What Are Your Strata’s Financial Statements Really Telling You?

You do not need to be an accountant to ask good questions about your strata's finances.

You just need to know where to look. Refer to the sample statement below.

A set of financial statements can appear intimidating, particularly when council members are presented with pages of numbers each month. But behind those numbers are several fairly simple questions.

Are we collecting what we expected?

Are we spending what we expected?

And does the money we have match the obligations we are taking on?

Start With the Operating Fund

Compare actual expenses with the budget.

One expense being over budget is not necessarily alarming. Timing matters. An annual insurance payment, for example, can create a large variance during one month.

What deserves attention is a pattern.

If repairs, utilities, legal expenses or another category continually exceed budget, council should understand why before preparing the following year's budget.

Look at What Owners Owe

Outstanding strata fees and special levies matter because a budget assumes the strata will actually collect the money owners are required to pay.

If receivables steadily increase, the strata may appear financially healthy on paper while experiencing real cash-flow pressure.

BC's financial best-practice guidance recommends that councils monitor payment of strata fees and special levies as part of their regular financial review.

Check the CRF Separately

The operating fund and CRF serve different purposes and must be accounted for separately. BC's required year-end financial information includes opening and current balances for both funds, as well as operating and CRF expenditures.

Council should understand:

What came into the CRF?

What was spent?

What projects have already been approved?

What remains available?

A bank balance without that context can be misleading.

Ask About Unusual Transactions

Large expenses deserve explanation.

So do unexpected credits, transfers between accounts, old outstanding cheques and amounts that appear month after month without changing.

Sometimes there is a perfectly reasonable answer.

The important part is that somebody asks.

Where a licensed strata management brokerage holds a strata corporation's trust funds, BCFSA requires separate trust accounts for operating, contingency and applicable special levy funds, along with monthly bank statements and reconciliations.

Financial Reports Should Create Questions, Not Confusion

Council does not need to perform the bookkeeping.

It does need enough financial visibility to make informed decisions.

Good reporting should make it easier to see what has happened, identify what needs attention and plan what comes next.

And that leads directly to one of council's biggest annual financial decisions: the budget.

Next week: Seven budget red flags councils should catch before the AGM.

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