What is the difference between a sinking fund and an administrative fund

Your email address will not be published. Close Menu Home. Tower Services. Developers — New Schemes. Dispute Mediation. Financial Management. Body Corporate Management. To assist the body corporate to determine how much money should be set aside, Leary and Partners prepares a specialised report called a Sinking Fund Forecast sometimes also called a Capital Works Plan or Maintenance Plan for this purpose.

Typical expenses that are met from the Sinking Fund are: painting costs, replacement of major plant and equipment e. Only expenses relating to the common areas of the complex can be met from the sinking fund.

The committee may refer to a sinking fund forecast to help determine how much is needed and when. It is not compulsory for the body corporate to do a sinking fund forecast, however it may be difficult to anticipate the expenditure over nine years without one. The body corporate may engage a professional to complete one or complete one themselves. There is no duty on the body corporate to adhere to a sinking fund forecast. At each AGM owners vote to approve the budgets and also agree how much to pay throughout the year to raise enough money to meet the budget.

These are called levies. The body corporate may choose the frequency of the levy payments throughout the year. For example a body corporate may decide on one annual levy or split the levies into quarterly payments.

Although there are two funds, the body corporate may decide to open only one bank account. Monies for each fund are deposited into the account. The body corporate may also invest funds.

Money spent from the fund Money in the administrative fund can be spent on anything that is not required to be paid from the sinking fund, including: regular maintenance of the common property insurance charges administrative expenses—such as secretarial fees and postage. Budgets The body corporate must prepare an administrative fund budget and a sinking fund budget each financial year. The administrative fund budget must estimate the necessary and reasonable expenditure for the financial year for: maintaining common property and body corporate assets insurance charges other costs incurred each year or more frequently called recurrent expenditure, e.

The fund must set the amount to be raised by owner contributions to meet the expected costs. It is up to the body corporate to decide how to manage and invest its funds.