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[Pamster]

Hi, is there some sort of formula to ascertain what a suitable amount of money should be in the Capital Works fund at any given time?

I own a unit in an older style block of 6 in NSW with no lift, gym or pool.

Thanks

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[Sir Humphrey]

I think nothing is better than starting with pen and paper and writing down every bit of non-routine maintenance you can think of that you might need and how often and what it cost last time etc. It won’t take long before you are well on the way to answering the question. 

I would also aim to have a fair bit of ‘contingency’ funding which you aim to have as a kind of basal residue in the fund that you could use if several of the expensive things ended up costing (say) 50% more than your reasonable estimates or there was something big you didn’t think of. 

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[Lady Penelope]

I live in Qld where Capital Works Funds (or Sinking Fund Forecasts) are mandatory. I have always found these documents to be extremely useful and well worth the professional expense. 

A forecast is usually prepared by a Quantity Surveyor (though there’s no legal requirement for that in Qld) who inspects the site. They’re looking for what works need doing and the condition of infrastructure so they can then estimate how long it’s likely to last and what will or won’t need replacing.

Then they do some complicated calculations to work out how much those works will cost in the future and put the whole lot into a comprehensive report breaking down the collection into specific time periods.

Quite literally the Sinking Fund Forecast tells a strata owners corporation how much to collect and when to collect it.

Quantity Surveyors provide 15 year forecasts. To remain current the document only needs to be updated every five years. The best use of a Sinking Fund Forecast is if the document is updated regularly to account for unplanned expenditure.

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[Sir Humphrey]

Our OC had a professional one done in 2009, which, in retrospect, I don’t think added all that much over what we could have worked out for ourselves but it had the advantage of being accepted with more confidence by owners because we paid money for it. The next one in 2015 we did ourselves but couched very much in terms of doing reality checks of our actual costs against the professional estimates of 5 years previous and noting where the two were in good agreement or at variance. 

I was treasurer for both of these. I am recently no longer treasurer. I had hoped that writing a lot of annotation on the 2015-25 plan to note the evidence for the estimates of costs and timing would help for succession and preservation of corporate memory. Our new treasurer has just produced a draft budget that suggests he didn’t read much of our sinking fund plan. This is consistent with the impression that he joined the EC to sort out our EC because it is self-evident that his predecessors, especially me, were incompetent. He seems determined to reinvent the wheel. 

Am I just a bit irritated, having put in the work to produce a document that can be reviewed every 5 years, updated etc., only to find it ignored after only 3 years?

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[Cosmo]

Pamster, please read here:  https://www.fairtrading.nsw.gov.au/Factsheet_print/Tenants_and_home_owners/Strata_schemes/The_owners_corporation/FTR47_Sinking_funds.pdf

The formula is the 10 year plan.  Ours is a small strata like yours.  A 10 year plan is easily done by anyone with a bit of spreadsheet knowledge.  

We have put into the plan: the things that need doing; their estimated cost; the total of sinking fund levys and the running balance of the Sinking fund (Capital works budget). 

The spreadsheet will give you an idea whether the strata has put enough away for capital works.  

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[Pamster]

Thanks everyone I really appreciate your input, I now have some useful information to take back to the owners.

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