After some unexpected expenses, our owners corporation has an administration fund deficit. Can we use the capital works fund to cover the shortfall?
Our administration fund has fallen into a $20,000 deficit after paying our insurance and some unexpected maintenance costs. Staff at our strata management firm have given us conflicting advice about what to do next.
One person advised that all administration-related spending must stop until the fund is back in surplus, either by waiting for regular levy payments or by raising a special levy. Another suggested we transfer money from the capital works fund to cover the shortfall.
What are the rules around using different funds to pay expenses? What are some best practice guidelines for managing the administration fund so it does not fall into deficit in the future?
Plenty of admin funds have deficits. It's not ideal, but it can be recouped in a couple of simple ways.
The advice to pause all admin-related works until the fund is back in surplus is incorrect.
Plenty of admin funds have deficits. It's not ideal, but it can be recouped in a couple of simple ways.
- At the next AGM, the following year's budget should ensure levies pay for all budgeted expenses (as normal) plus the admin deficit.
- At the next AGM, approve the permanent transfer of funds from the capital works fund to the admin fund to cover the deficit.
- Although this is not the most ideal way, it's also an opportunity to revisit some admin expense codings and consider whether they should have been capital works fund expenses.
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I am an FCPA and Tax Agent and run the only accounting firm in NSW that specialises in strata accounting. Whilst my practice is 11 years old, I have 15 years experience in the industry.
Based in Helensburgh (northern Illawarra) we audit strata from NSW, VIC, QLD & ACT.
My firm also lodges tax and BAS and acts as an ASIC agent too for those very old buildings that are Company Title Strata.
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