CPA Requirements for Reserve Fund Studies, Contributions, and Spending
Reserve Fund Study Requirements
Under the Condominium Property Act (CPA), condominium corporations must conduct a reserve fund study to ensure there are sufficient funds for major repairs and replacements of common property. The key requirements include:
The study must be conducted every five years by a qualified professional.
It must assess future repair and replacement costs of common property.
The corporation must create a reserve fund plan based on the study’s findings.
Reserve Fund Contributions
The interim board is responsible for ensuring unit owners contribute to the reserve fund through their condominium fees.
The CPA mandates that funds must be kept separate from the operating budget.
Reserve fund amounts must be adequate to meet long-term financial obligations.
Spending Restrictions
Reserve fund money can only be used for:
✅ Major repairs to common property
✅ Replacements of depreciating assets
Prohibited Uses:
❌ Daily maintenance expenses
❌ Operational costs (e.g., management fees, utilities)
Assessing an Interim Board’s Reserve Fund Obligations
Reviewing the Reserve Fund Study
To assess an interim board’s compliance, a condominium manager should:
Confirm whether the latest reserve fund study was conducted within the last five years.
Check if the reserve fund plan aligns with study recommendations.
Ensure contributions are being collected and deposited into the reserve fund account.
Evaluating Financial Sufficiency
Compare the reserve fund balance against projected expenditures.
Verify that owners are contributing as outlined in the study.
Identify any shortfalls and advise the board on corrective actions.
Addressing Non-Compliance
If deficiencies are found, the condominium manager must:
Notify the board and provide recommendations for correction.
Assist in adjusting financial planning strategies.
Ensure future compliance by documenting and tracking reserve fund transactions.
Creating a Compliance Checklist for Reserve Fund Management
Checklist Components
A Reserve Fund Compliance Checklist should include:
✔ Reserve Fund Study Review: Ensure the study is up-to-date and meets CPA requirements.
✔ Reserve Fund Contributions: Confirm all unit owners are contributing as required.
✔ Fund Segregation: Verify reserve funds are held in a separate account from operating funds.
✔ Usage Compliance: Ensure reserve funds are only used for major repairs and replacements.
✔ Financial Transparency: Maintain detailed records of fund transactions and reports.
Implementation
Provide the checklist to interim boards to self-assess compliance.
Use the checklist in regular financial reviews conducted by condominium managers.
