The funding table is the end result
Producing a funding table is one of the main points of having a LTMP in the first place and the funding table will probably be the part of the plan owners will study the hardest.
Fortunately the Plan Heaven funding table is simple and easy to comprehend.
The opening balance
It starts with the opening balance and while some bodies corporate will have a separate bank account to hold their long-term maintenance fund or reserves, most don’t. They might have a savings bank account in addition to their current account but this is likely to be more to do with attracting interest, rather than deliberately having a separate account strictly for maintenance.
The point is that if you don't have a specific account for long-term maintenance, you're going to have to work out how much of your spare cash can be reasonably estimated to be used as the opening balance of your maintenance reserves.
We suggest you use a sum that is estimated to be the surplus of the total body corporate’s cash reserves, over and above what is required for trading.
As an example, say a body corporate has cash of $35,000 in all of its bank accounts and the expenses (for such things as insurance and electricity) in the proposed operating budget for the coming year is $100,000. You could say that you have an opening balance for your LTMP of $35,000 - because that's how much surplus cash you have - but it is probably prudent to budget for a buffer or contingency of about $5,000 of additional expenses in the operating budget, just in case something unexpected comes up. That will leave $30,000 as a surplus not required for trading and could be used at the opening balance of reserves in the LTMP.
The annual contribution
The fields where you can add and edit your annual contribution allow you to use different values each year, or not.
However, to start with we suggest the following process.
Draft up all of your jobs and their cost in each year.
Edit the fund and put in your estimated opening balance. Save.
Go back to the fund table and take a look at your closing balance.
Say your closing balance at the end of year 10 is negative $150,000. That means you need to collect at least $150,000 from owners over the next 10 years to provide for a positive closing balance. $150,000 over 10 years is an average of $15,000 a year. Click edit again and enter $15,000 into the contributions field in each year. Save and go back and take a another look at the table.
Now you can go back and forth adjusting your contributions and jobs until you have a table that you believe is best for owners. But keep an eye on the closing balances each year because if they go into negative figures you're going to have an obvious problem.
Ideally you will end up with the same annual contributions each year. This may not be possible if you have a big job that can’t be put off any longer. But the whole point of having a LTMP and setting aside funds for it, is to avoid those events coming up again in the future when you haven't put aside the cash to fund them.
We are not advocating
We are not advocating you opt out of having a long-term maintenance fund. You can use Plan Heaven with or without a long-term maintenance fund, it’s entirely up to you. But when we designed and built Plan Heaven, we were aware that there were many different ways that body corporate’s managed their finances and we would need to provide a planning tool that was flexible enough to cater for everyone.
We have published a few more thoughts on funds on this page relating to compliance.
If you have any feedback or questions please use the feedback form.
The Plan Heaven team.
Disclaimer. Plan Heaven is not qualified in law and any comments made on this website are only the opinion of Plan Heaven and should not be regarded as legal advice. Our comments are merely providing some thoughts on how the legislation might be interpreted and how we go about attempting to meet its requirements. You should not rely on this information in isolation and do you own homework and at all times if you wish to be sure of your position relating to legal matters you should seek advice from a suitably qualified lawyer.