Stacked townhouses
—qualified report

The financial statements from a Mississauga stacked-townhouse condo corporation also contains a few gems. However, in this case, the auditor gave a qualified audit opinion.

Basis for Qualified Opinion
The invoices for the utilities and the deposit slips records for the year could not be located.

Assets

Fees receivable	2013	2012
	$37,524	74,470

The board seems to have a problem collecting the monthly condo fees.

Question: Ask the auditor if any of the unpaid fees were written off as bad debts.

Note 9 Contingent liability (in part)
“.. the corporation and its board of directors have become involved in various small claims actions for non-payment of maintenance fees and special assessment fees.”

It looks like the boards were negligent in putting timely liens on the units that were in arrears and they are now trying to collect through small claims court.

General fund

General fund deficit End of the year	2012	2011	2010
	$480,996	257,655	205,772

These figures means that the condo corporation does not bring in enough money to pay its day-to-day operating bills. What is worse is that the deficit more than doubled in two years.

Question: Ask the auditor how can the corporation pay their bills on time?

Reserve funds
Reserve Fund Balance—End of the year (Note 3)

2012	2011	2010
$861,994	996,31	822,750

It looks pretty good as this says that there is close to $900,000 in the Reserve Fund. However this is what Note 3 says.

Note 3 Reserve Fund (in part)
“The reserve fund has a balance of $861,994 as of May 31, 2013 (2012 – $996,831). However, the reserve fund has been used to fund current operations in the past which is in contravention of the Condominium Act. As a result the reserve fund has cash and investments of $302,285 (available for use $264,193) as at May 31, 2013 (2012–$442,573). ... the reserve fund balance has a deficiency of $559,709 (2012–$554,258) to fund future repairs and replacements.” (emphasis added—editor)

Note 3, which is three-quarters of a page long, goes on to say that the reserve fund will need “$903,090 which will need to be funded from the general fund or special assessment. This would be approximately $5,161 per unit to be adjusted on unit type.” (emphasis added—editor)

Questioning the auditor
The auditor did not attend this meeting so the owners could not ask any questions on the financial statements. How convenient.

Buyers beware!

What do the status certificates say?
I asked the district manager for the property management company (an ACMO member) when they prepared status certificates what figure did they put in for the Reserve Fund: the $861,994 that is shown on page 5 or the $264,193 from Note 3?

He told me that they use the $861,994 that is shown as the Reserve Fund balance and it was up to the buyer to exercise due diligence read the notes in the back.

Question: How can anyone trust this property management company?

Owners & buyers beware
The financial reports can say that there is almost $900,000 in the Reserve Fund when in fact there is a fraction of that. As long as there is a note in the back that explains this, a note that next to no one will read—or understand —the auditor figures he has protected himself.

The huge deficit in the operating fund (a negative) needs to be added to the large (a positive number) in the reserves to get a clearer picture of reality.

We also see that the auditors will not qualify their report if a board withdrawals huge amounts of money out of the reserves to pay the operating expenses.

Note:
At the time this was written (Dec 2015) the board has not called an AGM in the last two years. The owners don't seem to care.

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