The Power of the Funding Module – Part 3: Funding FCI Options

October 7, 2014

Seeing the effects of different funding strategies overlaid on one chart allows you to understand the impact of different strategies on the condition of your portfolio. It also empowers you to clearly communicate to your finance department or funding body the effects of the different strategies. Each approach matches an investment strategy or a way to anticipate the impact to your facilities based on a change to funding.

The Funding/FCI Options allows you to consider multiple funding approaches and overlay them. You can compare your current level of funding versus increased or decreased levels of funding, as well as its effects on your overall FCI. If you limit your analysis to a specific system, you can also find out the system condition index (SCI).

funding module fci options

Which Funding Option to Choose? Maintain vs. Target vs. Specific

funding fci options box

Maintain
How much do you need to spend to maintain the building in its current state? This funding option applies the amount of funding that is required to maintain a consistent facility condition (“staying the course”). For this option, the FCI/RI does not change throughout the forecast term. It shows the years in which funding requirements and renewals peak and ebb, and provides a baseline for comparison with the other funding options.

Target
funding module target fci option

You might want to target different condition levels for different facilities, due to a number of factors, such as the importance of a facility, whether or not it is used by the public, the use of the facility, etc. Understanding the right amount to invest will help avoid either over or under-funding the capital requirements of each facility. This option allows you to specify a target FCI/RI, and the number of years to reach that target. After the target is reached, funding is provided to maintain the target condition for the rest of the forecast term. This option is useful to compare the costs of upgrading and renovating an existing facility as compared to building the facility new.

Specific
funding module specific budget option
There may be times where you have the available capital and want to understand the impact on the condition of your facilities. For example, Finance might want to know what the impact would be with different levels of funding. This option allows you to enter specific funding amounts for each year in the forecast term. You can enter a funding amount in the first year and click Constant Funding to copy this amount to the rest of the years in the forecast, or you can enter a specific amount for each year. You can use the Apply Inflation to Funding checkbox to apply or remove the Forecast’s inflation rate to this funding option.

The other options are variations of these approaches. Percent selects a specific funding amount based on a percentage of the replacement value of the facilities, and Extrapolate sets a specific amount in year one, and then grows the investment by a certain percentage each year.

Comparing Scenarios
funding graph with different strategies
This graph shows you three funding approaches: Maintain (dark blue), Target (red) and Specific (light blue).

By overlaying the three approaches, you can make a long-term comparison of the impact of spending on your FCI. For example, you can see in the Specific (light blue) option, by choosing this approach to funding, the FCI gradually deteriorates from 0.25 to 0.7. The Target FCI (red) option in this example shows the increased investment required to improve condition over 10 years, as well as the reduced amount required to maintain that condition in the later years. Had we been targeting a higher FCI, then we would have seen the annual cost savings. And for all three options, you see the funding needed on an annual basis.

The Funding Module is a part of VFA’s facility capital planning software VFA.facility.

Learn more about the Funding Module

Check out Parts 1 and 2 of our Funding Module series:

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