Once levies have been collected from all owners, they are typically divided into two funds; an Administration fund and a Capital Works fund.
The Administration fund is used for regular payments including council expenses, insurance, management fees and payments to service contractors, cleaning, general maintenance and utilities such as power
The Capital Works fund is essentially a savings account for future major expenses as the building ages. This includes painting, tiling, plumbing, carpet and plant and equipment, or the purchase of new Owners Corporation assets.
It is a compulsory requirement of state legislation to prepare a Capital Works fund budget forecast. Having a healthy Capital Works fund reduces the need to raise a ‘special levy’ to pay for unexpected costs. It makes good management and smart financial sense.