How to manage the body corporate’s funds effectively

The body corporate is obligated to carry out the responsibilities assigned to it under the Sectional Titles Schemes Management Act (‘STSMA’) or in accordance with the rules, with the aim of establishing and sustaining an administrative fund that adequately covers the estimated annual operating costs for the repair, maintenance, management, and administration of the common property.

Administrative budget

The creation of a practical budget is imperative for effective financial planning in the management of Sectional Title Schemes. This budget serves as a crucial guideline for the financial management of the scheme, encompassing all essential expenses necessary for the seamless operation of the scheme. These expenses should include ongoing maintenance and repairs, insurance, legal, and management costs.

Trustees are tasked with analysing the income and expenditure from previous years to formulate a realistic budget. Additionally, a review of financial reports ensures that the budget accurately reflects the current financial status of the scheme. Consideration should be given to long-term projects or establishing a reserve fund to address unforeseen expenses.

Reserve fund

A reserve fund is established to cover unforeseen expenses or planned maintenance projects, thus mitigating the need to deplete the scheme’s operating funds or resort to imposing a special levy.

Income and expenses

Trustees must regularly manage and monitor income and expenses to ensure the availability of sufficient funds to meet ongoing expenses. This proactive approach enables trustees to take necessary measures, whether by increasing revenue or reducing expenses.

Unforeseen expenses

Incorporating provisions for unforeseen expenses into financial planning is a crucial element. This approach empowers trustees to anticipate and plan for unforeseen expenses, allowing for adjustments to the budget. Identifying potential expenses, such as utility costs, maintenance expenses, or security upgrades, enables trustees to allocate resources effectively.

Regular maintenance

Conducting regular maintenance at the scheme is essential for minimising the risk of costly repairs in the future. Regular property inspections help identify minor repairs that, if neglected, could escalate into major problems incurring significant expenses. Trustees should diligently review quotes from service providers to ensure sound financial planning. Additionally, scrutinising the scheme’s expenses aids in identifying non-essential costs that can be reduced or eliminated.

Author: Danielle Crewe – Sectional Title Senior Manager

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