The General Fund

 The General Fund

The content - including publications - on this website is intended only to provide a summary and general overview on matters of interest. It is not intended to be comprehensive nor does it constitute legal advice. We attempt to ensure that the content is current but we do not guarantee its currency or accuracy. We are not lawyers and any communications between the OCN and its members do not constitute legal advice and must not be relied on as legal advice. You should seek legal or other professional tailored advice to your circumstances.  You should seek legal advice before acting or relying on any of the content in this website and any communications from the OCN. OCN will not be liable to you or anyone else for any loss suffered in connection with the use of this website or any of the content. 

The General Fund is made up of the Administrative Fund and any Special Purpose Funds the OC agrees to create

Administrative Funds

The Administrative Fund pays for all the ordinary recurrent running costs of an Owners corporation (S 73).

At each AGM the OC must pass by ordinary resolution the budget that will raise enough from the owners by way of contributions (levies) to fund the running cost expenditure of the OC for the year in which the meeting is held (S 75).

The budget must state:

• the total amount of levies that will be paid into the Fund,

• an estimate of other amounts that will be paid into the fund, like any fees paid to the owners corporation for inspection of its records and S119 certificates, and

  • the estimated expenditure from the Fund

  • to maintain the common property and any other property held by the owners corporation in good condition on a day-to-day basis;(eg cleaning, gardening and minor maintenance) and

  • to pay for insurance premiums; and

• to pay for recurrent expenses (eg utility service charges, management fees)

OCs can now agree that certain owners or classes of owners should pay for some things or pay more of things than other owners and consequently pay a greater amount of the total levies than their unit entitlements indicate. 

The OCs accounts cannot end the financial year in deficit. Many managers advise that if the Administrative Fund is about to be expended funds can be borrowed from the Sinking Fund to cover the deficit and paid back.  This is unlawful. The Sinking Fund can only be used consistent with S88 

88  Sinking fund—what can fund be used for?

An owners corporation for a units plan may only make payments from its sinking fund if the payments are consistent with the sinking fund plan.

Note 1 An owners corporation may at any time, by ordinary resolution, amend its sinking fund plan to ensure that the plan reflects expected sinking fund expenditure and the total sinking fund contributions are sufficient to meet the expected sinking fund expenditure stated in the plan.

Note 2 Expenditure from the sinking fund for the purpose of installing sustainability or utility infrastructure must be provided for in the sinking fund plan (see s 23).

Lending to the Administrative Fund is not a usual item in a Sinking Fund Plan.

What the EC can do if they find the Administrative Fund is about to run out is ensure that the Administrative Fund has not been spent on work that should properly be charged to the Sinking Fund.  For example, a plumber might have been called to fix what initially appeared to be a minor pipe blockage.  On examination it was discovered that a section of pipe needed to be replaced.  The replacement properly should be funded from the Sinking Fund.  If the bill is split to move the long term maintenance tasks from the Administrative Fund to the Sinking Fund the Administrative Fund might be able to be brought into a better position.  However, the shortage in the Administrative Fund is indicative that it is being underfunded and it is the EC’s responsibility to ensure the next year’s Administrative Fund budget is increased to a realistic level.

Unpaid levies need to be followed up assiduously.  All owners are obligated to pay them and owners don’t pay them are welching on other owners.  On the other hand owners who are financially embarrassed are not assisted by allowing them to build up larger debts.  Simple reminders and use of a debt collector seem to achieve results with less grief to all concerned than using higher cost alternatives.

Funds can be spent from the Administrative Fund in accordance with S77 (as approved in the budget) and under S43 which details the treasurer’s functions

43          Executive committee—treasurer’s functions

The functions of the treasurer are—

(a)   on behalf of the owners corporation, to give to each unit owner notice of—
(i)   a determination of general fund contributions under section 78 (1); and
(ii)   a determination of sinking fund contributions under section 89 (1); and
(b)   on behalf of the owners corporation—
(i)   to pay all amounts the corporation receives into the corporation’s account in accordance with section 68 (1) (b); or
(ii)   if the owners corporation is exempt from section 68 (1)—to receive, acknowledge receipt of, and account for amounts paid to the corporation; and

Note:   An owners corporation for a units plan with only 2 or 3 units may, by unopposed resolution, exempt itself from s 68 (1) (see s 68 (2)).

(c)   on behalf of the owners corporation, to pay amounts the corporation spends out of the corporation’s account, in accordance with section 68 (1) (c), as authorised by the executive committee; and
(d)   on behalf of the executive committee, to keep the records (the records) mentioned in schedule 2, section 2.1 (1) (f); and
(e)   if the owners corporation requires the records to be audited—to arrange for the records to be audited by a qualified auditor; and
(f)   to give financial reports to meetings of the executive committee to allow the committee to monitor the financial performance of the owners corporation; and
(g)   to prepare and certify the annual financial statements mentioned in schedule 2, section 2.2 (1).

Managers do not need delegations to collect levies or pay accounts under direction of the EC.
EC should always approve invoices before money is actually paid out. 

Special Purpose Funds

The OC can create a Special Purpose Fund by special resolution under S74 that can be used only for the purposes stated in the resolution but those purposes must be consistent with the OCs powers and duties under the UT(M)A.

The OC can by special resolution change the purposes of the Fund or abolish the Fund and pay any remaining balance in it to either the Administrative Fund or Sinking Fund.

Special Purpose Funds are useful where there is an element of saving up for a major repair or replacement that is on a long cycle, like major overhaul or replacement of lifts or external painting.  Or where there is an element of ensuring there is money available for something that is very hard to predict, like payment of insurance excesses.  In the case of lifts on a 20 year cycle, there is a temptation for an under skilled EC to treat the far out years of the Sinking Fund Plan as irrelevant and use accumulated funds in the short term. 

In the case of insurance excesses, last year’s expenditure is probably no guide to this year’s so putting a few times the excess amount aside and topping it up as necessary ensures the OC is not caught short.