A projection is a representation of future changes based on past assumptions about future trends. It is a concept through which the brain understands the world, or an hypothesis about what is going on, or an imagined scenario about what can happen.
The component inventory provides the raw-data for the 30 year projection, to which is added the point-in-time benchmark analysis, used to assess contribution levels, and the monies required for aging assets’ planned expenditures. The projection is common to all scenarios and includes unique, repeated, and sequenced expenditures.
Phased expenditures over several concurrent fiscal-years do not belong in a projection, and are contrary to the SPA’s determination that Reserve Fund expenditures occur less than once a fiscal-year, or every two (2) fiscal-years or more. Phased projects are to be recorded in the schedule of historical expenditures, and do not belong in a projection.
At the point-in-time of the assignment, the projection is used to determined the benchmarked scenario’s fiscal-year current requirements, and to provides the position of the Reserve Fund based on its current needs, to help direct the efforts of successive strata councils since construction.
A best-practice Depreciation Report (DR)’s first, translates the development’s physical analysis into a point-in-time current financial benchmark of performance based current requirements; second, then adjusts the benchmark’s current requirements on a fiscal-year basis against a projection of expenditures on a sinking method accounting principle that factors in inflation and interest as well, and third, used the projection to determine the residual value of required monies against a series of scenarios.
Having stakeholders buy into thinking more than one calendar year at a time is a risk-management improvement, even if, scenarios built on many fluctuating variables make a 30 year projection sketchy. The practice of reserve funds planning makes comparison for a development over time, and comparison across developments possible.
That is why the Strata Property Act (SPA) has mandated that DRs be redone every three years, which is in effect a valid horizon for managing anticipated fiscal-year scheduled inspections and expenditures.