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Reserve Fund Standing

Based on a well-constructed realistic component inventory and on well-benckmarked current replacement requirements’ calculations, a reserve fund standing has a fiscal-year based cumulative closing balance divided by a carried-over benchmark adjusted current requirements amount for the same fiscal-year, expressed as a percentage.

The cashflow method stipulates that individual components’s funds can be allocated from one asset to another such that only the aggregate total amount can be compared from one fiscal-year to the next.

A reserve fund standing factors-in all variables on a fiscal-year basis, and produces a computed interpretation of the components’ depreciation, based on their deterioration and wear.

The benchmark produces a computed current fiscal-year reserve fund’s requirements based on the expected, reviewed effective, and remaining lifespans of each component.

This is a simple and realistic concept that divided an end of fiscal-year adjusted cumulative reserve fund balance by the end of fiscal-year adjusted cumulative reserve fund requirement number.

One could divide the contributions and special contributions by the by the end of fiscal-year adjusted cumulative reserve fund requirement number to refine the analysis, but in BC, as we are at the end of the first cycle of depreciation reports, this refinement is not beneficial presently.

On a fiscal-year basis, two or more reserve fund standings offer a relative measuring scale to compare developments, and allows stakeholders to determine if a lot in one development is a more attractive investment than a lot in another development.

Beware of reports that set their full funding | fully funded model to reach deficit-zero – when the reserve fund position is equal to $0 – in year 30 of the projection rather than in the year following the current year.

What happens to a reserve fund during the next 29 years following the current fiscal-year is unpredictable, may be manipulated, and might leave a condo | strata board | corporation with some reserve fund positions that are below statutory reserve guidelines.

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.