Your condominium may be the single largest investment that you have. Unlike most other accommodations where the property is owned individually, a condominium unit owner shares ownership of the common elements. The common elements are maintained by your condominium corporation of which you are a member. As a result, the health of your condominium corporation is important to the overall value of your investment.
Your condominium’s elected board of directors is accountable for the health of the corporation and responsible for the preparation and fair presentation of the financial statements in accordance with Canadian generally accepted accounting principles. If an audit is required on the corporation’s financial statement, a qualified, independent accountant will need to be engaged. The Condominium Act of Ontario (the Act) requires that all condominiums with 25 or more units have an audit. This requirement can be waived if there are fewer than 25 units and there is written consent by 100% of the unit owners.
The engaged accountant (auditor) must have a public license. The auditor adheres to a code of ethics and they conduct the audit in accordance with Canadian generally accepted auditing standards. The auditor’s responsibility is to express an opinion on the financial statements and this opinion adds credibility to the statements. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The auditor’s opinion is found in the financial statements in the “Independent Auditor’s Report”. In addition to a standard audit, the statements are usually scrutinized to ensure they comply with the financial aspects of the Act. Contraventions to the financial aspects of the Act are found on the report page under the heading “Condominium Act of Ontario”.
Reviewing your financial statements will provide you with insight as to how your corporation took care of your investment. The financial statements list the items owned and owed by the corporation at year end. They show how the general operating costs compared to the board of directors’ plan or budget. This budget drives your common element assessment. The statements will show if there is an excess or shortage in the general operating fund, which is key in day to day operations. Another important aspect of the statements is information about your reserve fund. This is the money put aside for major repairs or replacements. The list of items to be repaired or replaced and the timing is documented in a Reserve Fund Study. It is important that the reserve fund is maintained at a level to cover all future expenses as projected by the study.
As with any major service provider, it is a good idea to get quotes when looking for an auditor. In addition to price, consider quality and service. Ask the following:
Does the auditor specialize in condominium audits?
- Familiarization with the Condominium Act is important. The audit should include a review for compliance with the financial requirements of the Act. Therefore, the accountant needs to be familiar with the Act.
Will the auditor present the statements at the AGM?
- The auditor can “translate” the statements and answer questions of those members who are not familiar with reading financial statements.
Can the auditor meet your deadline?
- The condominium is required to have their AGM within six months of year end. The board will need to approve the audited draft statements in time to have the final statements available to include in the Notice of Meeting.
It’s important to look after your corporation’s interest, that is, the health of your condominium corporation and the investment of all the unit holders.
Gwen Story, B.Com (Hons), CPA, CGA
RLB Chartered Professional Accountants