Condo corporations maintain two independent accounts for handling the business of the corporation.
The Operating Account allows a condo corporation to handle its day to day affairs. It is comprised of monthly common expense fees less the portion transferred to the Reserve Fund. It is a requirement that condo corporations prepare an annual budget for Operating Account expenditures.
Reserve Funds allow a condo corporation to maintain the long term market value of the building by handling major repairs and improvements. The Condo Act provides restrictions on how these funds are to be utilized.
The Reserve Fund can be viewed as a savings account for special expenditures that may come up in the future. The Reserve Fund Study, which is usually updated every few years, serves as an estimate of when expenditures from the Reserve Fund will be required and for what purpose. This differs from a budget which also identifies expenditures on an annual basis but is prepared each year.