Interfund balance

Fund accounting is an accounting system that uses separate bank accounts. called funds. In fund accounting, each fund should:
• Stand on its own.
• Be segregated and kept in separate bank or investment accounts.
• Be used only for its intended purpose.

For condo corporations there should be:
• an operating fund
• A reserve fund
• there may also be a contingency fund.

This system helps to ensure that sufficient funds will be available to pay for the particular fund’s designated expenditures, and that monies will not be “co-mingled”—that is, loaned/borrowed between the different funds.

I can be a bad sign to see an Interfund Balance on a condo's financial statements. It means that one fund "owes" another fund money.

Usually, money that should have gone to the reserves was used to pay the day-to-day operating bills and was never put in the Reserves. It is possible the borrowed money will never make it back to the reserve fund.

In some condos, money is regularly pulled out of the reserve fund and used to pay operating expenses. That should never happen but it does.

The reserve fund account is a saving account. Money that is put into the Reserves, and the accumulated interest, cannot be used to pay the operating expenses. To do so is a violation of the Condo Act.

Watch for Interfund Balances
For example, look at the bottom

	Operating fund	Reserves fund
Interfund balance	$90,963	($90,963)

This means that as of the end of the fiscal year, $90,963 was transferred from the reserve fund and added to the operating fund. (Remember that brackets means an negative figure.)

Watch the Interfund Balances and be concerned if it grows larger with each passing year. They should shrink if not disappear. If not this will compound the problem and will create difficulties for future board members and owners.

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