DOLLARS AND SENSE

By Michelle Lucente

Condominium corporations benefit greatly when board members have financial knowledge and follow common-sense financial management processes.  

Who wants to be surprised by a sudden increase in annual condominium contributions, or a levy of a special assessment?  

Boards of directors have significant fiduciary and financial responsibilities to the condominium corporation, whose stakeholders include all owners. While boards can delegate responsibility to another party, such as a condominium manager, boards cannot delegate accountability.  

Board membership should include at least one person with financial experience, who can analyze and clearly communicate the condominium corporation’s current and forecast financial position to other board members and all owners, and who can oversee and supervise any other hired personnel acting on behalf of the condominium corporation, such as a condominium manager, accounting, or audit firm.  

Annually – Three months before the start of the fiscal year 

Each year, the board should hold a meeting, separate from a board meeting, to conduct an annual in-depth review of the operating and capital budgets, to ensure all expected work items have been identified and included.  

Operating expense budgets should use the zero-based budgeting method, which means all expenses must be justified for each new fiscal year.  

Operating budgets should include expenses related to any initiatives the board has identified, such as updating the corporation’s bylaws, as well as maintenance plan items. Operating budgets should not include anticipated revenue amounts collected via levying usage fees, interest charged, or fines.  

Reserve fund plans are the basis for capital budgets and must be reviewed and updated annually.  Reserve fund accounts are not “rainy day” funds to be dipped into at any time, but restricted fund accounts (refer to Accounting Standards for Not-for-Profit Organizations or ASNPO), set aside to ensure adequate savings for capital repair or replacement, as predicted in the Reserve Fund Plan and confirmed by technical audits.  

Annual budgets must be approved by the board and provided to all owners, with the annual schedule for condominium contributions, at least a month before the new fiscal year. Refer to your condominium corporation’s bylaws for specifics. It may be helpful if boards provide owners with a comparison of the current year’s budget to last year’s budget, with notes explaining forecast expenditures. Are there additional initiatives, such as revising bylaws? What impact has inflation had on the condominium corporation’s expenses?  

The board is accountable for ensuring that amounts have been responsibly budgeted and that any end-of-fiscal-year deficit or excess is minimal.  

  • If a board underestimates amounts (deficit) required for the fiscal year, owners may face a special assessment (refer to the Condominium Property Act section 39.1 Special Levy).
  •  If a board over-estimates amounts (excess) required for the fiscal year, excess amounts are not refunded to the owners but are held as excess operating funds or moved to a capital fund, with notification to the owners.  

Remember that the operating budget and capital budget from the reserve fund plan are the basis for the amounts owners pay via monthly condominium contributions to the condominium corporation. 

Monthly or quarterly during the fiscal year 

Each month or quarter, the board should review and analyze any variances between what was set in the budgets and what actual amounts have been recorded.  

Once the budget has been approved by the Board, it cannot be changed, i.e., no new categories should suddenly appear on financial statements that weren’t on the approved budget with an approved budget amount.  

While there can sometimes be a time lag between when work is completed vs. when work is invoiced, amounts must be recorded in the month and fiscal year work is completed.  

If the budgets have been set properly, budget amounts should track closely to actual amounts.  

Are there any trends that are emerging? If there are significant over- or under- spends in budget categories, the variance should be analyzed and noted, and the category possibly adjusted in the following year’s budgets. If the variance is related to a project starting later than anticipated, that learning should be incorporated into the next year’s budget review process.  

Consistent and/or significant deltas between budgeted and actual amounts are a red flag.  

Recoverable costs are any amounts the condominium corporation paid that should have been paid either by an owner (internal) or by the developer (external). In most cases, these costs should net to zero. Ensure that recoverable costs are recorded and reported properly. Reports indicating revenue amounts due to owner chargebacks or vendor recovery should indicate the corresponding offset expense amounts. It may be helpful if boards provide owners with an explanation of any amounts that do not net to zero.  

At year-end, ensuring all amounts have been recorded in the correct fiscal year is vitally important.  

It is essential that the board regularly review and resolve owner accounts that are in arrears with condominium contributions. Notify owners promptly, including late payment interest amounts. Don’t allow an arrears position to continue for an extended period. If the unit is tenant-occupied, the condominium corporation has the right to collect rent to apply against condominium contributions. The condominium corporation may file a caveat against the certificate of title to the unit, which has the same priority and may be enforced in the same manner, as a mortgage. The caveat is withdrawn upon payment of arrears. Refer to the Condominium Property Act Section 39.2. Any owner can see whether an arrears process is in place by reviewing financial documents and Accounts Receivables amounts.  

A best practice is for the board to clearly communicate the condominium corporation’s financial position in the monthly meeting minutes provided to owners. Sometimes one picture is worth one thousand words. Boards may consider using graphs to represent comparisons of revenue and expenses.  

Annually – end of the fiscal year 

Each year, boards should ensure an appropriate financial review of the operating and capital expenditures, whether via an audit engagement, review engagement, or notice to reader. Refer to your condominium corporation’s bylaws for specifics.  

Remember that the quality of any financial review depends on the experience of the reviewer and the expectations set by the board.  

Beware of anyone hired for an audit or review engagement who just “rubber stamps” the financial statements. No board, condominium manager, or accounting firm is perfect, and adjusting entries are not unexpected. Audit adjusting entries should be made against the last month of the audited fiscal year, instead of against Retained Earnings.

The best practices recommended above are scalable to a condominium corporation’s size and specific requirements.


Michelle enjoyed a 39-year career as a Senior Analyst with a major oil and gas company. Upon retiring, she was voted to her own condo board in September 2019 where she served as Treasurer until she resigned in June 2022. She has volunteered with COF since 2019 and currently sits on the Education, Communication, and Audit committees. Michelle is committed to working with like-minded people to improve the governance and management, especially responsible financial management, of all our condos. She can be reached at michelle@cofsab.ca.

Please spread the word!

Related Articles

Is Your Condo Counting Special Resolutions Properly? Bill 19: Changes to Voting Procedures

The predominant concern appears to be that the proposed legislative amendments will create confusion, not clarity, and that passing special resolutions will be made much more difficult and costly in terms of imposing additional administrative requirements. Many of these inquiries have also assumed that calculating the result of a special resolution vote is based on the total number of units in a condominium. As I will explain, this is incorrect.

Please spread the word!

The Tenant Conundrum

The Tenant Conundrum                                          By Phil Rosenzweig There is a misconception amongst some Condominium Boards and Owners that suggests that Tenants are the cause…

Please spread the word!
Verified by MonsterInsights