Surplus Funds

Surplus funds: the committee’s options

The ways a committee can hold surplus money, and how the decision is made.

Most schemes hold money they will not spend for some time, usually in the sinking fund. Where that money is kept is the committee's decision. This page sets out the options. It does not recommend one.

The starting point

Money the scheme holds but does not need yet

The sinking fund builds up over years for capital and long-term work: a roof, painting, lifts, paving. The administrative fund can also hold more than the next few months of running costs need.

Until it is spent, that money sits in the body corporate's own accounts. The committee can leave it where it is, or keep part of it somewhere else in the body corporate's name.

The sinking fund forecast shows when the money is expected to be needed. Any decision about where to keep it starts from that forecast.

The options

Four ways a committee can hold surplus funds

Each option below is described the same way. None is put forward as better than another. Which suits a scheme depends on its forecast, its committee and its owners.

Leave it in the operating account

The money stays in the account levies are paid into and bills are paid from.

Access
Available at any time.

To weigh
The fewest accounts to run and report. The account may earn little or no interest.
A separate at-call savings account

A second account in the body corporate's name, at the same bank or another, that the money can move in and out of.

Access
Usually available at any time, by transfer back to the operating account.

To weigh
Keeps the money apart from day-to-day spending. The interest rate can change at any time. It is one more account to reconcile each month.
A term deposit

An amount placed for a fixed period at a fixed rate, in the body corporate's name.

Access
Not available until the term ends without breaking it, which may cost interest or a fee.

To weigh
The rate is known for the term. The term needs to end before the forecast says the money is needed.
A mix

Some money kept available in the operating or at-call account, and some placed on term deposit. Some committees split the money across several deposits that end at different times.

Access
Depends on how it is split.

To weigh
Can match money to the forecast's timing. There is more to track and more to decide.

Before deciding

Questions to put to any bank

These questions are a starting point, not advice. A committee may want its own financial or legal advice before deciding.

1Is the account in the body corporate's name, with the body corporate as the account holder?
2What does it cost to open, hold and close?
3How is interest paid, and how often?
4On a term deposit, what happens if the money is needed before the term ends?
5Who can authorise a transfer, and how?
6Can statements be sent each month for the reconciliation?
7What happens at the end of a term if nobody gives an instruction?

Deciding

The decision is the committee's, and it is on the record

Step 1 · The committeeLooks at the sinking fund forecast and the current balances
Step 2 · The committeeChooses an option, or decides to leave things as they are
Step 3 · The committeeRecords the decision as a resolution, with the account, the amount and any term
Step 4 · Whoever is authorised to payCarries out the transfer the resolution sets out, and nothing more
Step 5 · The monthly reportShows every account the scheme holds, with its balance, so owners can see where the money is

Any account opened to hold surplus funds is in the body corporate's name and appears in the monthly reconciliation like every other account.

Our part

We set out the options. The committee chooses.

What Clearview does

Shows the committee the forecast and the balances, side by side.
Asks the banks the committee names for their terms in writing, and passes them on unchanged.
Carries out the transfer the committee has resolved.
Reports every account each month.

What Clearview does not do

Recommend an option or a bank.
Move surplus funds without a committee resolution.
Take a commission, fee or benefit from any bank.
Hold any arrangement with a bank.

Surplus Funds

Money the scheme holds but does not need yet

Four ways a committee can hold surplus funds

Leave it in the operating account

A separate at-call savings account

A term deposit

A mix

Questions to put to any bank

The decision is the committee's, and it is on the record

We set out the options. The committee chooses.

What Clearview does

What Clearview does not do

Talk to us about your scheme's reserves