A Reserve Study is a budget planning tool which identifies the current status of the reserve fund and a stable and equitable funding plan to offset the anticipated future major common area expenditures. The reserve study consists of two parts: the physical analysis and the financial analysis. Source: CAI National Reserve Study Standards (pdf).
As long range budget tools, Reserve Studies serve several key purposes of which consumer protection via future funding disclosure is crucial. These studies also fulfill statutory requirements, governing document requirements, long range planning needs, sales disclosures, loan qualifications, HUD requirements, insurability requirements, and other purposes. Each year, the Reserve Study funding plan supplies the necessary reserve contribution amount required within the annual operating budget.