Educating the Condo Corporation

New Condo Guide

The amount of money that a Condominium Corporation has on deposit in its reserve bank account can range from $20,000 to over $2,000,000. The management of these funds, and the ongoing operating fund, is the ultimate responsibility of the Condominium Corporation’s Board of Directors.

Currently, the Condominium Act requires only three following qualifications in order to become a member of the Board of Directors:

1. The person must be at least 18 years old
2. The person is not an un-discharged bankrupt
3. The person is mentally competent

There are no requirements to understand the financial matters of the corporation and yet the same Condominium Act requires the Board of Directors of a Condominium Corporation to approve financial statements reflecting all the condominium fees revenue and expenses, the investments of the reserve fund, and the financial position of the Corporation at a year-end, before presenting them to the condo owners at the Annual General Meeting. The approval of the financial statements requires the signature of two directors on the Balance Sheet, to show their approval. In doing so, these directors are assuming great obligation.

The presentation of the Condominium Corporation’s financial statements can be difficult to understand. Some of the financial statements may include the Balance Sheet and the Income Statement, as well as various notes to the financial statements. Others will also include a cash flow statement. This all can be very confusing to the Board who needs to approve them especially considering the fact that not all the Board members fully understand them. It is therefore critical that the Association of Condominium Manager of Ontario (ACMO) and the Canadian Condominium Institute (CCI) educate Board members about these financial statements. As the condo population grows, it relies on the Board of Directors to know that their financial affairs are in order and are well looked after.

It should be a mandatory requirement that Condominium Board members are financially educated at the beginning of their term on the Board, to better to better understand the financial reporting process. In addition, this will provide them with a better knowledge of the proposed budget, which requires their approval. It would be extremely important that the Institute of Chartered Accountants ensure that there is uniformity and an understandable presentation of the financial statements, as the reader of the condominium’s financial statements is a diversified group “probably more so than any other group“ and needs to understand what is being presented to them.