Every year a body corporate holds an Annual General Meeting (AGM) to consider among other things what funds it needs to collect for the coming year. If in the previous year it spent more than it collected then in addition to the funds it needs for the coming year it should also make up any shortfall.
The treasurer is responsible for overseeing the budget preparation and could if they have the appropriate skills prepare the budget. In most instances however the body corporate manager under the terms of their management agreement prepares the budget on behalf of its members.
There are two budget categories, the administration fund for the payment of expected expenses for the coming twelve months and the sinking fund for the long term expenses such as repainting the building and the replacement of plant and machinery.
The administration’s budget is calculated based on last year’s expenses with the appropriate expected increase for the year taking into account any extraordinary expenses in the last year and any planed additional expenditure for the coming year.
The manager usually refers the draft budget to the committee for their endorsement. It is then sent to the body corporate members with the agenda for the upcoming AGM. The budget approval is usually dealt with after the financial report for the previous year has been tabled and accepted by the members. The draft budget is then tabled and reviewed considering the previous financial reports and any queries the members may have.
It is then up to the members to move and second the motion to accept the budget. The budget will be carried at the meeting with a majority as a general resolution.