Question: Funds have been transferred from our Sinking Fund to our administrative Fund. Who would have authorised this?
Answer: Money cannot be transferred from one fund to another.
Money cannot be transferred from one fund to another.
The rationale behind this is that it has been raised a specific purpose and should be used for that purpose.
If that is what has happened, then it is a breach of the legislation.
What can happen next or what can you do?
As ever, start by asking the Committee and the Body Corporate manager what has happened and why. If necessary, advise of the legislative requirement. Get as much information as you can. Was it just a misguided decision by a Committee trying to balance a budget? In that case, maybe there could be a simple reversal of the transaction. Or, was it a decision made with the full knowledge of the law and a choice to disregard it anyway? Then you might need to look at making a change in the administrative set-up of your scheme.
If there isn’t a good explanation or response, you could raise the matter with the Commissioner’s office.
If you have an audit scheduled, the auditor is likely to pick up on this and could provide a direction. If you have a regular auditor, maybe you could contact them and ask them to take a look at the financials to confirm your viewpoint.
Longer term, you might consider that as owners look to purchase in your scheme, people looking at the books and records in advance might see the irregularity. Such a finding would likely be a significant red flag for purchasers. There is no definite outcome from taking such an action, but most of the likely outcome are negative.
Are there any other possibilities here? Maybe there is something you are missing? As I say, ask the Committee and see. Is it possible the movement was an adjustment? An item could have been paid from the sinking fund in error and it was determined to pay this from the admin fund on review. If so, then that is OK and it should be possible to explain this and provide a record why.
Please see this link for more info on the admin and sinking funds.
This link is information from the standard module regulation on the transfer of funds.
This post appears in Strata News #596.
William Marquand
Tower Body Corporate
E: willmarquand@towerbodycorporate.com.au
P: 07 5609 4924
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