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We have just received our budget for a small block of 13 flats . The Admin Fund has a deficit of $16,500. The levies raised were $26,500. This year they are proposing to increase the levies to $50,000. However this will still leave a proposed budget deficit of $9,000. There is very little in the budget where we can save money – maybe 1 or 2 thousand dollars. To compensate the Capital Works Fund levies have been slashed. The total levies to be paid are only $3,500 more than the current year. Is it legal to propose an Admin budget that will result in such a large deficit?
I realise that times are tough however I am concerned that we might be breaking Strata Law. I have emailed the Strata Manager but did not get a good explanation.
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How did the admin fund get into deficit? A deep dive needs to be done to determine what the money was sent on. It’s a large miss for a relatively small complex.
Were there any unexpected payments? Was capital works items charged to the admin fund.
A complex of your size should have total levies (admin and CWF) to be somewhere around $30k to $45k per year
It looks like your strata levies have been inadequate.
The only way the admin fund can go into deficit is to borrow from the CWF. The strata act says that this situation has to be rectified within 3 months. That means either the next quarter levies cover the deficit or a special levy needs to be raised.
Id also ask the person who is doing the treasury function to explain how you got into this situation.
Kaindub said:
The strata act says that this situation has to be rectified within 3 months.
I only mention this because I made the same error a couple of weeks ago and was corrected offline. Section 76 (2) only says the OC must, within three months, determine the amount to be levied to repay the loan, not actually repay that loan within that timescale.
It would be very easy to see how that figure could slide around for years while the committee is recommending keeping the levies to a minimum.
And it looks very like in this case the committee/treasurer is using the capital works fund as a bank for the admin fund, and having kept levies too low in the past, and now the chickens are coming home to roost.
I wonder how old this building is, because if it’s post-2016 the developer could be forced to make up the deficit if they set the levies unrealisitically low to encourage sales.
Section 76 (2) The owners corporation must, not later than 3 months after the transfer or use, determine the amount to be levied as a contribution to the fund from which the transfer or use was made to reimburse the amounts paid from the fund.
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There seems to be some creative accounting allied to a couple of misconceptions here. My guess is that the money from the case was paid either in part or entirely into the wrong fund. Rather than just declare an error, someone has decided to siphon the excess back into the admin fun, in a way that keeps levies down but doesn’t involve repaying the money raised to fight the case in the first place. I may be wrong but I think there is nothing sinister happening here, just a little bit odd.
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