Can you build a contingency into a Body Corporate Budget?

Contingency – a future event or circumstance which is possible but cannot be predicted with certainty.

Can you have a line item as a contingency in a Body Corporate Budget?  The short answer is no. Having a line item called Contingency in your budget is not lawful.

The legislation focuses on anticipated expenditure and a contingency is not that.  Some relevant comment from adjudicators includes:-

‘Contributions can only be raised to cover the estimated expenditure on specific budget items and should not be raised for unknown or uncertain contingencies.’

and;

‘I consider it is contrary to the financial provisions of the legislation for a Body Corporate to deliberately seek to amass a surplus for unspecified or very loosely defined contingencies.  Section 92 refers to budgets covering estimates of ‘necessary and reasonable spending’.  Certainly it can be difficult to estimate exact costs and may be reasonable to estimate at the higher end of the anticipated range to cover normal increases in the costs of budgeted items.  However, contributions can only be raised to cover the estimated expenditure on specific budget items and should not be raised for unknown or uncertain contingencies.’

Rather than building contingency into your budget as an actual line item, it is recommended that it is built into each line of expenditure.  If you think it may cost $10,000 for the lifts to be replaced, make the anticipated expenditure $110,000.  In that way you create a contingency without actually calling it that.

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