Sinking fund and administrative fund
A community corporation must establish a sinking fund (for non-recurrent expenditure only) and an administrative fund (for all other expenditure) [ss 116(1)—(2)].
Non-recurrent expenditure is expenditure for a particular purpose that is normally made less frequently than once a year [s 3(1)]. Recurrent expenditure is expenditure for a particular purpose that is normally made every year or more frequently [s 3(1)].
Money received by a corporation, including contributions of lot owners, must generally be credited to the sinking or administrative fund according to the purpose for which the money will be used [s 116(4)].
An expenditure statement must be presented by a corporation to each annual general meeting of the corporation. The statement must include [s 113(1)]:
- for the current financial year, the estimated expenditure of a recurrent nature and the estimated expenditure of a non-recurrent nature
- the estimated expenditure in future years for which funds should be raised now and held in reserve
- the amount to be raised by way of contributions from lot owners to cover the current financial year expenditure and reserve funds.
Some corporations must also include a forward budget (a ‘sinking fund’ budget) as part of the expenditure statement.
Forward budget (sinking fund budget)
For corporations with seven to twenty lots, and with improvements on the common property insured for $100 000 or more, a forward budget must be presented at each annual general meeting, as part of the expenditure statement. The forward budget must include proposed expenditure (other than recurrent expenditure) for a three year period. New information must be presented about proposed non-recurrent expenditure every three years. [s 113(1)(aa), reg 18A].
For corporations with more than twenty units, and with improvements on the common property insured for $100 000 or more, the forward budget presented at each annual general meeting must include proposed expenditure (other than recurrent expenditure) for a five year period. New information must be presented about proposed non-recurrent expenditure every five years. [s 113(1)(aa), reg 18A]
Community corporations with six or less community lots and community corporations with buildings and improvements on the common property insured for less than $100 000 are not required to present a forward budget as part of their expenditure statement at their annual general meeting [reg 18A(3)].
Audit of accounts
A community corporation must have its annual statement of accounts audited unless it is exempted from this requirement [s 138(1)].
The auditor must be a registered company auditor within the meaning of the Corporations Act 2001 (Cth) [s 138(2)]. A member of the corporation and any person who has a personal or pecuniary interest in the results of an audit must not be appointed as auditor [s 138(3)].
An annual statement of accounts in respect of a financial year need not be audited in any of the following circumstances.
- If the aggregate of the contributions made or to be made by members of the corporation in respect of that year does not exceed $20 000 AND the balance standing to the credit of the administrative fund at the commencement of that year does not exceed $20 000 AND the balance standing to the credit of the sinking fund at the commencement of that year does not exceed $20 000 [s 138(4)(a), reg 24].
- If all community lots are owned by the same person [s 138(b)].
- If the community scheme consists only of lots used for residential purposes AND there are not more than 6 community lots AND the community corporation, by unanimous resolution, resolves not to have the statement of accounts for that financial year audited [s 138(4)(c)].
- If the by-laws of a community corporation with two lots exempt the corporation from the requirement to have its statement of accounts audited [s 35(1)(c)].
Depending on the amount the corporation proposes to spend, different types of resolutions are needed in order to authorize the expenditure [s 119, reg 21].
If the proposed expenditure is less than the number of community lots in the scheme x $2 000, an ordinary resolution is required.
If the proposed expenditure is more than the number of community lots in the scheme x $2 000 and less than the number of community lots x $5 000 then a special resolution is required.
If the proposed expenditure is more than the number of community lots in the scheme x $5 000, then a unanimous resolution must be passed to authorize the expenditure.
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