Thursday, March 29, 2012
Strata corporations can make use of a document called a Depreciation Report to budget for repair and replacement of major building systems and components. It covers the building structure as well as the building systems.
The structure includes the exterior and the interior common property. Items like the roof, the exterior walls, doors, windows, landscaping and parking lots all come under the exterior heading. Included in the interior portion of the structure are common property doors, windows and walls as well as the underground parking. Systems include fire prevention, heating and plumbing, electrical and ventilation systems.
The costs that are considered in the Depreciation Report are those that normally do not occur on an annual basis. Generally they are the expenses paid from the Contingency Reserve Fund or through special levies. They are not the types of expenses that are normally paid from operating accounts.
A main part of a Depreciation Report s financial forecasting. It typically spans a 30 year time frame. There are various cash flow funding models for the Contingency Reserve Fund that can provide specific balances, contributions, withdrawals and any special levies.
The Depreciation Report can be broken into three time periods. The complete thirty year period is the first. The second forecasting period is for the coming five years. The immediate year in front makes up the last period, dealing with year to year administration. You will see Depreciation Report issues turn up in the annual budget in the form of contributions to the CRF.
The Depreciation Report is only a forecast. It is an estimate of projected expense based on best guesses and industry standards. Items may last for longer or shorter periods than the Depreciation Report sets out . The actual expenditures may be greater or less than the forecast amounts.
This kind of report has been required in other provinces, but is new to British Columbia. It is now a component in BC's Strata Property Act. By 2013 it will be a requirement that strata corporations have a plan in place or in progress .
This approach to long term costs is the best one to adopt for strata corporations. It removes a lot of crisis management and reduces the number of unexpected special levies. It is easier to budget for big expenses if you take a long term view. It can also reduce total costs by reducing emergency work.
The structure includes the exterior and the interior common property. Items like the roof, the exterior walls, doors, windows, landscaping and parking lots all come under the exterior heading. Included in the interior portion of the structure are common property doors, windows and walls as well as the underground parking. Systems include fire prevention, heating and plumbing, electrical and ventilation systems.
The costs that are considered in the Depreciation Report are those that normally do not occur on an annual basis. Generally they are the expenses paid from the Contingency Reserve Fund or through special levies. They are not the types of expenses that are normally paid from operating accounts.
A main part of a Depreciation Report s financial forecasting. It typically spans a 30 year time frame. There are various cash flow funding models for the Contingency Reserve Fund that can provide specific balances, contributions, withdrawals and any special levies.
The Depreciation Report can be broken into three time periods. The complete thirty year period is the first. The second forecasting period is for the coming five years. The immediate year in front makes up the last period, dealing with year to year administration. You will see Depreciation Report issues turn up in the annual budget in the form of contributions to the CRF.
The Depreciation Report is only a forecast. It is an estimate of projected expense based on best guesses and industry standards. Items may last for longer or shorter periods than the Depreciation Report sets out . The actual expenditures may be greater or less than the forecast amounts.
This kind of report has been required in other provinces, but is new to British Columbia. It is now a component in BC's Strata Property Act. By 2013 it will be a requirement that strata corporations have a plan in place or in progress .
This approach to long term costs is the best one to adopt for strata corporations. It removes a lot of crisis management and reduces the number of unexpected special levies. It is easier to budget for big expenses if you take a long term view. It can also reduce total costs by reducing emergency work.
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