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Reserve Fund Balance

Also known as reserves, reserve accounts or cash reserves. In theory, it is the actual reserve monies that the strata corporation has identified and is investing for use to defray the future repair or replacement costs of components.

When a lot is bought there is the expectation that common property is maintained and in usable condition. One expects that the walls, roofing, pavement, and wooden structures etc. are sound and that there will be no large special levy during ownership. Conversely, when a home is sold, part of the sale price factors in the share of the reserve monies.

The reserve fund balance is often interpreted to be the opening balance as determined by the closing balance of the prior fiscal-year, plus transfers from the operating fund, plus the contributions that haven’t been collected, plus interest that hasn’t been collected on the opening balance etc. Everything is included but the reserve fund expenditures for the fiscal-year in question.

As there is no strata police and auditing is not mandatory and limited in scope, this ballpark-type variable is typically based on information provided by councils. It can be determined in several ways and sometimes erroneously include special levies.

Having a clear accepted way to determine the reserve fund balance and yet seeing that is interpreted in idiosyncratic ways is a concern as often, following through from one fiscal-year to the next, there are indications that different accounting procedures are used for the same strata corporation.

A best-reserve practice reserve fund writer will suggest that a sitting strata council have their numbers audited if irregularities are found.

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.