What accounting resources are available for body corporates and how should asset purchases be treated?

William Marquand, Tower Body Corporate:

Body corporate owners often ask the question about whether there are average costs they can compare their building against. It's an understandable instinct, but for the most part, there is no average, as the costs of each building depend so much on the construction and history of the building.

When thinking about this, I often reflect on my experience managing two identical neighbouring twelve-lot sites. Both were built around 30 years old, and they should have been broadly comparable in their requirements. However, over the years, one of the sites had an excellent long-term committee who were invested in the maintenance and upkeep of their building. Meanwhile, on the other side of the fence, the owners had always taken the cheaper option or avoided maintenance where possible. A culture had developed where the primary goal was to keep body corporate levies as low as possible. You can guess the results. At the well-maintained building, owners had paid more in levy contributions over the years, but they got that investment back in the quality of their environment, rental yields and unit prices when it came time to sell. They were also a happier group who found the management of their site straightforward. Next door, the property was in poor repair, and the owners faced larger bills to repair big-ticket items that had never been addressed. Occupants at the buildings had more social issues, and there was always a problem to be dealt with.

This digression doesn't answer your question, but it gives you an idea that making direct comparisons between buildings and establishing 'average costs' can be a tricky, if not impossible, business.

Still, this doesn't mean that your body corporate managers shouldn't be more helpful. The manager should be able to review the budget with you, line item by line item, and provide comments on the costs. They should know, or be able to review, general market costs for items such as utilities, lifts, bin cleaning, and other relevant expenses. They should be able to help you identify areas where you may be overpaying and suggest alternatives. They should be able to discuss the sinking fund with you and how that relates to your sinking fund report. If you can't get this type of help, it's reasonable to ask why.

From your end, you may need to understand that body corporates are set up to be compliant with the legislation. If your body corporate company has done that with your accounts, then they may well have fulfilled their contractual obligation. As an individual, you may want something more specialised, but that may mean either doing that accounting work yourself – you should at least be able to obtain detailed records of expenditure over the years – or paying an accountant to do it. You also have to think about your fellow owners and whether they want this type of analysis, want to pay for it or whether it would bring them a benefit.

There's usually some middle ground here. Multiple accountants serve as treasurers for body corporates and often ask questions about body corporate accounting. If they are dealing with a management company that takes the time to explain how the system works and how requests can be accommodated, then they are usually happy with the outcomes. The willingness to discuss how things work is a key part of resolving customer frustrations, and if your company is not open to that, it's reasonable to feel unhappy.

In terms of a resource to help you out, I don't think there is a specialist point to go to for body corporate accounting. Search the internet and you can find lots of individual bits of advice, but if any readers know of a place where this is collated, please advise in the comments.

Body corporate managers won't usually depreciate body corporate assets as part of their accounting procedures. However, this doesn't mean that depreciation doesn't have a role in a body corporate. Here's an article from HR Block to show you how it can be considered: Claiming depreciation for common property - H&R Block Australia

Matthew Faulkner, Matthew Faulkner Accountancy:

The BCCM Act says the Corporations Act doesn't apply to strata. The plan is not carrying on a business and the BCCM Regs say the sinking fund takes all the would be capitalised expenses. To do otherwise would contravene the Act and Regulation.

Strata accounts are deliberately simple to understand and should not require much accounting knowledge to read.

32 Corporations Act does not apply to body corporate

Corporations Act does not apply to a body corporate.

96 Body corporate must not carry on business 

1. A body corporate must not carry on a business.

169 Application of administrative and sinking funds 

1. The sinking fund may be applied towards— 
   1. spending of a capital or non-recurrent nature; and
   2. the periodic replacement of major items of a capital nature; and
   3. other spending that should reasonably be met from capital.
2. All other spending of the body corporate must be met from the administrative fund.