Question: Our executive committee collects levies for the sinking fund, but we don’t have a sinking fund plan, and there is no transparency about how we use the funds. Should there be more accountability on how the money is spent?
The executive committee of our CTS collect a sinking fund contribution from all owners, however, we don’t have a sinking fund plan or a sinking fund report. The committee has stated there is no requirement for them to do so.
At the recent AGM, they doubled the contribution with no details on planned expenditure. The budget for the last financial year lists money spent from the sinking fund as miscellaneous.
If levies are collected for the sinking fund, should there be full transparency, governance and accountability on what the money is for and how it is spent?
Answer: Any expenses should be accountable, and a description should be noted on the financials.
Does the CTS acronym mean Community Title, not a Units Plan? The legislation differs. The Community Titles Act 2001 is outdated legislation and has not kept up with the Unit Titles Legislation.
Each entity (still called a Body Corporate) would have its own management statement. This should form part of the contract of sale and may have by-laws noting the management of the finances.
Any expenses should be accountable, and a description should be noted on the financials. The committee is elected at each AGM. Any owner can attend and nominate. Also, request that a separate sinking fund be established and a sinking fund forecast obtained. This could be a motion at the meeting. The by-laws may need to be changed accordingly.
Below is the standard wording in the current legislation. There is no mention of a sinking fund, but can have separate allocations. We refer to section 45 and section 46 of the Community Titles Act 2001.
45 Administrative fund
- A body corporate must keep a fund for meeting its financial obligations under this Act.
- All income must be paid into the fund and all expenditure must be made from the fund.
- If the body corporate considers it appropriate, the fund may be subdivided into separate parts, one related to recurrent expenditure and the other related to capital expenditure.
- The fund must be kept at a level sufficient to meet reasonably foreseeable expenditure to be incurred by the body corporate.
46 Contributions
- The body corporate may from time to time levy contributions in relation to the lots in the scheme to raise an amount the body corporate decides to be necessary to meet expected expenditure.
- The contributions must be levied on a basis fixed by the management statement registered under this Act.
- A contribution must be paid by a day fixed by the body corporate and notified to the owner of the lot by written notice of the amount payable.
- The day fixed by the notice must be:
- not earlier than 14 days after the owner is given the notice; and
- not later than 28 days after the owner is given the notice.
- The owner of the lot on the day by which the amount is payable is liable for the contribution and a person who later becomes an owner before the contribution is paid becomes separately and collectively liable for the payment.
Jan Browne Bridge Strata E: jan@bridgestrata.com.au P: 02 6109 7700