The committee prepares the administrative fund and sinking fund budgets for owners to consider at each annual general meeting, and a budget can be approved by ordinary resolution. Approval is not permission to spend: every payment still has to be authorised, either by a general meeting or by the committee within its spending limit.
Explanatory noteGeneral information about the BCCM Act, not financial or legal advice. Spending limits here are stated for the Standard, Accommodation and Small Schemes modules; Commercial Module committees have none, and two-lot schemes need no formal budgets. The official pages are body corporate budgets and committee spending.
1.Two budgets a year
Every body corporate must keep an administrative fund and a sinking fund and budget for each one every financial year. Each budget is a forecast of spending, and what each owner pays in levies follows from the budgets the owners set. This guide is about what happens after the forecast: changing a budget at the meeting, and how the money in it may be spent.
2.Changing a budget at the meeting
The proposed budgets travel with the meeting notice, along with an explanatory note warning that they may be adjusted. At the annual general meeting, a proposed budget can be adjusted only if all of these hold:
- the change takes it no more than 10% above or below the budget first proposed;
- it follows a decision at the meeting on a spending motion that was on the agenda;
- a majority of the voters present and entitled to vote agree.
Owners thinking the figures too high or too low is not, on its own, a reason to adjust. If a budget does change, the levies change with it, and each owner gets the approved budget with the minutes.
An owner who disagrees has several routes. They can vote against the budget motion, or put up their own administrative or sinking fund budget as a motion. Even after the annual meeting approves one, an alternative can go to an extraordinary general meeting. An owner who believes a budget is unreasonably high can apply for dispute resolution, naming the items objected to and why, after first trying other ways to settle it, such as proposing an alternative budget.
3.The committee’s spending limit
The owners can set the committee’s spending limit by ordinary resolution, with no minimum or maximum. If they never set one, the limit is the number of lots multiplied by $200, and in a layered scheme the number of layered lots. Three further rules shape it:
- GST counts: the committee has to allow for it in what it spends.
- The money must be in the budget for that expense; if it is not, the owners must meet to change the budget or agree a special levy.
- A single project cannot be cut into smaller jobs to bring each under the limit.
The same limit governs improvements: a committee can organise improvements to the common property, within its spending authority.
An 18-lot scheme whose owners have never set a limit.
18 lots × $200 = $3,600 committee limit
The committee wants new gutters along one wing and has three quotes, each including GST: gutters $1,900, downpipes $1,450, repainting the fascia $980.
$1,900 + $1,450 + $980 = $4,330
Each quote sits under $3,600, but the work is one project and its total is $730 over the limit, so the committee cannot approve it in pieces. The owners would decide it at a general meeting. The figures are invented for the example.
4.Quotes, and a second limit
A scheme also has a limit for major spending, which decides how many quotes the committee must consider. Above it, the committee needs at least 2 quotes. The owners may set the committee’s spending limit higher than the major spending limit, so the committee can approve work between the two once it has its 2 quotes. Nothing stops a body corporate from getting more quotes than the law requires.
5.When the committee may go over
The committee can spend above its limit only where:
- the owners authorise it by ordinary resolution;
- the owners of every lot give written consent;
- an adjudicator authorises the spending to meet an emergency; or
- it is needed to comply with a statutory order or notice to the body corporate, an adjudicator’s order, or a court’s judgment or order.
Insurance has its own exception: the committee may go over the limit to take out or renew a policy, provided authorising that spending is not a restricted issue for it. What the committee may never do is spend on items only a general meeting can approve, and it should not spend above the level the owners have approved. In a Commercial Module scheme the committee has no spending limit, but each spend must still be authorised at a committee meeting or by a vote outside one.
6.Paying the bills
Money leaves either fund only against a written request, such as an invoice, or written evidence of payment, such as a receipt. Where a manager looks after the funds, it must reconcile every account within 21 days after the end of each month. Without a manager, the committee may ask the treasurer for that statement; the guide to the committee covers the treasurer’s role, and the guide to managers the manager’s.
7.Money not needed yet
Money in either fund that is not needed straight away may be invested, much as a trustee can invest. How the funds are managed and invested is for each body corporate to decide.