Financial

Management

Office of the Commissioner for Body Corporate and Community Management

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Presenter

Rosemary Priebe

Senior Information Officer

Information and Community Education Unit

(ICE)

Office of the Commissioner for Body Corporate

and Community Management (BCCM Office)

Topics

• Budgets

• Sinking fund forecasts

• Committee spending

• Body corporate spending

• Spending Limits in Layered Schemes

• Spending on maintenance vs improvements

• Audits

• Financial reporting

• Reconciliation Statements

• Debt recovery

Budgets

• Administrative and sinking fund budget required

for all modules except Two Lot Scheme.

• Copy of budget must accompany the motion

approving the budget

• No minimum amount that has to be in the

sinking fund – based on forecast

• Draft budget set by committee before AGM

• no limit on increase in budget

• based on reasonable and necessary

expenditure for that scheme

Adjusting Budgets at AGM

• Budget can be adjusted by 10% up or down AT

the AGM

• Adjustment happens ONLY if there is a motion

already on the AGM agenda relating to spending

• Adjustment must be approved by majority of

voters present and entitled to vote

• Levies get proportionately adjusted

• Copy of the amended budget must be sent out

with AGM minutes

Administrative Budget

Administrative fund budget raises money for the

current financial year for anything that is not

required to be paid from the sinking fund,

including:

• Regular and recurring maintenance of the

common property

• Insurance charges

• Administrative expenses – such as

administrative costs for meetings, body

corporate manager or caretaker fees, common

property utility charges or legal expenses

Sinking Fund Budget

Sinking fund budget raises money for the current

financial year plus at least 9 years into the future

for the following:

• Anticipated one off or capital expenditure for

maintenance eg painting or structural repairs

• Replacement of common property or assets

• Improvements to common property – ie

upgrading, adding or removing items.

• Other expenditure that should reasonably be

met from capital.

Sinking Fund Forecast

• Sinking fund budget must be based on a sinking

fund forecast

• Expenditure for maintenance is time based

• No requirement to obtain a professional report

• Forecast is a guide – best practice is to review

each year to ensure sinking fund monies are on

track for projected expenditure.

Levies

• Based on the administrative and sinking fund

budgets approved at the AGM

• Due date and number of instalments must be

approved at the AGM

• All of levy except insurance premium is

calculated using contribution schedule lot

entitlements

• Insurance premium is calculated using interest

schedule lot entitlements (if BFP) or by % share

of reinstatement costs (if SFP)

Levy notices

• Written notice of levies must be sent out at least

30 days prior to due date

• Must show total amount, instalment amount, due

date, discounts, penalties and arrears amounts

• Can also show amounts that owner has agreed

to. EG supply of maintenance services,

exclusive use payments

• Can be sent to address for service or in way

directed by owner. EG emailed.

Discounts and Penalties

• Discount of not more than 20% can be approved

by ordinary resolution.

• Budget will need to allow for discount.

• Penalty interest of up to 2.5% per month can be

approved by ordinary resolution. Must be simple

interest.

• Penalty interest can only be applied from the

date of the general meeting approval. It cannot

be backdated.

Committee Spending

• Committee can spend up to the committee spending

limit in one approval

• “Relevant limit for committee spending” = $200 x

number of lots or amount set by ordinary resolution

at a general meeting (GST inclusive)

• Cannot break up projects to bring costs down to

stop requirement to call an EGM for approval

• Can only spend money if there is allocation or room

in the budget for the spending

• Special levy is required if there are insufficient funds

or amend budget by ordinary resolution EGM

Body Corporate Spending

• Body corporate can approve any expenditure at

general meeting if budget has funding included

• If no allocation in budget, then special levy must be

raised by ordinary resolution or amend budget

• Cannot break up projects to prevent the need for

two quotes

• Summary of large quotes can be attached with

information about where owners can get full quote

Major Spending Limit

• 2 quotes are required if spending is over the

“relevant limit for major spending” - $1100 x number

of lot or $10,000, whichever is lower. Or the amount

previously set by ordinary resolution. (Inclusive of

GST)

• 1 quote can be obtained if it is not practicable to

obtain 2 quotes. EG goods or works with the

required specifications are only obtainable from a

single provider.

• Single quote must be presented with the motion on

the General Meeting paperwork

Spending Limits in Layered Schemes

• “Relevant limit for committee spending” = $200 x

number of LAYERED lots or amount set by ordinary

resolution at a general meeting (GST inclusive)

• “Relevant limit for major spending” where 2 quotes

are required = $1100 x number of LAYERED lots or

$10,000, whichever is lower. Or the amount

previously set by ordinary resolution (GST inclusive)

• Total number of layered lots is all the subsidiary

scheme’s lots and non-BC lots added together.

EG 1 + 120 + 59 = 180 x $1100 = $18,000

Spending Limits for Maintenance

• Maintenance = repair or replacement like for like

• Committee can approve spending on

maintenance if funding is available in the budget

• Maintenance is always ordinary resolution vote

at a general meeting if over committee spending

limit. No upper limit.

Spending Limits for Improvements

• Improvement = change by addition, exception,

omission or substitution. Structural or non-structural.

• Improvement to common property by BC:

• Basic improvement limit = up to $300 x number of

lots (subject to committee spending limit)

• Ordinary resolution limit = basic limit up to $2000

x number of lots

• Special resolution limit = more than $2000 x

number of lots

• Only 1 ordinary resolution improvement per year

Spending at a General Meeting

Audits - Definition

An audit is an examination of the financial statement

and records of the body corporate where the auditor

provides an opinion about whether the financial

statements present a true and fair view, and are in

accordance with accounting standards (and legislation

where appropriate).

Cost of auditing is minor expense compared to issues

that may arise from not getting the audit done – best

practice is to get the audit done.

Audits

• Body corporate must audit the books each year

(except Small Schemes and 2 Lot Scheme).

• Body corporate must decide by special resolution

whether or not to audit the books at each AGM.

Reverse motion - owners must vote NO to not

auditing the books if they want an audit.

• Can vote to appoint auditor at AGM or anytime

during year at EGM by ordinary resolution with

quote attached.

• Auditor must be qualified and have at least 2 years

experience and be independent.

Financial Reporting

• Body corporate manager (not when engaged as

committee) must (if asked) give written report on

an approved payment.

• Committee member must give written report (if

asked) on an approved payment (in Standard

Module only)

Reconciliation Statements

• Reconciliation statements must be prepared by

body corporate manager within 21 days of last day

of month for payments into and from bank account

reconciled with invoices and other documents

showing payments.

• When no body corporate manager engaged, body

corporate can vote by ordinary resolution to

require treasurer to complete reconciliation.

Definition of Body Corporate Debt

Definition of Body Corporate Debt

From dictionary schedule in relevant module:

a) a contribution or instalment of a contribution;

b) a penalty for not paying a contribution or instalment of a contribution by the date for payment;

c) another amount associated with the ownership of a lot. Note – must be agreed amounts eg supply of service or exclusive use by-law payments.

Debt Recovery Authorisation

• Owner must pay the levies

• Body corporate must recover owing levies within

2 years (S145 Standard Module)

• Committee can recover liquidated debts (levies

and interest) only (S42 Standard Module)

• Body corporate must approve debt collection of

non-liquidated debts (recovery costs) by special

resolution. (S312 BCCM Act)

• Body Corporate Manager cannot commence

debt recovery without authority of BC.

Debt Recovery – Budget Issues

• Committee MUST monitor recovery costs to keep

them within a reasonable level

• Must be allocation in budget for legal costs

• Special levy must be raised if no provision in budget

therefore restricted for committee

• If debt over 2 years, statutory limitations are 6 years

– Court of Appeal decision: BC for Mount Saint John

Industrial Park CTS v Superior Stairs & Joinery Pty

Ltd [2017] QCA 173

https://www.queenslandjudgments.com.au/case/id/3

10702

Dealing with Debt Recovery

• Committee can approve waiving penalty interest

or recovery costs, or allowing a discount if

satisfied there are special reasons. Cannot waive

levy. S145 Standard Module

• Committee must act reasonably and consider

each case individually – S94 BCCM Act

• If debt collector is involved, owner should contact

committee directly

• Body Corporate cannot delegate authority to

solicitor or Body Corporate Manager - Section 97

BCCM Act

Debt Recovery Disputes

• Cannot be heard by adjudicator (S.229A(3)

BCCM Act)

• Can come to conciliation IF no proceeding has

commenced in QCAT or Court

(S.229A(4) BCCM Act)

• If a proceeding has commenced, application

may be rejected as a related dispute to debt

dispute (S.229A(5) BCCM Act)

• If debt has been paid and no court order, owner

can dispute reasonableness of BC decisions

Payment of Body Corporate Debts

Amounts paid by an owner are allocated in this

order:

1. Towards the penalty interest amount

2. Reducing the outstanding contribution levy

3. Towards any recovery costs for the debt

• Owing levies attach to the lot, not the owner of

the lot unless the court has assigned the debt to

the owner.

• Debt will transfer with the lot making new owner

liable at the sale of the lot.

Contact us and Questions

Phone: 1800 060 119 (free call back service)

Online enquiry:

www.qld.gov.au/bodycorporatequestion

Website:

www.qld.gov.au/bodycorporate

Search Adjudicators’ Orders:

http://www.austlii.edu.au/cgi-

bin/viewdb/au/cases/qld/QBCCMCmr/