Practical guide
How to Reconcile the Works Fund with Payments to the Contractor
During an extraordinary project the works fund lives on two parallel flows: the inflows from owners paying their installments and the outflows to the contractor at each progress stage. Reconciliation is the periodic check that compares these flows with the actual balance on the dedicated condominium bank account, to make sure everything adds up: fund collected minus payments made must match the balance attributable to the site. Doing it regularly avoids discovering too late that the till is not enough for the next payment. This guide explains how to set up the works fund reconciliation.
What to compare in a fund reconciliation
- Total fund resolved by the meeting
- Fund installments actually collected from owners
- Remaining arrears on the fund
- Progress-stage payments made to the contractor
- Withholdings retained on the works transfers
- Site ledger balance compared with the balance on the account
The two flows to keep aligned
The first flow is inflows: the fund installments owners pay under the resolved plan. The second is outflows: the advance and progress stages paid to the contractor, plus technicians' fees and accessory charges. The difference between the two, at any time, is the fund's theoretical surplus.
Reconciliation checks that this theoretical surplus matches the real balance attributable to the site on the dedicated condominium account required by Article 1129. If the two values diverge, there is an error to find: an unrecorded inflow, an unposted payment, an overlooked withholding.
Reconciling the fund inflows
On the inflow side you compare the fund installments expected, under the resolved plan, with the payments actually credited to the account. The gap between expected and collected measures the arrears on the fund, a crucial figure because it reduces the coverage available for payments to the contractor.
It is good practice to reconcile inflows at each installment deadline, so as to trigger reminders promptly to late owners. A fund with high arrears risks not covering the next progress stage, requiring money to be advanced or the site to slow down.
Reconciling the outflows to the contractor
On the outflow side you compare the progress-stage payments recorded in the ledger with the transfers actually debited from the account. Each payment must correspond to a certified SAL and an invoice, and account must be taken of the withholding tax retained by the bank on transfers for deductible works, provided by Article 25 of Decree-Law 78 of 2010.
Reconciling outflows also serves to check progress against the contract amount: by summing the payments made you know how much has already been paid to the contractor and how much remains, so you can plan the fund installments still needed.
- Each payment linked to a certified SAL and an invoice
- Dedicated transfers verified on the bank account
- Withholding taxes taken into account in the comparison
- Total paid compared with the overall contract amount
Closing the reconciliation and documenting it
The reconciliation closes when the site ledger balance, that is fund collected minus payments and net of withholdings, matches the balance attributable to the site on the account. At that point the figures add up and you can proceed to the next payment with confidence.
Documenting each reconciliation, even briefly, builds over time the basis of the final separate report. It will be easy to show the meeting that inflows, outflows, and balance were checked regularly, reducing the risk of disputes over the management of the fund.
Automating reconciliation with software
Reconciling inflows, outflows, and balance by hand at each deadline is burdensome and error-prone. Management software linked to the bank account lets you automatically compare bank movements with the fund entries and immediately flag deviations.
With AmministraPro you can keep the site in separate management, reconcile the account movements with the installments collected and the payments made, and check the fund coverage in real time before each progress stage. The features are described on the /funzioni page and the available plans with their costs on the /prezzi page.
Frequently asked questions
How often should the works fund be reconciled?
It is best to reconcile it at each installment deadline and before every progress-stage payment. The check at installment deadlines lets you trigger reminders to defaulters; the one before payments verifies that the fund has enough coverage for the transfer to the contractor without cash shortfalls.
What do I do if the ledger balance does not match the account balance?
There is an error to find: typically an unrecorded inflow, an unposted payment, or a withholding tax not taken into account in the comparison. The account movements must be rechecked against the fund entries until the two values match again.
Must the withholding tax be included in the reconciliation?
Yes. On transfers for deductible works the bank retains the withholding under Article 25 of Decree-Law 78 of 2010 and pays the net to the contractor. In reconciling outflows you must account for both the gross amount and the withholding, otherwise the ledger balance will not match the account balance.
Does the works fund sit on a separate account to reconcile apart?
No. The fund money flows through the dedicated condominium account required by Article 1129, together with ordinary management. The fund reconciliation isolates the share of the balance attributable to the site, comparing the fund's inflows and outflows with the related bank movements, while staying on a single account.
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