EXTERIOR 8 to 60 years 0 to 40 years $777,180 $4,000 $12,000 ($4,000) $12,000

BUILDING INTERIOR 2 to 45 years 0 to 32 years $833,720 $186,231 $14,897 ($122,175) $78,953

BUILDING INTERIOR (cont.) 5 to 30 years 1 to 20 years $379,700 $47,876 $13,324 $61,200

BUILDING INTERIOR (cont.) 3 to 20 years 0 to 10 years $601,800 $265,991 $154,068 ($144,600) $275,459



BUILDING SYSTEM 3 to 50 years 0 to 40 years $1,287,400 $49,000 $7,000 ($49,000) $7,000

BUILDING SYSTEM 10 to 20 years 5 to 10 years $8,200

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1112303SCHOOL O13




Total reserve funding (including the Beginning Balance) of $1,173,492 in 2013 through 2014.


All Projected Replacements scheduled in the Replacement Reserve Inventory in 2014 being*****




SITE COMPONENT 5 to 60 years 1 to 59 years $528,620 $33,410 $33,410


SITE COMPONENT (cont.) 10 to 30 years 1 to 17 years $22,400 $6,000 $6,000

BUILDING EXTERIOR 8 to 60 years 2 to 39 years $777,180 $12,000 $12,000






BUILDING SYSTEM 3 to 50 years 2 to 39 years $1,287,400 $7,000 $55,880 $62,880

BUILDING SYSTEM 10 to 20 years 4 to 9 years $8,200 $3,570 $3,570

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1112303SCHOOL O13




Total Replacement Reserve funding (including the Beginning Balance) of $1,460,237 in 2013 to 2015.


All Projected Replacements scheduled in the Replacement Reserve Inventory in 2015 beingaccomplished in 2015 at a cost of $281,675.




SITE COMPONENT 5 to 60 years 0 to 58 years $528,620 $33,410 $6,694 ($2,450) $37,654

SITE COMPONENT (cont.) 5 to 60 years 0 to 38 years $421,740 $28,382 $2,270 ($24,950) $5,702

SITE COMPONENT (cont.) 10 to 30 years 0 to 16 years $22,400 $6,000 ($6,000)

BUILDING EXTERIOR 8 to 60 years 1 to 38 years $777,180 $12,000 $12,000






BUILDING SYSTEM 3 to 50 years 1 to 38 years $1,287,400 $62,880 $32,520 $95,400

BUILDING SYSTEM 10 to 20 years 3 to 8 years $8,200 $3,570 $1,630 $5,200

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1112303SCHOOL O13

CASH FLOW METHOD - THREE-YEAR REPLACEMENT FUNDING REPORT

TABLE 4 below details the allocation of the $600,000 Beginning Balance, as reported by the Association and the$860,237 of Replacement Reserve Funding calculated by the Cash Flow Method in 2013 to 2015, to the 144Projected Replacements listed in the Replacement Reserve Inventory. These allocations have been made byChronological Allocation, a method developed by Miller Dodson Associates, Inc., and outlined on Page CF-1.The accuracy of the allocations is dependent upon many factors including the following critical financial data:




Total Replacement Reserve funding (including the Beginning Balance) of $1,460,237 in 2013 to 2015.


All Projected Replacements scheduled in the Replacement Reserve Inventory in 2013 to 2015 beingaccomplished as scheduled in the Replacement Reserve Inventory at a cost of $696,725.

If any of these critical factors are inaccurate, do not use the data and please contact Miller DodsonAssociates, Inc., to arrange for an update of the Replacement Reserve Study.

CASH FLOW METHOD - THREE-YEAR REPLACEMENT FUNDING - TABLE CF-4Description of Estimated Allocation 2013 2013 2013 2014 2014 2014 2015 2015 2015

Item Projected Replacement of Beginning Reserve Projected End of Year Reserve Projected End of Year Reserve Projected End of Year# Replacement Costs Balance Funding Replacements Balance Funding Replacements Balance Funding Replacements Balance

SITE COMPONENT

1 Asphalt pavement, seal coat 30,960 30,960 30,960 30,960 30,9602 Asphalt pavement, mill & overlay 263,1603 Concrete curb & gutter (20%) 34,0004 Concrete curb & gutter (20%) 34,0005 Concrete curb & gutter (20%) 34,0006 Concrete sidewalk (6%) 6,375 6,375 (6,375)7 Concrete sidewalk (6%) 6,375 6,375 6,3758 Concrete sidewalk (6%) 6,3759 Concrete sidewalk (6%) 6,37510 Concrete sidewalk (6%) 6,37511 Concrete sidewalk (6%) 6,37512 Concrete sidewalk (6%) 6,37513 Concrete sidewalk (6%) 6,37514 Concrete sidewalk (6%) 6,37515 Concrete sidewalk (6%) 6,37516 Paver reset, sand (20% allowance) 2,450 1,609 841 2,450 2,450 319 (2,450) 31917 Reset garden wall (20% allowance) 1,05018 Site light, heads 16,65019 Site light, poles 48,600

SITE COMPONENT (cont.)

20 Ramp, wood railing 2,250 293 29321 Ramp, synthetic deck 2,10022 Ramp, wood structure 4,00023 Benches (1/3 allowance) 3,150 2,068 1,082 3,150 3,150 410 (3,150) 41024 Picnic tables 3,60025 Field equipment (allowance) 5,000 3,432 3,432 1,568 5,00026 Tot lot, large play structure 38,00027 Tot lot, play structure (10% refurb) 3,800 2,495 1,305 3,800 3,800 (3,800)28 Tot lot, synthetic border 2,40029 Tot lot, wood fencing 5,94030 Pond & entry, wood fencing 18,000 11,819 6,181 18,000 18,000 (18,000)31 Pond, dredging (1/3 allowance) 279,50032 Storm water, pipe & inlet (10% allow.) 3,50033 Underground water & sanitary (allow.) 21,00034 Fire hydrant 10,50035 Shed, lg 12,00036 Shed, sm 7,000

SITE COMPONENT (cont.)

37 Entry monument 6,000 3,940 2,060 6,000 6,000 (6,000)38 Bollard & access gate (allowance) 3,00039 Flag pole 5,400

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1112303SCHOOL O13

CASH FLOW METHOD - THREE-YEAR REPLACEMENT FUNDING - TABLE 4 cont'dDescription of Estimated Allocation 2013 2013 2013 2014 2014 2014 2015 2015 2015


40 Foundation planting (allowance) 8,000

BUILDING EXTERIOR

41 Shingle asphalt/fiberglass 386,40042 Gutter & downspout, 6" aluminum 23,80043 Standing seam metal 15,60044 Cupola, large, refurbish 1,80045 Cupola, small, refurbish 2,40046 Soffit & fascia 34,56047 Storefront, entry 19,32048 Doors, glazed 8,40049 Windows 229,95050 Doors, solid, per leaf 16,15051 Repointing (10% allowance) 22,80052 Building caulking (allowance) 12,000 12,000 12,000 12,000 12,00053 Small exterior lighting (1/3 allowance) 4,000 4,000 (4,000)

BUILDING INTERIOR

54 Carpet & refinish, east wing & lobby 50,00055 Carpet & refinish, west wing & library 53,625 53,625 (53,625)56 Carpet & refinish, middle wing 40,500 40,500 40,500 (40,500)57 Carpet & refinish, office & church 17,875 11,737 6,138 17,875 17,875 (17,875)58 Flooring, vinyl tile 56,43059 Flooring, ceramic (kitchen) 32,60060 Flooring, gym (resurface) 48,300 48,300 (48,300)61 Flooring, gym (strip & replace) 48,30062 Flooring, gym (repair allowance) 1,000 686 686 314 1,00063 Gym partition wall, general service 4,500 7,455 4,124 (4,500) 7,078 1,922 9,000 4,500 (4,500) 9,00064 Gym partition wall, recover 13,500 8,864 4,636 13,500 13,500 (13,500)65 Gym partition wall, hinge & track 12,00066 Gym partition wall, replace 225,00067 Backstop, hoop, & pulley refurb 7,20068 Gym wall padding 4,500 3,089 3,089 1,411 4,50069 Motorized window shades 67,640 46,434 46,434 21,206 67,64070 Ceiling tile (5% allowance) 15,750 15,750 (15,750)71 Interior lighting (allowance) 135,000

BUILDING INTERIOR (cont.)

72 Stage curtains 11,600 7,963 7,963 3,637 11,60073 Stage lighting (allowance) 2,000 1,313 687 2,000 2,000 260 (2,000) 26074 Stage/gym sound system (allowance) 9,000 5,909 3,091 9,000 9,000 1,171 (9,000) 1,17175 Stage screen 4,500 3,089 3,089 1,411 4,50076 Cafeteria tables 21,60077 Round tables 5,400 3,707 3,707 1,693 5,40078 Rectangular tables 2,400 1,648 1,648 752 2,40079 Stack chairs 36,000 24,714 24,714 11,286 36,00080 Class rm/office furnishing (10% allow) 25,000 16,415 8,585 25,000 25,000 (25,000)81 Class rm/office furnishing (10% allow) 25,000 17,162 17,162 7,838 25,00082 Class rm/office furnishing (10% allow) 25,00083 Class rm/office furnishing (10% allow) 25,00084 Class rm/office furnishing (10% allow) 25,00085 Classroom, cabinet & counter 105,00086 Nurse, breakrm & lab, cab & counter 32,00087 Library furnishing 22,400 22,400 22,400 (22,400)88 Window treatment (10% allowance) 2,800 1,839 961 2,800 2,800 364 (2,800) 364


89 Server, data/file 12,000 12,000 12,000 (12,000) 1,561 1,56190 Desktop computers (1/3) 85,000 85,000 (85,000) 85,000 85,00091 Desktop computers (1/3) 85,000 55,812 29,188 85,000 85,000 (85,000)92 Desktop computers (1/3) 85,000 48,701 48,701 36,299 85,000 85,00093 Laptop computer (1/3) 54,600 54,600 (54,600) 54,600 54,60094 Laptop computer (1/3) 54,600 35,851 18,749 54,600 54,600 (54,600)95 Laptop computer (1/3) 54,600 31,283 31,283 23,317 54,600 54,60096 Network (allowance) 5,000 5,000 5,000 5,000 5,000 10,00097 Peripheral & printer (allowance) 5,000 5,000 5,000 (5,000) 5,000 5,000 5,000 10,00098 Smart board system 12,000 6,875 6,875 5,125 12,000 12,00099 Mimio system 14,000 14,000 14,000

100 Projector, audio/video (1/3 allowance) 27,000 17,728 9,272 27,000 27,000 (27,000)101 Projector, audio/video (1/3 allowance) 27,000 18,535 18,535 8,465 27,000102 Projector, audio/video (1/3 allowance) 27,000103 Telephone system 20,000

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1112303SCHOOL O13

CASH FLOW METHOD - THREE-YEAR REPLACEMENT FUNDING - TABLE 4 cont'dDescription of Estimated Allocation 2013 2013 2013 2014 2014 2014 2015 2015 2015


104 Entry/security system 12,000 8,238 8,238 3,762 12,000105 PA system 8,000106 Fire control/alarm (allowance) 14,000 9,611 9,611 4,389 14,000


107 Hood & ventilation, cooking 12,000108 Fire suppression 4,000 4,000 4,000 4,000 4,000109 Range/ovens 9,800110 Convection oven, double stack 5,700 5,700 5,700 5,700 5,700111 Steam tables 4,400112 Commercial refrigerator, pass thru 7,200 7,200 7,200 7,200 7,200113 Commercial, small refrig (50% allow.) 4,800 4,800 4,800 4,800 4,800114 Cooler/freezer, box & door 8,000115 Cooler/freezer, condensing unit 4,600 4,600 4,600 4,600 4,600116 Stainless work surface/sink (allow.) 3,000117 Small counter top appl (allowance) 2,000 1,313 687 2,000 2,000 260 (2,000) 260118 Residential kitchen appl (allow) 2,400 1,648 1,648 752 2,400


119 Restroom, counter 9,000 9,000 (9,000)120 Restroom, partition 36,000121 Restroom, tile, floor & fixture 48,000122 Powder room (refurbish) 16,000123 Lockers 48,750124 Piano/organ, replace 20,000 11,459 11,459 8,541 20,000 20,000125 Piano/organ, voice & repair (allowance 5,000 8,283 4,582 (5,000) 7,865 2,135 10,000 5,000 (5,000) 10,000

BUILDING SYSTEM

126 Boiler, heating, (10% refit allowance) 16,400 11,258 11,258 5,142 16,400127 Boiler, heating, replace 164,000128 Chiller, (10% refit allowance) 26,000 26,000 (26,000) 17,849 17,849 8,151 26,000129 Chiller, replace 260,000130 Evaporators 120,000131 Air handler (refit allowance) 12,000 12,000 (12,000)132 Air handler (rebuild/replace allowance 600,000133 Pump & motor, (20% allowance) 7,000 7,000 7,000 (7,000) 7,000 7,000 7,000 14,000134 HVAC control system, refit 4,000 4,000 (4,000) 2,746 2,746 1,254 4,000135 HVAC control system, replace 20,000 13,730 13,730 6,270 20,000136 Split HVAC system, 7.5 ton 15,000 10,297 10,297 4,703 15,000137 Split HVAC system, 1 ton 6,000138 Transformer (allowance) 5,000139 Building piping (allowance) 14,000140 Hot water heater 10,000141 Tank (allowance) 8,000

BUILDING SYSTEM

142 Snow blower 1,200 824 824 376 1,200143 Floor cleaner 4,000 2,746 2,746 1,254 4,000144 Floor buffers 3,000

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1. COMMON INTEREST DEVELOPMENTS - AN OVERVIEW Over the past 40 years, the responsibility for community facilities and infrastructure around many of our homes has shifted from the local government to Community Associations. Thirty years ago, a typical new town house abutted a public street on the front and a public alley on the rear. Open space was provided by a nearby public park and recreational facilities were purchased ala carte from privately owned country clubs, swim clubs, tennis clubs, and gymnasiums. Today, 60% of all new residential construction, i.e. townhouses, single family homes, condominiums, and cooperatives, is in Common Interest Developments (CID). In a CID, a home owner is bound to a Community Association that owns, maintains, and is responsible for periodic replacements of various components that may include the roads, curbs, sidewalks, playgrounds, street lights, recreational facilities, and other community facilities and infrastructure. The growth of Community Associations has been explosive. In 1965 there were only 500 Community Associations in the United States. According to the U.S. Census, there were 130,000 Community Associations in 1990. Community Associations Institute (CAI), a national trade association, estimates there were more than 200,000 Community Associations in the year 2000, and that the number of Community Associations will continue to multiply. The shift of responsibility for billions of dollars of community facilities and infrastructure from the local government and private sector to Community Associations has generated new and unanticipated problems. Although Community Associations have succeeded in solving many short term problems, many Associations have failed to properly plan for the tremendous expenses of replacing community facilities and infrastructure components. When inadequate replacement reserve funding results in less than timely replacements of failing components, home owners are exposed to the burden of special assessments, major increases in Association fees, and a decline in property values.

2. REPLACEMENT RESERVE STUDY The purpose of a Replacement Reserve Study is to provide the Association with an inventory of the common community facilities and infrastructure components that require periodic replacement, a general view of the condition of these components, and an effective financial plan to fund projected periodic replacements. The Replacement Reserve Study consists of the following:

Replacement Reserve Study Introduction. The introduction provides a description of the property, reviews the intent of the Replacement Reserve Study, and lists documents and site evaluations upon which the Replacement Reserve Study is based.

Section A Replacement Reserve Analysis. Many components owned by the Association have a limited life and require

periodic replacement. Therefore it is essential the Association have a financial plan that provides funding for the timely replacement of these components in order to protect the safety, appearance, and value of the community. In conformance with American Institute of Certified Public Accountant guidelines, Section A Replacement Reserve Analysis evaluates the current funding of Replacement Reserves as reported by the Association and recommends annual funding of Replacement Reserves by two generally accepted accounting methods; the Cash Flow Method and the Component Method. Section A Replacement Reserve Analysis includes graphic and tabular presentations of these methods and current Association funding.

Section B Replacement Reserve Inventory. The Replacement Reserve Inventory lists the commonly-owned

components within the community that require periodic replacement using funding from Replacement Reserves. The Replacement Reserve Inventory also provides information about components excluded from the Replacement Reserve Inventory whose replacement is not scheduled for funding from Replacement Reserves.

Replacement Reserve Inventory includes estimates of the normal economic life and the remaining economic life for

those components whose replacement is scheduled for funding from Replacement Reserves.

Section C Projected Annual Replacements. The Calendar of Projected Annual Replacements provides a year-by-year listing of the Projected Replacements based on the data in the Replacement Reserve Inventory.

Section D Condition Assessment. Several of the items listed in the Replacement Reserve Inventory are discussed in

more detail. The Condition Assessment includes a narrative and photographs that document conditions at the property observed during our visual evaluation.

Section E Attachments. The Appendix is provided as an attachment to the Replacement Reserve Study. Additional

attachments may include supplemental photographs to document conditions at the property and additional information specific to the property cited in the Conditions Assessment (i.e. Consumer Product Safety Commission, Handbook for Public Playground Safety, information on segmental retaining walls, manufacturer recommendations for asphalt shingles or siding, etc).

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3. METHODS OF ANALYSIS The Replacement Reserve industry generally recognizes two different methods of accounting for Replacement Reserve Analysis. Due to the difference in accounting methodologies, these methods lead to different calculated values for the Minimum Annual Contribution to the Reserves. The results of both methods are presented in this report. The Association should obtain the advice of its accounting professional as to which method is more appropriate for the Association. The two methods are:

Component Method. This method is a time tested mathematical model developed by HUD in the early 1980s. It treats each item in the replacement schedule as an individual line item budget. Generally, the Minimum Annual Contribution to Reserves is higher when calculated by the Component Method. The mathematical model for this method works as follows:

First, the total Current Objective is calculated, which is the reserve amount that would have accumulated had all of the items on the schedule been funded from initial construction at their current replacement costs. Next, the Reserves Currently on Deposit (as reported by the Association) are distributed to the components in the schedule in proportion to the Current Objective. The Minimum Annual Deposit for each component is equal to the Estimated Replacement Cost, minus the Reserves on Hand, divided by the years of life remaining.

Cash Flow Method. The Cash Flow Method is sometimes referred to as the "Pooling Method." It calculates the

minimum constant annual contribution to reserves (Minimum Annual Deposit) required to meet projected expenditures without allowing total reserves on hand to fall below the specified minimum level in any year. This method usually results in a calculated requirement for annual contribution somewhat less than that arrived at by the Component Method of analysis.

First, the Minimum Recommended Reserve Level to be Held on Account is determined based on the age, condition, and replacement cost of the individual components. The mathematical model then allocates the estimated replacement costs to the future years in which they are projected to occur. Based on these expenditures, it then calculates the minimum constant yearly contribution (Minimum Annual Deposit) to the reserves necessary to keep the reserve balance at the end of each year above the Minimum Recommended Reserve Level to be Held on Account. The Cash Flow Analysis assumes that the Association will have authority to use all of the reserves on hand for replacements as the need occurs. This method usually results in a Minimum Annual Deposit which is less than that arrived at by the Component Method.

Adjusted Cash Flow Analysis. This program has the ability to modify the Cash Flow Method to take into account

forecasted inflation and interest rates, thereby producing an Adjusted Cash Flow Analysis. Attempting to forecast future inflation and interest rates and the impact of changing technology is highly tenuous. Therefore, in most cases it is preferable to make a new schedule periodically rather than attempt to project far into the future. We will provide more information on this type of analysis upon request.

4. REPLACEMENT RESERVE STUDY DATA

Identification of Reserve Components. The Reserve Analyst has only two methods of identifying Reserve Components;

1) information provided by the Association and 2) observations made at the site. It is important that the Reserve Analyst be provided with all available information detailing the components owned by the Association. It is our policy to request such information prior to bidding on a project and to meet with the individuals responsible for maintaining the community after acceptance of our proposal. After completion of the Study, the Study should be reviewed by the Board of Directors, individuals responsible for maintaining the community, and the Association’s accounting professionals. We are dependent upon the Association for correct information, documentation, and drawings.

Unit Costs. Unit costs are developed using nationally published standards and estimating guides and are adjusted by

state or region. In some instances, recent data received in the course of our work is used to modify these figures.

Contractor proposals or actual cost experience may be available as part of the Association records. This is useful information which should be incorporated into your report. Please bring any such available data to our attention, preferably before the report is commenced.

Replacement vs. Repair and Maintenance. A Replacement Reserve Study addresses the required funding for Capital

Replacement Expenditures. This should not be confused with operational costs or cost of repairs or maintenance.

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5. DEFINITIONS Adjusted Cash Flow Analysis. Cash flow analysis adjusted to take into account annual cost increases due to inflation and interest earned on invested reserves. In this method, the annual contribution is assumed to grow annually at the inflation rate. Annual Deposit if Reserves Were Fully Funded. Shown on the Summary Sheet A1 in the Component Method summary, this would be the amount of the Annual Deposit needed if the Reserves Currently on Deposit were equal to the Total Current Objective. Cash Flow Analysis. See Cash Flow Method, above. Component Analysis. See Component Method, above. Contingency. An allowance for unexpected requirements. Roughly the same as the Minimum Recommended Reserve Level to be Held on Account used in the Cash Flow Method of analysis. Critical Year. In the Cash Flow Method, a year in which the reserves on hand are projected to fall to the established minimum level. See Minimum Recommended Reserve Level to be Held on Account. Current Objective. This is the reserve amount that would have accumulated had the item been funded from initial construction at its current replacement cost. It is equal to the estimated replacement cost divided by the estimated economic life, times the number of years expended (the difference between the Estimated Economic Life and the Estimated Life Left). The Total Current Objective can be thought of as the amount of reserves the Association should now have on hand based on the sum of all of the Current Objectives. Cyclic Replacement Item. A component item that typically begins to fail after an initial period (Estimated Initial Replacement), but which will be replaced in increments over a number of years (the Estimated Replacement Cycle). The Reserve Analysis program divides the number of years in the Estimated Replacement Cycle into five equal increments. It then allocates the Estimated Replacement Cost equally over those five increments. (As distinguished from Normal Replacement Items, see below) Estimated Economic Life. Used in the Normal Replacement Schedules. This represents the industry average number of years that a new item should be expected to last until it has to be replaced. This figure is sometimes modified by climate, region, or original construction conditions. Estimated Economic Life Left. Used in the Normal Replacement Schedules. Number of years until the item is expected to need replacement. Normally, this number would be considered to be the difference between the Estimated Economic Life and the age of the item. However, this number must be modified to reflect maintenance practice, climate, original construction and quality, or other conditions. For the purpose of this report, this number is determined by the Reserve Analyst based on the present condition of the item relative to the actual age. Estimated Initial Replacement. For a Cyclic Replacement Item (see above), the number of years until the replacement cycle is expected to begin. Estimated Replacement Cycle. For a Cyclic Replacement Item, the number of years over which the remainder of the component's replacement occurs. Minimum Annual Deposit. Shown on the Summary Sheet A1. The calculated requirement for annual contribution to reserves as calculated by the Cash Flow Method (see above). Minimum Deposit in the Study Year. Shown on the Summary Sheet A1. The calculated requirement for contribution to reserves in the study year as calculated by the Component Method (see above). Minimum Recommended Reserve Level to be Held on Account. Shown on the Summary Sheet A1, this number is used in the Cash Flow Method only. This is the prescribed level below which the reserves will not be allowed to fall in any year. This amount is determined based on the age, condition, and replacement cost of the individual components. This number is normally given as a percentage of the total Estimated Replacement Cost of all reserve components. Normal Replacement Item. A component of the property that, after an expected economic life, is replaced in its entirety. (As distinguished from Cyclic Replacement Items, see above.) Normal Replacement Schedules. The list of Normal Replacement Items by category or location. These items appear on pages designated. Number of Years of the Study. The number of years into the future for which expenditures are projected and reserve levels calculated. This number should be large enough to include the projected replacement of every item on the schedule, at least once. This study covers a 40-year period. One Time Deposit Required to Fully Fund Reserves. Shown on the Summary Sheet A1 in the Component Method summary, this is the difference between the Total Current Objective and the Reserves Currently on Deposit.

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Reserves Currently on Deposit. Shown on the Summary Sheet A1, this is the amount of accumulated reserves as reported by the Association in the current year. Reserves on Hand. Shown in the Cyclic Replacement and Normal Replacement Schedules, this is the amount of reserves allocated to each component item in the Cyclic or Normal Replacement schedules. This figure is based on the ratio of Reserves Currently on Deposit divided by the total Current Objective. Replacement Reserve Study. An analysis of all of the components of the common property of the Association for which a need for replacement should be anticipated within the economic life of the property as a whole. The analysis involves estimation for each component of its estimated Replacement Cost, Estimated Economic Life, and Estimated Life Left. The objective of the study is to calculate a recommended annual contribution to the Association's Replacement Reserve Fund. Total Replacement Cost. Shown on the Summary Sheet A1, this is total of the Estimated Replacement Costs for all items on the schedule if they were to be replaced once. Unit Replacement Cost. Estimated replacement cost for a single unit of a given item on the schedule. Unit (of Measure). Non-standard abbreviations are defined on the page of the Replacement Reserve Inventory where the item appears. The following standard abbreviations are used in this report: EA: each FT: linear feet LS: lump sum PR: pair SF: square feet SY: square yard

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Capital Replacement Reserve Study Video Answers to Frequently Asked Questions

What is a Reserve Study? Who are we?

What kind of property uses a Reserve Study? Who are our clients?

Who conducts a Reserve Study? Reserve Specialist (RS) what does this mean?

When should a Reserve Study be updated? What are the different types of Reserve Studies?

What is in a Reserve Study and what is out? Improvement vs Component, is there a difference?

What is my role as a Community Manager? Will the report help me explain Reserves to my clients?

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Capital Replacement Reserve Study Video Answers to Frequently Asked Questions

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Community dues, how can a Reserve Study help? Will a study help keep my property competitive?

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REFERENCE LIST

RELIGIOUS AND EDUCATIONAL FACILITIES

Archdiocese of Baltimore 1 320 Cathedral Street 2 Baltimore, MD 21201 3 Contact: Mr. Nolan McCoy 4 410.547.5366 5

Saint Elizabeth Ann Seton Church 6 1800 Seton Drive 7 Crofton, MD 21114 8 Contact: Mr. Jack O’Malley 9 410.721.5770 10

School of the Incarnation 11 2601 Symphony Lane 12 Gambrills, MD 21054 13 Contact: Ms. Emily Mehler 14

410.519.2285 15

Wilde Lake Interfaith Center 16 10431 Twin Rivers Road 17 Columbia, MD 21044 18 Contact: Ms. Margo Duke 19 410.730.7920 20

Temple Emanu-EL and Pre-School 21 8500 Hillcrest Avenue 22 Dallas, TX 75225 23 Contact: Mr. Randy Crosland 24 214.706.0000 25

Edenton Street United Methodist Church 26 228 West Edenton Street 27 Raleigh, NC 27603 28 Contact: Mr. Dan Johnson 29 919.832.7535 30

Burke Presbyterian Church 31 5690 Oak Leather Drive 32 Burke, VA 22015 33 Contact: Mr. J. Richard Gauthey 34 703.764.0456 35 36 37 38 39

40 41

Wilshire Baptist Church and 42 Early Childhood Learning Center 43 4316 Abrams Road 44 Dallas, TX 75214 45 Contact: Mr. Paul Johnson 46 214.452.3157 47

Dumbarton United Methodist Church 48 3133 Dumbarton Avenue, NW 49 Washington, DC 20007 50 Contact: Mr. David Cook 51 609.915.3063 52

Saint Bede Catholic Church 53 3686 Ironbound Road 54 Wilmington, VA 23188 55 Contact: Mr. Al Jaroszewicz 56 757.229.3631 57

Gonzaga College High School 58

19 Eye Street, NW 59 Washington, DC 20001 60 Contact: Mr. Mark Emory 61 202.336.7129 62

Vanderbilt Presbyterian Church and 63 Learning Center 64 12250 Piper Boulevard 65 Naples, FL 34110 66 Contract: Mr. Rudy Zant 67 239.597.5410 68

Grove Baptist Church and 69 Marriner Christian Academy 70 5910 West Norfolk Road 71 Portsmouth, VA 23703 72 Contact: Dr. Curry-Williams 73 757.967.9618 74

Bradley Hills Presbyterian Church 75 6601 Bradley Boulevard 76 Bethesda, MD 20817 77 Contact: Mr. Farid Beltran 78 301.365.2850 79 80

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REPORT FY 2013 SCHOOL OF THE INNOCENT

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