Fund Accounting in Co-Ownership Management

When managing the accounting of a syndicate of co-ownership, you must also manage many different funds. Let’s clarify some things!

What Is the Purpose of a Fund?

A fund allows you to accumulate the amount necessary for one or more repairs on the co-ownership. You can have different funds for each improvement or for all of them.

Usually, syndicates of co-ownership set up four funds:

  • The operating fund: This fund is used for routine operations.
  • The contingency fund: This fund is mandatory since 2016. It is used for expenses related to major repairs and to the replacement of parts in the common portions.
  • The self-insurance fund: This mandatory fund is used to cover deductibles in the event of loss or damage.
  • The emergency fund: This fund is used for unexpected expenses of various kinds for emergency repairs.

How to Manage These Funds?

Legally, you must account for each fund’s transactions in different bank accounts and financial statements. Thus, each fund must have its own bank account, earning statement, balance sheet, and statement of net assets.

The statement of net assets is all the assets minus the liabilities. This illustrates the co-ownership’s financial situation. The syndicate of co-ownership can then determine if it has a surplus or a loss.

Sometimes, syndicates of co-ownership multiply the number of funds to compartmentalize every predictable repair. Since every fund requires its own bank account and financial statements, this can complicate things.

Imagine: In addition to four basic funds, you decide to divide the operating fund and create a fund for repairs, a legal fund, and an improvement fund. This means you need to manage 7 bank accounts and create 6 financial statements.

A Compromise?

Instead of multiplying your funds, you can create reserves in the statement of net assets. These reserves do not require a separate bank account. They are created when you have a surplus in your operating fund. You can now justify your surplus by putting it in a reserve.