Sinking fund budget

I have just received notice of our AGM to be held next week.  Included with the papers attached to the notice is the proposed budget for the Admin Fund and the Sinking Fund prepared by the Strata Manager under Section 75 of the SSMA.  These budgets are the basis for the calculation of levies for the coming year and the levies are only a slight increase (2%) from last year.  

Whilst the Admin Fund budget looks reasonable the Sinking Fund budget fails to recognise several large pending projects and also several large payments which have already been made since balance date (31 March).

Section 71 of the SSMA states “An owners corporation must not pay any money from its sinking fund except for the purpose of … payments of the kind for which estimates have been made under section 75 (2)”.  Section 75 (2) states “An owners corporation must, at each annual general meeting, estimate how much money it will need to credit to its sinking fund for actual and expected expenditure … for painting, replacing (etc) and other expenses of a capital nature”.

These projects have been identified under our 10 year Sinking Fund plan and there are funds available to cover their expense.  The projects are not likely to be repeated within the next 10 years.  The Sinking Fund levies have had slight  increases over the years and the Sinking Fund balance has been slowly increasing – to avoid having to raise a special levy to cover a major expense, with which we are now faced.

The AGM agenda item dealing with approval of next years proposed levies refers to Section 76 (1) of the SSMA, which states “The owners corporation must determine the amounts to be levied as a contribution to the administrative fund and to the sinking fund to raise the amounts estimated as needing to be credited to those funds”.  Perhaps suggesting an accumulation for perceived future expenditures.

Does the wording of Section 76 (1) (“…estimated as needing to be credited to those funds”) over-ride the perceived requirements of Sections 71 and 75 noted above?

There is also an agenda item which states “To discuss and determine painting quotes already obtained, in the context of the attached Sinking Fund budget”.

Comments would be appreciated.

Paddy