› Flat Chat Strata Forum › The Professionals › What’s the Correct procedure to repay an Admin Fund deficit › Current Page
It sounds to me, without knowing exact details, that the appropriate thing is to have this general meeting to approve a special levy to deal with the admin fund deficit/repay the sinking fund. Then, I would expect, with everything square again, when the time for the regular AGM comes around again, there would be a normal budget resolution at that AGM to approve the next year’s budget and raise a levy sufficient to cover that, or possibly a little more than just cover it, to build up a little reserve in the bank to cover cash flow through the year of routine, anticipated expenses.
It is not always necessary to levy an amount to exactly equal the budget. Sometimes you might have money left over from the previous year and a more than sufficient reserve in the bank and could levy a bit less than the budget. Other times you might levy a bit more than the budget to build up a comfortable reserve if the previous year went over budget a bit, eating into reserves. Our strata manager once advised aiming for 25% of a typical annual budget in the admin fund just kept in the bank to cover imperfect matching of the timing of income and expenses. I have tended to err on the side of caution and we have had around 33% in reserve in the admin fund. This year our proposed budget is balanced but the last couple of years we budgeted for slight deficits (levied slightly less than the budget) as we had more than needed in that reserve.
The sinking fund is separate and should not be dipped into to deal with day to day cash flow.