When was the last time your scheme really had a look at its sinking fund forecast? That is, really had a look and considered the recommendations for savings and maintenance and thought about where your site sits within them. If you haven’t done it for a while, it might be time to give it some thought and start a conversation about where your plan is heading.
Like a lot of things in the body corporate world, the sinking fund and the forecast that is supposed to guide it are good ideas for the sound management of your scheme that can quickly lose shape when put through the wringer of day-to-day management.
The problems start with the requirement that every scheme must have a report but then leave it up to owners to determine how they should follow it. Talk about a mixed message. Yes, owners must have self-determination over the investment into their schemes, but if the legislators think it necessary to have the report, why make it so easy to dismiss?
Then, consider that the contributions to the sinking fund get paid into the same bank account as the admin fund. That means that while on paper there are two separate funds designed to meet different objectives, in practice, there’s one big money pot and a lot of work for accountants. It’s not a structure that encourages clear thought about savings and spending, leaving many owners confused about the true financial picture of their plan.
The timeframe of the reports may also not be beneficial. By law, Body Corporates need to budget for major capital spending for the current financial year and the next nine years. There’s plenty of good reasons for that, but it can be hard to conceptualise why it’s a good idea to save today to paint the hallways of your complex in 2031. Most people can understand that long term savings are a good idea, but it is not always easy to align the realities of your immediate requirements today.
If it is all so confusing, why bother at all? Why not just set an annual budget to meet expenses and raise a special levy now and then? Some schemes do just this, maintaining a minimal sinking fund with owners digging into their pockets when money is needed. It’s a high-risk game, though, as funds can be short in the event of an emergency and while people can grasp the idea that they may have to make occasional lump sum payments getting agreement to this in the real world is rarely straightforward.
As ever, the slow and steady approach tends to be the one that produces the best results. That is, to get a forecast, make sure it is regularly updated, review the recommendations and keep the contributions into the sinking fund stable so that savings are made over time and big-ticket items paid for consistently.
Schemes that follow this approach tend to have a good environment and happier owners, so if you think the quality of your complex can be improved, a review and discussion of the sinking fund report can be a good point to start that conversation.
If you would like to get a copy of your scheme’s sinking fund report, check the online portal or ask your manager for a copy. Get a copy of the current financials statement too, and see where you stand against recommended savings and expenditure.