Question: What is the reason for not having separate accounts for an admin and a sinking fund in a body corporate? And why are body corporates prohibited from transferring money from one fund to the other?
For accounting purposes body corporates have two accounts – an admin fund and a sinking fund. In practice most body corporate work with one current account from which money from either fund is drawn. This can create confusion over how much money schemes really have allocated to either fund and how much money they really have to use on an immediate basis.
What is the reason for not having separate accounts for an admin and a sinking fund in a body corporate? And why are body corporates prohibited from transferring money from one fund to the other? I can understand that this may not be good practice but ultimately it is the owners money.
Answer: It is important that bodies corporate are unable to transfer money between funds as the money has been raised for a particular purpose.
The body corporate is required to keep various financial statements and proper accounting records which confirm the amounts allocated to each fund – so there is no need for multiple accounts.
It is important that bodies corporate are unable to transfer money between funds as the money has been raised for a particular purpose. For example, if money was transferred from the sinking fund to the admin fund for an administrative expense, all that would do is create a future issue when the money originally earmarked to be used from the sinking fund becomes due.
It is correct to say that this is owners’ money – but more importantly owners have already decided in advance as to how to apply those funds when the levies and budgets were set at general meeting. Transferring funds would contradict that earlier decision.
This post appears in Strata News #482.
Todd Garsden Mahoneys E: tgarsden@mahoneys.com.au P: 07 3007 3753