Funding the Reserve Fund
Paragraph 30.1(2)(b) of the Act states that once the expenditure has been made, there must be sufficient funds left for the purpose of capital replacement. The exact balance that needs to remain in the fund, after an expenditure, would be the amount that is reasonable as determined by the reserve study and the plan for funding.
So how does the Board deal with an unexpected expense and ensure sufficient money remains in the reserve fund to comply with the Act?
- The Board could make a special assessment to the owners.
- The Board could transfer more money from the operating fund to the reserve fund.
- The corporation could obtain a bank loan and transfer those funds into the reserve fund.
- The corporation could allow the payable to the contractor to remain outstanding for a period agreed to by the contractor.