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Contingency fund in management Company Budget

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  • 30-11-2012 8:08pm
    #1
    dori_dormer
    Registered Users Posts: 1,919 ✭✭✭


    Hi,

    Im an owner in an apartment block, where the landlords are all Directors and we run the Management Compny ourselves.

    I have just recieved the budget this year, and the fees are very high, €400 more than last year. and the proposed budget for next year is the same.

    Basically the budget for this year includes a new fire alarm system, and painting the whole building next year in the following budget.


    Is this not what the contingency money that we pay into is for? For things that crop up but arent neccessarily year on year outgoings? Or am i wrong, and if so what is the contingency allowance supposed to be for?

    I just feel a bit ripped off, as I know theres plenty of money in the company bank account.

    Thanks


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    #2
    Victor
    Registered Users Posts: 78,404 ✭✭✭✭Victor


    Systematic things like cleaning, gardening, small maintenance all need to come from the current budget.

    Annual or multi-annual things like painting, flooring, lighting need to be budgeted in that timeframe.

    You still need to keep a reserve and are legally obliged to. What would happen if tomorrow, the fire officer turned around and said the property wasn't up to standards and you all end up on the side of the street next week? Who would pay for the remedial works? What if there was an infestation and all the woodwork had to be replaced? The lift or automatic gates? Rewiring the electrical systems?


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    #3
    dori_dormer
    Registered Users Posts: 1,919 ✭✭✭dori_dormer


    Thanks Victor,

    I understand the painting being budgeted then. I know we have to have money on the side in case of emergencies, but Ive had this apartment for 7 years and the budget has never been this high, and the contingency money has never been touched in this time.

    The fire alarm actually was a safety issue like you describe, and had to be dealt with immedatly and cost a lot of money, so would this come under the contingency fund section?

    Im just trying to understand where my money is going.

    Thanks


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    #4
    Victor
    Registered Users Posts: 78,404 ✭✭✭✭Victor


    dori_dormer wrote: »
    Ive had this apartment for 7 years and the budget has never been this high
    The honeymoon period is coming to an end.
    The fire alarm actually was a safety issue like you describe, and had to be dealt with immedatly and cost a lot of money, so would this come under the contingency fund section?
    That could be argued. However, it would somewhat deplete the contingency fund. You could suggest that the contingency fund be left as is and the alarm paid for out of a supplement over two years, but thats just moving money around.

    Make sure you are getting value for money.


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    #5
    dori_dormer
    Registered Users Posts: 1,919 ✭✭✭dori_dormer


    Thanks again,

    Is there some calculation to ascertain how much money is required in the contingency fund?

    Does it have to be a certain percentage or value based on how many apartments or anything?


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    #6
    athtrasna
    Closed Accounts Posts: 13,420 ✭✭✭✭athtrasna


    The MUD act recommends a contribution in the region of €200 per unit per year to the sinking fund.


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    #7
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,285 Mod ✭✭✭✭The_Conductor


    Sink fund and an annual contingency subhead in your budget- are in fact normally two entirely different things. We budget 100 per unit for the contingency fund, and 200 per unit for the sink fund. If we don't use the contingency fund, it automatically rolls into the sink fund. Different companies do it in different ways.


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    #8
    peter_dublin
    Registered Users Posts: 385 ✭✭peter_dublin


    smccarrick wrote: »
    Sink fund and an annual contingency subhead in your budget- are in fact normally two entirely different things. We budget 100 per unit for the contingency fund, and 200 per unit for the sink fund. If we don't use the contingency fund, it automatically rolls into the sink fund. Different companies do it in different ways.

    Yep. We are exactly the same, although we have no official contingency fund heading we just allow an amount for exceptional repairs per unit, this is in combination with controlled costs has allowed us each year to divert the extra into the sinking fund.

    There is bound to be plenty of suprises for you. Our development is 20 years old+ and I discovered this year that in one block, the party wall between attics was "missing". Seems the builder ran out of blocks and left as was. You could step over what was built into the next attic.

    A heathy sinking fund is a "Plus" for your company, any sensible future buyer will have a copy of the accounts before they even register their interest. Your lucky to have such a diligent set of directors especially considering some of them are "landlords", we have had screaming matches at AGMs from landlords over raising the fees by €50 a year. This assumes they are controlling all other costs correctly.


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