Question: What changes can the committee make to budgeting for the 10 year forecast?
Is it permissible for a Committee to do either or both of the following without seeking approval at a general meeting? Expend, albeit within its spending limit, some 3 to 4 times on a sinking fund budget line item. Bring forward expenditure, albeit within its spending limit, budgeted for the following year in the 10 year forecast, but not allowed for in the current year’s budget.
Answer: These are budgets – they are never going to be perfectly precise.
The important issue to remember is that these are budgets – they are never going to be perfectly precise. Some years budgets will be under, and in other years, they will be over.
The legislation relevantly provides that:
“If a liability arises for which no, or inadequate provision, is made in the budget, a special contribution must be raised.”
A special contribution can only be raised by an ordinary resolution at general meeting. Accordingly, taking a strict interpretation, a general meeting would be required to authorise the additional funding for the unbudgeted expenditure.
However, adjudicators take a more flexible approach as to when this general meeting needs to be held. In Valley Terraces Echohamlets [2012] QBCCMCmr 314 the adjudicator relevantly provided:
“Spending amounts above what has been budgeted might be poor practice. However, it is not specifically prohibited. If spending below the committee limit is validly authorised then there seems to be nothing wrong with the committee subsequently calling a general meeting at which amended budgets can be adopted, based either on the body corporate power to change its decisions or ratify irregular decisions. If owners do not agree to adopt an amended budget so the spending is within the new budget then owners will have no choice but to levy a special contribution to meet this unbudgeted expenditure (Standard Module, 141(2)). However, the legislation does not require the special levy to be adopted before the spending occurs.”
Accordingly, yes – the additional spending in excess of the budget does need to be authorised at general meeting.
However, that further authorisation does not need to take place before or immediately after the spending takes place. Unless it is going to substantially impact on the body corporate’s cash flow, the authorisation can probably wait to be readjusted at the next annual general meeting. That would also save for the costs of an EGM (which also would probably not have been budgeted for).
This post appears in the March 2021 edition of The QLD Strata Magazine.
Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753