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) [Community Titles Act 1996 (SA) 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)].

Expenditure statements

An expenditure statement must be presented by a corporation to each annual general meeting of the corporation. The statement must include [s 113(1)]:

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); Community Titles Regulations 2011 (SA) 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 [Community Titles Act 1996 (SA) s 113(1)(aa); Community Titles Regulations 2011 (SA) reg 18A]

Exempt corporations

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 [Community Titles Act 1996 (SA) s 138(1)].

The auditor must be a registered company auditor within the meaning of the Corporations Act 2001 (Cth) [Community Titles Act 1996 (SA) 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)].

Exempt corporations

An annual statement of accounts in respect of a financial year need not be audited in any of the following circumstances:

Authorising expenditure

Depending on the amount the corporation proposes to spend, different types of resolutions are needed in order to authorise the expenditure [s 119; Community Titles Regulations 2011 (SA) reg 21].

If the proposed expenditure is less than the number of community lots in the scheme multiplied by $2,000, an ordinary resolution is required.

If the proposed expenditure is more than the number of community lots in the scheme multiplied by $2,000, and less than the number of community lots multiplied by $5,000, then a special resolution is required.

If the proposed expenditure is more than the number of community lots in the scheme multiplied by $2,000 or $5,000, but is reasonably required to complete works required by council (or a body established by council) or a public authority, then a special resolution is required.

If the proposed expenditure is more than the number of community lots in the scheme multiplied by $5,000 (and not required by council or the like), then a unanimous resolution must be passed to authorise the expenditure.