An update with an added concern

The UOAQ published Newsflash #86 last week urging all body corporate committees to step up to their leadership role as a matter of priority.  We urged committees to really start focussing on two fundamental issues:

  • LIVES: what can be done in relation to community property to protect the lives and well-being of your community members, eg ensure safe passage from the front-gate to the owners’ front-doors; shut-down non-essential community facilities like the pool, gym, BBQ etc.
  • LIVELIHOODS: what impact may Covid-19 have on the levies flowing in, and on expenses flowing out.  For example, we suggested a different approach may be needed in the case of those having difficulties paying their levies on time.  Further, hard decisions may need to be taken about delaying any proposed non-essential expenditure over the next six months or so, until this crisis passes.

Newsflash # 86 prompted a lot of very positive feedback.  At the same time, it seems that events have already caught up with most of us, forcing the closure of non-essential community facilities.  The speed of the virus exceeds the speed of human decision-making.*

What is interesting is that a number of UOAQ members have approached us about another concern they have about Livelihoods, ie an increased risk of misappropriation of body corporate funds.

Misappropriation: Prevention and Control

Our members are concerned that in difficult times like the present, where all members of our strata world are experiencing extraordinary strains and pressures, some few may be tempted to do what they normally would not even contemplate, ie dip into someone else’s funds to see them through their own personal hard times.

There is always the risk of misappropriation, even in the best of times.  Most bodies corporate have considerable amounts of money squirrelled away, amounts which are often a lot more than what most of us have in our personal bank accounts.

In times like the present, most people do rise to the occasion whatever the pressures and temptations… but history tells us that in any large community, desperation can drive some people to do desperate things.

The key to good governance is attention – especially visible attention – to identifiable risks, and when the risks increase so too the level of attention and scrutiny needs to increase.

We urge all committees to be especially attentive over the coming months to any questionable movement of their body corporate funds.  This may require discussion and decision within the committee about who precisely will take on this role.  If you leave it to everyone, no one does it.

An added difficulty in strata world:  Who Can Access Your Funds?

The UOAQ has published several articles over the years about the risks attached to the common practice of depositing all body corporate funds in accounts where the signatories are exclusively representatives of the body corporate manager (BCM).  That is, no one from the body corporate, not even the committee, is a signatory on the accounts.

Whatever the merits of this practice, it means that:

  1. Signatories, ie the BCMs, are the legal owners of your funds and, in the eyes of the banks, the signatories have exclusive control of deposits, withdrawals and access; and
  2. Non-signatories, ie the committee, may not have direct access to these accounts, not even view-access.

(BCMs are very protective of this view-access.  The UOAQ has witnessed a number of cases where BCMs would rather terminate the contract with the body corporate than allow them view-access to their own funds.)

The UOAQ is not suggesting that current times permit a major overhaul of this very unsatisfactory business practice.

What we do suggest is that all committees should be very mindful that many people – people other than their own lot owners – have direct access to their body corporate funds.  Extra care and attention should be employed to ensure that nothing inappropriate happens to these funds.

There is no point your closely managing incoming levies and outgoing expenses if your funds are being quietly siphoned out through the back-door by those who have no right to your funds, even if they have convinced themselves they will put the money back ‘tomorrow’.

Please be caring and careful

Finally, we wish you all safe passage through this crisis.

*Paul Kelly (Editor-At-Large) The Australian Wed, March 25, 2020 p.12

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