If you think getting rid of the strata manager is the answer, you can do this by mutual consent, by getting orders at NCAT or – and this is the trickier of the three – finding a clause in their contract that they have clearly breached.
The use of money from the capital works (sinking) fund to pay Admin shortfalls is not that unusual but under Section 76 (2) that money has to be repaid withing three months or a special levy raised to repay the money.
Many strata committees and strata managers will avoid the latter by moving the money back and forth during the course of a financial year, then adjusting the amounts of the levies at the next AGM, evening matters up between the two funds while avoiding the pain of special levies.
It does sound, however, that your budget is out of whack and needs close examination, especially for future maintenance. It may be that your strata manager is keeping committee members happy by avoiding increases in levies through plundering the capital works fund.
On the matter of the insurance claims, you need to discover who made them and under what circumstances. This sounds suspiciously like individuals taking advantage of insurance coverage of fixtures and fittings to get themselves a nice new kitchen or bathroom.
But individuals can claim against strata insurance for items covered in their own lots – and some of the lots covered would surprise you. Tighten up procedures with the insurers and the strata managers and ask them to investigate and report on the incidents on which they paid out.