Dialogue
Contingency Reserve Fund Options
FROM:
JUL-AUG 2004 ISSUE | BY FRED GURNEY, CGA
In the May-June issue, Mr. Wilson-Tagoe, CGA, posed a good question. [
Dialogue,
pp. 10-11] I do not feel that the presentations shown reflect the balance sheet appropriately. However, I do feel that the contingency reserve should show as $50,000, given that the balance sheet of a condominium corporation reflects both the current operations and the contingency funding required for the
long-term health of the corporation. To clear up any misunderstanding, we can present the balance sheet as follows:
|
PRESENTATION D
|
|
| |
|
|
Assets
|
|
| Cash — Operating |
5,000
|
| Cash — CRF |
35,000
|
| CRF Receivables Operating Fund |
15,000
|
|
Total Assets
|
55,000
|
| |
|
|
Current Liabilities
|
|
| Payable to CRF |
15,000
|
| |
|
|
Equity
|
|
| Contingency Reserve |
50,000
|
| Operating Fund deficiency |
–10,000
|
|
Total L & E
|
55,000
|
The only negative effect this presentation has on the balance sheet is that the assets are inflated by the loan between funds. The purpose of a financial report to the owners is to concisely reflect operations and the status of the contingency funding. I believe the above presentation does that by removing the CRF expensed from equity, as it must be replaced in the next operating cycle unless a special assessment levy is required.
My thought is that the reserve has not been touched, but rather the cash is invested elsewhere. Presentation D also shows the liability to be addressed by the operating fund.
Fred Gurney, CGA
Toronto, Ontario
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