Transferring funds from Capital Works to Admin Fund – is this possible?
At each AGM, the owners corporation must estimate how much money it needs for actual and expected expenditure for both the administration fund and capital works fund (formerly called the sinking fund).
This year, a number of admin funds suffered a blow because of increased energy costs. The energy cost has doubled in a lot of circumstances. This was somewhat unforeseen and needs to be accounted for in the next budget.
Another area to watch out for is expenses charged to the wrong fund. This is rather common and easy to do. An accounting correction is quite OK with a transfer back to the appropriate fund. Items like painting and plumbing are often expensed to the admin fund whereas the right place may have been the capital works fund.
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In your circumstance, it would appear that the administration fund has been over spent and you have surplus funds in the capital works fund.
Section 76 of the Strata Schemes Management Act 2015 allows you to transfer money from one fund to another but with a strict caveat. The owners corporation must, no later than 3 months after the transfer, determine a levy contribution to be re-paid to the fund.
So, in principle, the transferring funds from the Capital Works to Admin Fund is possible but it is actually a loan and the owners corporation must determine a levy, within 3 months, to re-pay the transferred amount. This repayment is often taken care of when the next quarterly levy comes in or a special levy will need to be determined.
Transferring funds from Capital Works to Admin Fund – what’s the solution?
At the AGM, set contributions to the administration fund that covers the shortfall and the estimated expenses for the year ahead. In line with your ten-year plan you may set contributions to the capital works fund to zero.
This approach gets you back in the black while depleting the capital works fund for a year.
This option is a little bit more complicated and highly unusual. At the AGM, pass a unanimous resolution to distribute surplus capital works funds to owners based on unit entitlements. At the same time, levy the same amount back to the administration fund.
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