Options When a Strata Has a Budget Surplus
- Trevor Morley
- Mar 8
- 2 min read
Updated: Jul 17
WHAT CAN A STRATA DO IF IT COLLECTS MORE STRATA FEES THAN ITS OPERATING EXPENSES?
Budgeting is a key responsibility for Strata Corporations. The budget is usually approved at the Annual General Meeting and includes an estimate for both operating expenses and the contribution to the contingency reserve fund. The strata fees payable by each strata lot is calculated based on these estimates.
Sometimes, the estimated expenses are more than the actual expenses and there is a surplus. When there is a surplus the Strata has some options:
Transfer the money to the Contingency Reserve Fund.
Retain the money in the Operating Fund as a surplus.
Use it to reduce the Strata Fees in the next budget.
CAN A STRATA TRANSFER A BUDGET SURPLUS TO THE CONTINGENCY RESERVE FUND?
At the end of a fiscal year, if the Strata has a surplus in the Operating Fund it transfer that money to the Contingency Reserve Fund.
The benefit of this is that it increases the amount of money available to the Strata to meet expenses that should be paid from the Contingency Reserve Fund.
The disadvantage of this, is that it limits the flexibility of the Strata regarding using that money in the future and means that Owners have "overpaid" Strata Fees in that fiscal year.
CAN A STRATA RETAIN EXTRA STRATA FEES IN THE OPERATING FUND?
A Strata can retain a positive balance in the Operating Fund within that fund. Our recommendation is that it is kept in a Category of Expenditure described as "Retained Money (Contingency)". For an explanation of how Categories of Expenditure work in an Operating Fund Budget, please read this article.
The benefit of this is that it provides a ‘buffer’ in case future budgets under-estimate expenses. Using retained money in the Operating Fund to meet future budget deficits is described in this article.
CAN A STRATA 'CARRY OVER' UNSPENT MONEY TO REDUCE STRATA FEES IN THE NEXT BUDGET?
A Strata can use unspent money as a general 'credit' to the next budget. In this situation, it should be noted as a source of income in addition to Strata Fees. This money is 'general' and is not assigned to any particular Category of Expenditure.
The benefit of this is that it reduces the Strata Fees payable in the next year.
WHO DECIDES WHAT TO DO WITH AN OPERATING FUND SURPLUS?
The Strata Council has the authority to decide what to do with the surplus, if it is:
Transferred to the Contingency Reserve Fund.
Retained in the Operating Fund as a surplus.
Used to reduce Strata Fees in the next budget.
However, any other option (such as returning it to Owners) requires a resolution passed by a ¾ vote at an annual or special general meeting.
