The funds were deposited when?

It would seem that if a condo corporation had a budget that called for $2,014,229 of that year's total income to be transferred into the reserves, then twelve equal monthly deposits of $167,852.42 would be made.

That way, the reserves are fully funded and the reserve funds start making immediate interest on those payments.

Less prudent would be for the corporation to transfer the money from the operating funds to the reserves every quarter. At the very least, you would expect that the reserves would be topped up by the end of the fiscal year.

That is not how it is done at this Toronto condo.

Reserve Fund—Funded

	2013	2012
Balance start of year	$ 663,496	$(938,644)
Contributions	2,014,229	2,239,229
Interest	7,049	3,467
Total increase	2,021,348	2,242,696
Expenditures	305,825	912,028
Increase for the year	1,715,453	1,330,668
Accumulative reserve for major repairs & replacements
Increase for year	1,715,453	1,330,668
Transfer from Reserve Fund—underfunded		271,472
Balance end of year	2,378,949	663,496

First glance
At first glance, the new board that took over in the autumn of 2012, did a great job in building up the reserves. It went from a deficit of $938,000 to a balance of $2.4 million in less than a year and a half.

How did they do it?
The notes in the financial statements explains how.

1. Balance sheet
Current liabilities

	2013	2012
Operating fund—due to reserve fund (note 5)	$389,774	416,740

Note 5
"This represents the net shortfall in funds required to be transferred to the Reserve Fund from the operating Fund, in lieu of the Reserve Fund Assessment Contributions as per the Annual Budget approved by the Board of Directors."

So each year roughly $400,000 was not put into the reserves by the board during the actual fiscal year they were due. The Reserve Fund page shows that the full amount was deposited but the Balance Sheet reports that this was not true.

Note 5 goes on to say:
"...on July 10, 2013 the balance of $416,740 was repaid by the Operating Fund to the Reserve Fund in lieu of the shortfall in Reserve Fund Assessment Contributions for 2012 (refer to note 4). On March 24, 2014 a sum of $389,774 was transferred from the Operating Fund to the Reserve Fund, this represented the net shortfall in Reserve Fund Assessment Contributions for 2013."

So the 2012 Reserves were not fully funded until six months after they were due and the 2013 Reserves were not fully funded until three months after the end of the 2013 fiscal year.

Question: Ask the auditor if this shortfall in reserve fund deposits is a regular occurrence by the corporation. Also, what about the missing interest?

2. Major repairs and replacements
The second way the board managed to increase the reserves was by not doing any of the needed work on the roofs, hot water risers and the underground garage that the reserve fund study and city work orders stated had to be done.

The money that was collected was put into the bank and it was left there.

The only work that was done was an improvement to the security system, an expense that should have been paid for out of the operating funds not the reserves, a point that the auditor did not mention in his notes.

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