Jeremy, you’re right. Regardless of the movement of money, your Strata Manager has presided over un unsustainable drain on the sinking fund, which means your strata plan is not only in debt but non-compliant with the law. The SM sounds like he was trying to avoid the inevitable hike in levies (or maybe you have a former EC member who sold recently). Anyway, what you need is a budget that a) restores the Sinking Fund to it’s correct level (over two or three years) and b) puts enough money in the admin fund to run the building.
You might want to have a serious look at sacking your strata manager who has allowed/encouraged this to happen. If your sinking fund is over-supplied, you adjust the payments at the next budget – you don’t start playing “find the pea” with cups of money.