Serving on a condominium board means overseeing more than building maintenance and owner concerns.

The board is also responsible for significant financial resources.

Condominium fees must be collected, suppliers paid, budgets monitored, reserve funds protected and financial information communicated to owners.

For larger condominium corporations, these amounts can easily reach hundreds of thousands or even millions of dollars.

Reliable accounting is therefore an important part of effective condominium governance.

Here are some of the areas Alberta condominium boards should monitor.

Understand the Two Main Financial Areas

A condominium corporation generally needs to distinguish between its ordinary operations and its reserve fund.

The operating fund is used for normal recurring activities such as:

• Utilities
• Cleaning
• Landscaping
• Snow removal
• Management fees
• Insurance
• Routine repairs
• Professional fees

The reserve fund exists for major repairs and replacement of depreciating property and common property.

The Government of Alberta states that condominium corporations generally must establish and maintain a reserve fund for major repairs and replacement and that reserve fund money is not intended for ordinary ongoing maintenance such as yard work or window cleaning.

Keeping these two areas clearly separated is one of the foundations of condominium accounting.

The Reserve Fund Needs Its Own Bank Account

Reserve money should not simply be mixed with operating cash.

Alberta’s guidance states that a condominium corporation must maintain the reserve fund in a separate bank account and not combine it with other corporation funds, except when amounts are properly paid under the reserve fund plan.

That separation should also be clear in the accounting records.

A board should be able to determine at any time:

• Operating cash balance
• Reserve cash balance
• Reserve investments
• Amount contributed to the reserve fund
• Reserve expenditures
• Remaining reserve resources

This becomes particularly important when significant capital projects are underway.

The Reserve Fund Is Not Extra Operating Cash

A large reserve balance can create a false impression that a condominium corporation has plenty of available cash.

But reserve money has a specific purpose.

For example, a condominium corporation might have:

Operating bank account: $45,000
Reserve fund: $600,000

At first glance, the corporation appears to have $645,000 available.

But if the reserve fund is intended to finance roof replacement, exterior repairs and other major work, the operating budget cannot simply rely on that money to cover routine shortfalls.

Boards should therefore review operating and reserve finances separately.

Use the Reserve Fund Study as a Financial Planning Tool

The reserve fund study is not just another document to keep on file.

It helps the corporation anticipate significant future expenditures.

Alberta guidance requires reserve fund studies to consider depreciating property and estimate matters such as repair or replacement timing and costs. The study must cover at least the next 30 years.

From an accounting perspective, this information can help the board consider:

• Current reserve balance
• Expected future contributions
• Planned major expenditures
• Timing of projects
• Whether contribution levels remain appropriate

A healthy reserve fund does not necessarily mean it has accumulated the largest possible balance. It means the corporation has considered its expected future obligations and has an appropriate funding plan.

Alberta Requires Annual Reserve Fund Reporting

The reserve fund also carries an ongoing reporting responsibility.

Alberta states that condominium corporations must prepare an annual report on the reserve fund and provide it to owners as part of the annual general meeting package.

This is another reason reserve transactions need to be accounted for carefully.

Trying to reconstruct an entire year of reserve activity immediately before the AGM is inefficient and increases the risk of errors.

Prepare a Realistic Operating Budget

The annual budget should reflect what the condominium corporation realistically expects to collect and spend.

Common budget items may include:

• Condominium contributions
• Parking or other income
• Utilities
• Insurance
• Management
• Repairs and maintenance
• Landscaping
• Snow removal
• Security
• Professional fees
• Reserve fund contributions

Budgets should use current information rather than simply copying last year’s amounts.

If insurance costs increased 20%, for example, carrying forward the old insurance budget creates a predictable deficit.

Compare Budget to Actual Results

Approving the budget is only the beginning.

A simple monthly or quarterly report can identify:

Boards should compare actual results to budget throughout the year.

Category	Annual Budget	Actual to Date	Expected	Variance
Utilities	$90,000	$53,000	$45,000	$8,000 over
Repairs	$60,000	$24,000	$30,000	$6,000 under
Insurance	$75,000	$75,000	$75,000	—

Large variances should be investigated.

The explanation may be completely reasonable, but the board should understand it.

Waiting until year-end to discover that expenses exceeded budget significantly gives the board very little opportunity to respond.

Reconcile Bank Accounts Every Month

Bank reconciliations are one of the most basic but important accounting controls.

The accounting records should be reconciled to actual bank balances regularly.

This applies separately to:

• Operating accounts
• Reserve fund accounts
• Savings accounts
• Investment accounts

Unreconciled differences should be investigated instead of carried forward indefinitely.

Monthly reconciliations can identify:

• Missing transactions
• Duplicate entries
• Unrecorded bank charges
• Outstanding cheques
• Incorrect deposits
• Posting errors

They also make year-end preparation much easier.

Track Condo Contributions and Arrears

The board should know how much owners owe the corporation.

An accounts receivable report should make it possible to distinguish:

• Current condominium contributions
• Past-due contributions
• Special assessments
• Chargebacks
• Other owner balances

A growing receivable balance deserves attention.

If several units fall significantly behind, the corporation can experience cash-flow pressure even if the annual budget appears balanced.

Management and the board should have a consistent process for monitoring outstanding amounts and handling collections in accordance with applicable legislation, bylaws and professional advice.

Account for Special Assessments Separately

When a significant unexpected project arises, a condominium corporation may need additional funding.

A special assessment can result in large amounts being collected from owners over a relatively short period.

Those amounts should be clearly tracked.

The accounting records should make it easy to identify:

• Amount assessed
• Amount collected
• Amount outstanding
• Purpose of the assessment
• Related expenditures
• Unspent balance

Owners will naturally want to understand how special-assessment money has been used.

Clear accounting can prevent confusion.

Keep Major Projects Organized

Suppose the corporation undertakes a $500,000 exterior rehabilitation project.

Do not simply record every invoice to a vague “repairs” account.

Consider maintaining project-specific records showing:

• Original approved budget
• Contractor
• Contract value
• Change orders
• Invoices received
• Payments made
• Amount remaining
• Source of funding

This allows the board to quickly determine whether the project remains within budget.

It also produces a much cleaner record for year-end reporting.

Maintain Good Approval Controls

Accounting controls are especially important because condominium boards consist of volunteer directors who may change regularly.

No single person should have unnecessary control over every stage of a transaction.

Depending on the size of the corporation, useful controls may include:

• Board approval for significant contracts
• Proper invoice authorization
• More than one authorized person for significant payments
• Independent review of bank reconciliations
• Review of credit-card purchases
• Supporting documents for expenditures
• Regular financial reporting to the board

The exact system will differ between a 10-unit condominium and a 300-unit condominium.

The important point is that financial activity should be reviewable.

Review Contractor and Management Invoices

Boards should understand what the corporation is paying for.

When reviewing invoices, consider:

Does the invoice agree with the contract?

Was the work actually completed?

Was the expenditure approved?

Is it an operating or reserve expenditure?

Does it relate to a specific project?

Was GST handled correctly?

Good bookkeeping begins with good supporting documentation.

Keep Board Decisions Connected to the Accounting Records

Minutes and accounting records often need to work together.

Board minutes may document approval of:

• Budgets
• Contracts
• Special assessments
• Major repairs
• Reserve projects
• Financing
• Investment decisions

If a significant transaction appears in the accounting records, the supporting approval should be easy to locate.

Maintaining organized board minutes can therefore make year-end accounting and assurance work much more efficient.

Give the Board Understandable Financial Reports

A 40-page general ledger is not a useful board financial report.

Board members should receive information in a format that helps them make decisions.

A regular package might include:

• Balance sheet
• Income and expense statement
• Budget-to-actual comparison
• Operating cash
• Reserve fund balance
• Owner receivables
• Accounts payable
• Major project status

The purpose is not to turn every director into an accountant.

It is to give directors enough information to recognize problems and ask useful questions.

Look at Trends, Not Just This Month

Monthly financial information can fluctuate.

Looking at longer-term trends often provides more insight.

Boards should pay attention to whether:

• Utility costs are consistently increasing
• Insurance premiums are rising
• Repairs are regularly exceeding budget
• Arrears are increasing
• Reserve expenditures differ from the plan
• Operating cash is gradually declining

A recurring $5,000 monthly shortfall is much more significant than one unusual invoice.

Prepare for Year-End Before the Accountant Arrives

At year-end, having organized records can reduce delays and unnecessary questions.

Useful information includes:

• Bank reconciliations
• Bank and investment statements
• Owner receivable listing
• Accounts payable
• Reserve fund activity
• Special-assessment schedules
• Major contracts
• Project invoices
• Insurance information
• Board minutes
• Approved budget
• Reserve fund study and plan
• Loan information
• Significant transactions after year-end

If the condominium corporation requires an audit, review or another financial statement engagement, organized records also make that process considerably smoother.

Accounting Is Part of Good Condominium Governance

Condominium accounting is ultimately about accountability.

Owners are contributing money to maintain a shared property.

They should be able to understand:

Where the money was spent.

How much remains.

Whether the corporation is operating within budget.

Whether reserve resources are being appropriately maintained.

Whether major projects are financially controlled.

Strong accounting does not eliminate difficult decisions, but it gives the board reliable information for making them.

Condominium Corporation Accounting Services in Edmonton

Seniuk & Marcato, Chartered Professional Accountants serves condominium corporations as part of its broader accounting and assurance practice in Edmonton and Alberta. The firm provides financial statement preparation, compilation, review and audit services, along with accounting and related professional services.

If your condominium corporation needs assistance with year-end financial statements, accounting, an audit or review engagement, contact Seniuk & Marcato to discuss the corporation’s requirements.

This article provides general information only and is not legal, accounting or tax advice for a specific condominium corporation. Boards should refer to the applicable Condominium Property Act, regulations, bylaws and professional advice for their circumstances.