Smart Financial Planning

Posted on Wednesday November 01, 2017

Safeguarding a strata corporation’s operating and reserve funds is one of the main fiduciary duties of all board members, not just the treasurer. This means strata councils must protect the financial interests of the strata corporation and its members. FirstService Residential strata clients rely on their qualified strata management team to make sure all funds are properly managed, invested and even guaranteed by the government or financial institutions.
 
It is important for strata councils to understand a few essential considerations about solid financial planning. 
 
1. Understand the strata corporation’s obligations and options
The investment options for reserve funds are set by the Strata Property Act and are limited to certain financial products and ratings, as outlined in 6.11 of the Strata Property Regulations. Councils must select the right investment products based on the regulations, strata investment policy and reserve fund requirements. Since safeguarding the strata corporation’s assets is a top priority of the council and FirstService Residential, councils commonly invest in money market accounts for liquid funds and GICs for longer term investments.
 
2. Find the right financial institution
  • Check multiple sources when researching a bank’s ratings to gauge how predictable and stable its rates will be.
  • Understand what is required to open an account, complete a transaction and whether directors need to physically visit a branch to sign paperwork (due to recurring council turnover).
  • FirstService Residential clients have exclusive access to a banking program.
3. Know the basics
The strategy for managing reserve investments and operating funds differ. The key is to ensure the strata corporation’s liquidity needs are met while maximizing interest yield and protecting principal. Develop a plan for planned capital improvements which can be based on the depreciation report and also consider a contingency for unexpected situations which could vary across strata corporations.
 
Timely payment of strata fees are due on the first of each month. Having homeowners pay through Pre-Authorized Payments will allow for payments to be collected on time and allow the strata to run on a smaller operating fund balance.
 
4. Review your strata’s investments regularly
Strata councils should conduct a thorough examination of their investment strategy at least once per year. Keep it simple by incorporating this review into the annual budget process. Remember, financial decisions made by council members have far-reaching implications for the strata corporation’s bottom line now and into the future.

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