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Reserve ‘Adequacy’

The ratio, at a particular point of time – typically the end of the fiscal-year – of the actual or projected reserve fund balance to a ‘fully-funded’ ceiling amount, expressed as a percentage.

The term originates from the work of our North American sister associations, with their specific definition of what a component is for a projection.

There is further confusion as many planners set their model on differing component inclusion, costing basis, and time of full funding estimate.

Reserve Adequacy is not to be confused with the more realistic REIC based reserve fund standing concept that sets full funding in the year after the current year, and that recognises that only boards | councils decide if a reserve fund is adequately funded.

A reserve fund’s standing divides an end of fiscal-year adjusted cumulative reserve fund balance by the end of fiscal-year adjusted cumulative reserve fund requirements, at the end of consecutive fiscal-years, over a projection.

As the ‘adequacy’ concept is interpreted in a myriad of ways, as the term is not part of the requirements of the BC legislation, and as our friends in owner’s associations are taking providers that use this term to court, we consider it  prudent to continue not to use it.

About Author: Jean-François

With experience gained in construction, project management, field reviews, inspections, report writing and as strata president, J.-F. has cross-industry expertise guaranteeing that you will participate in a process geared to improving the corporation's finances and to setting the condo | strata board | council's planning to stand the test-of-time.