Think Nicholsons

Jul 29

Body Corporate Financial Management Master Class - 25 February 2016

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.

 

Slide 2

  1. End of the month before the month of the anniversary of the establishment of the scheme.
  2. Adoption of budgets; fixing levies; appointment of an auditor (at other AGMs you also need to present the accounts for that year).
  3. Admin fund budget - Estimates for the financial year of necessary and reasonable spending from the admin fund to cover:
    1. Maintenance of CP and BC Assets;
    2. Insurance;
    3. Other expenditure of a recurrent nature (i.e. BCM costs).
  4. 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:
    1. Anticipated expenditure of a capital or non-recurrent nature; and
    2. The periodic replacement of items of a major capital nature; and
    3. Other expenditure that should reasonably be met from capital.
  5. 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.
  6. Ordinary resolution to:
    1. Fix (based on the budgets) contributions to be levied on owners;
    2. Decide the number of instalments;
    3. Fix the date on or before which payment of each instalment is required.
  7. Ordinary resolution to:
    1. Fix a special contribution to be levied on owners;
    2. Decide the number of instalments;
    3. Fix the date on or before which payment of each instalment is required.
  8. Yes – interim contributions:
    1. Must later be set off against the contributions raised at the AGM;
    2. Must be at same rate as previous year’s contributions;
    3. 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.

Slide 3 

  1. At least 30 days before the payment is required the BC must give (Aus Post!) the owner of each lot written notice of:
    1. The total amount payable by the owner; and
    2. The amount of the contribution or instalment currently required; and
    3. The date by which it must be paid; and
    4. Any discount if paid by the date for payment; and
    5. Any penalty for each month the owner is in arrears; and
    6. 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.

  1. 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%.
  2. 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.
  3. The BC may recover each of the following as a debt:
    1. The amount of the contribution (or instalment);
    2. Any penalty;
    3. Recovery costs (reasonably incurred by the BC in recovering the amount).
  4. 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.
  5. 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.
  6. First to the penalty, second to the reduction of the outstanding contribution and last to any recovery costs.

Slide 4 

  1. Yes.
  2. 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.
  3. Yes, in the same way a trustee may invest trust funds.
  4. 1 or more accounts kept solely in the name of the BC at a financial institution (not defined).
  5. No. A BC cannot transfer between funds.

Slide 5

  1. 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.
  2. 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:
    1. If required by the BC – a balance sheet, as at the termination day, for the fund/s;
    2. An income and expenditure statement for the fund for the financial year in which the termination day falls;
    3. A list of all amounts owing to, and payable from, the fund as at the termination day;
    4. A reconciliation statement for the account or accounts kept for the fund for the month most recently completed before the termination day;
    5. Details of the most recent notice given to each owner of a lot requiring payment of a contribution, or instalment of a contribution;
    6. A record of all contributions, or instalments of contributions, paid by owners of lots during the financial year in which the termination day falls;
    7.  Any other financial record for the fund held by the body corporate manager on the termination day (e.g. deposit books).  
  3. Admin and sinking funds;
  4. 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).

Slide 6

  1. Must audit unless BC resolves not to by special resolution, appointment is by ordinary resolution – must include name of auditor.
  2. 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).
  3. Yes – in the same way a trustee may invest trust funds.
  4. 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).
  5. $200 x no. of lots or as approved by ordinary res (no limit for Com Mod).
  6. As set by ordinary resolution, or the lesser of $10k or $1100 x no. of lots.

Andrew Suttie

Partner
Andrew practices predominantly in strata law. He has extensive experience in advising bodies corporate and other stakeholders of their rights and obligations under the Body Corporate and Community Management Act 1997 and related legislation.