Here are Andrew's slides, covering Body Corporate Financial Management as presented on the 25 February 2016 to Strata Community Australia members on the Sunshine Coast.
2. QuizQuiz
1.1. When is a body corporate’s financial year?When is a body corporate’s financial year?
2.2. What are the budget requirements of the first AGM?What are the budget requirements of the first AGM?
3.3. What needs to be included in the Admin Fund budget?What needs to be included in the Admin Fund budget?
4.4. What needs to be included in the Sinking Fund budget?What needs to be included in the Sinking Fund budget?
5.5. How can proposed budgets be adjusted at an AGM?How can proposed budgets be adjusted at an AGM?
6.6. How are contributions raised from owners?How are contributions raised from owners?
7.7. What happens if a liability arises that wasn’t in the budget?What happens if a liability arises that wasn’t in the budget?
8.8. Does the committee have any power to fix contributions?Does the committee have any power to fix contributions?
3. QuizQuiz
1.1. What are the requirements for a contribution notice?What are the requirements for a contribution notice?
2.2. Can the body corporate give discounts to owners?Can the body corporate give discounts to owners?
3.3. Can the body corporate impose penalties for late payment?Can the body corporate impose penalties for late payment?
4.4. What can the BC do if a contribution is not paid?What can the BC do if a contribution is not paid?
5.5. Can a committee allow a discount or waive a penalty orCan a committee allow a discount or waive a penalty or
costs?costs?
6.6. In what order of priority are recovered amounts applied toIn what order of priority are recovered amounts applied to
BC liabilities?BC liabilities?
4. QuizQuiz
1.1. Must every BC have a sinking fund and an admin fund?Must every BC have a sinking fund and an admin fund?
2.2. What amounts are paid into the sinking fund?What amounts are paid into the sinking fund?
3.3. Can admin or sinking funds be invested?Can admin or sinking funds be invested?
4.4. Where does a BC keep money it receives for the admin orWhere does a BC keep money it receives for the admin or
sinking funds?sinking funds?
5.5. If your monthly fee is outstanding and there are insufficientIf your monthly fee is outstanding and there are insufficient
funds in the admin fund, can the committee approvefunds in the admin fund, can the committee approve
payment from the sinking fund?payment from the sinking fund?
5. QuizQuiz
1.1. Who administers the body corporate’s funds?Who administers the body corporate’s funds?
2.2. If a BCM administers the funds, what rules apply and areIf a BCM administers the funds, what rules apply and are
there any penalties for non-compliance?there any penalties for non-compliance?
6. QuizQuiz
1.1. What are the requirements for auditing the accounts?What are the requirements for auditing the accounts?
2.2. Who can audit the accounts?Who can audit the accounts?
3.3. Can a body corporate invest its funds? How?Can a body corporate invest its funds? How?
4.4. Can a body corporate borrow funds? How?Can a body corporate borrow funds? How?
5.5. What is the relevant limit for committee spending?What is the relevant limit for committee spending?
6.6. What is the relevant limit for major spending?What is the relevant limit for major spending?
7.7. What spending approvals are required for improvements?What spending approvals are required for improvements?
End of the month before the month of the anniversary of the establishment of the scheme
Adoption of budgets; fixing levies; appointment of an auditor (at other AGMs you also need to present the accounts for that year)
Admin fund budget - Estimates for the financial year of necessary and reasonable spending from the admin fund to cover:
Maintenance of CP and BC Assets
Insurance;
Other expenditure of a recurrent nature (i.e. BCM costs)
Sinking Fund Budget – allow for raising a reasonable capital amount both to provide for necessary and reasonable spending from the sinking fund for the financial year, and also to reserve an appropriate proportional share of amounts necessary to be accumulated to meet anticipated major expenditure over at least the next 9 years after the financial year having regard to:
Anticipated expenditure of a capital or non-recurrent nature; and
The periodic replacement of items of a major capital nature; and
Other expenditure that should reasonably be met from capital.
Can be adjusted up or down by no more than 10%. Approval is by a majority of voters present and entitled to vote. If the budget is adjusted, the contributions are also adjusted proportionally.
Ordinary resolution to:
Fix (based on the budgets) contributions to be levied on owners;
Decide the number of instalments;
Fix the date on or before which payment of each instalment is required
Ordinary resolution to:
Fix a special contribution to be levied on owners;
Decide the number of instalments;
Fix the date on or before which payment of each instalment is required
Yes – interim contributions:
Must later be set off against the contributions raised at the AGM;
Must be at same rate as previous year’s contributions;
Must relate, as closely as practicable, to the period from the end of the previous financial year to 2 months after the proposed date of the AGM
At least 30 days before the payment is required the BC must give (Aus Post!) the owner of each lot written notice of:
The total amount payable by the owner; and
The amount of the contribution or instalment currently required; and
The date by which it must be paid; and
Any discount if paid by the date for payment; and
Any penalty for each month the owner is in arrears; and
If the owner is in arrears, the arrears.
(may also include amounts payable under a service agreement between the BC and the owner or under a EU by-law)
The notice must be served on an owner at their address for service, or in the way directed by the owner.
The BC can, by ordinary resolution, fix a discount if payment for a contribution or instalment is made by the date for payment. The discount can not be more than 20%.
The BC can, by ordinary resolution, fix a penalty if a contribution or instalment is not received by the date for payment. The penalty must consist of simple interest at a stated rate (of not more than 2.5%) per month.
The BC may recover each of the following as a debt:
The amount of the contribution (or instalment);
Any penalty;
Recovery costs (reasonably incurred by the BC in recovering the amount)
If an amount has been outstanding for 2 years the BC must within 2 months from the end of the 2-year period, commence proceedings to recover the debt.
If the BC is satisfied there are “special reasons” it can allow a discount or waive a penalty and costs, in whole or part. Act is silent on whether committee can do it, but orders support committee making the decision.
First to the penalty, second to the reduction of the outstanding contribution and last to any recovery costs
Yes
Sinking fund contributions for payment of capital or non-recurrent spending (and renewal or replacement of items of a capital nature); amounts received under insurance for destruction of items of a “major capital nature”; interest from investment of the sinking fund; transfer fees
Yes, in the same way a trustee may invest trust funds
1 or more accounts kept solely in the name of the BC at a financial institution (not defined)
No. A BC cannot transfer between funds
The treasurer OR the body corporate manager acting under the authority of s119 of the Act OR a body corporate manager acting under a Chapter 3 Part 5 engagement.
Rules: an invoice from a BCM cannot include services provided by another person (e.g. insurance broker or service contractor); when an authorisation under s119 is revoked or a Part 5 engagement expires, the BCM must, in not later than 30 days, give to the body corporate the following records:
If required by the BC – a balance sheet, as at the termination day, for the fund/s;
An income and expenditure statement for the fund for the financial year in which the termination day falls;
A list of all amounts owing to, and payable from, the fund as at the termination day;
A reconciliation statement for the account or accounts kept for the fund for the month most recently completed before the termination day;
Details of the most recent notice given to each owner of a lot requiring payment of a contribution, or instalment of a contribution;
A record of all contributions, or instalments of contributions, paid by owners of lots during the financial year in which the termination day falls;
Any other financial record for the fund held by the body corporate manager on the termination day (e.g. deposit books).
Admin and sinking funds;
Recurrent expenditure (maintenance of CP and assets, insurance, bank fees, body corporate management fees) and non-recurrent expenditure (periodic replacement of items – roof repairs, repainting, fencing, resurfacing driveways)
Must audit unless BC resolves not to by special resolution, appointment is by ordinary resolution – must include name of auditor
Must be a member of CPA Australia (CPA or FCPA) or the Institute of Chartered Accountants (CA or FCA) or Institute of Public Accountants (MIPA or FIPA) and have a total of 2 years auditing experience (whether or not continuous)
Yes – in the same way a trustee may invest trust funds
Yes - (Accom and Comm Mod - by ordinary resolution unless amount is greater than $250 x lots then Special Res); (Std Mod – ord res unless amount is greater than $250 x lots then Res without Dissent)
$200 x no. of lots or as approved by ordinary res (no limit for Com Mod)
As set by ordinary resolution, or the lesser of $10k or $1100 x no. of lots.