Certified Facility Manager (CFM) Practice Exam

Which of the following expense items is not eligible to be covered by replacement reserve funds?

1. Facility repairs

2. Building expansion

3. Equipment upgrades

4. Property maintenance

The correct answer is: Building expansion

Replacement reserve funds are typically designated for specific purposes related to maintaining and preserving the existing assets of a facility. These funds are intended for expenses related to the replacement of existing components or systems that have reached the end of their useful life. Building expansion, however, is categorized differently than immediate maintenance or replacement needs—it involves increasing the facility's footprint or capacity, rather than simply replacing existing elements. Such expansions usually require a significant capital investment and are generally planned as part of a capital improvement project, rather than being funded through operating reserves. This distinction underscores why building expansion is not covered by replacement reserve funds, as these funds focus on maintaining current operations rather than enhancing or enlarging them. In contrast, expenses such as facility repairs, equipment upgrades, and property maintenance typically align with the intended use of replacement reserves, as they all pertain to replacing or repairing existing infrastructure or equipment to ensure ongoing functionality and safety within the facility.