Strata FAQ – People

As the built form of our strata buildings becomes more complicated, sharing facilities between strata communities is becoming more common.

These arrangements are normally established by the developer before buildings are completed and handed over to members of the strata communities.

The main purpose of providing for the sharing of facilities and services among strata communities is to access bigger and better amenities than the strata communities could hope to access on their own.

Examples of shared facilities and services include:

• Entrances, roadways and parks to major gated residential communities;
• Shared gym and recreational facilities such as pools in major high-rise towers built as a precinct; and
• On-site building management services working across different but adjoining strata communities.

The legal mechanisms used for the sharing of services and facilities include:

• Layered strata communities where an overarching strata community is formed to control and manage these shared facilities and services and it contains a number of subsidiaries that control and manage discrete classes of common property used only by the members of the subsidiary
• Legal agreements between different strata communities which is more likely to occur in New South Wales and Queensland than in Victoria and Western Australia.

However,the sharing of facilities comes about, the most important thing for the strata communities involved is to have a clear understanding of how the costs of repair,maintenance and replacement are shared. This should be documented in written form and form part of the records of all of the strata communities involved. It is important that purchasers are made aware of these arrangements and their liability to contribute to the shared costs before they become members of the strata communities involved.

The chairman of a strata community is a curious position. Normally a chairman is a figure head and leader of an organisation and is closely identified with the organisation’s success or failure.

It is normally quite a powerful job. However, in a strata community the chairman’s only power is to chair the meetings. Beyond that, the power rests with the Committee and the owners at large.

In a practical sense, the chair of a strata community, despite legal constraints, has the opportunity to be a figurehead and leader. The chair of a strata community can be a sounding board for the Strata Manager/Body Corporate Manager, a facilitator of effective meetings and a steward of the organisation’s standards of governance. All of this depends upon the personality of the chair and the relationship with the Strata Manager/Body Corporate Manager.

At a committee level, one of the most important things that a chairman can do is to encourage active debate. Some of the techniques for doing this include:

• Asking a member who has made a long speech to summarise their main points;
• Inviting a quiet member to contribute if they have tried unsuccessfully to get into the discussion;
• Asking a member who is continually disagreeing what suggestions she has that she would like to see taken up by the meeting;
• Giving a summary when the meeting is getting bogged down; and
• Requesting a colleague, whose body language indicates disagreement, to make their views known.
• A good chair will:
• Read meeting papers carefully in advance;
• Arrive early for meetings and be there to greet members;
• Listen to what others are saying;
• Be willing to question and challenge but be supportive of others’ contributions; and
• Agree to accept special assignments between meetings so that substandard issues can be progressed.

At the annual general meeting, the spotlight will be very much on the chair. Here are 11 points that will contribute to a successful annual general meeting:

1. Start on time out of respect for those in attendance at the appointed time;
2. Manage the meeting so it finishes on time out of respect for those present with other commitments;
3. Follow the agenda and pace yourself against a pre-prepared meeting timetable;
4. Do not read the motions–they are published in advance and can be taken as read to save time;
5. Allow people to speak once on each issue and limit them to five minutes each if necessary;
6. Prepare people for bad news in advance if motions have to be ruled invalid;
7. Be sensitive to peoples’ feelings and don’t publicly embarrass those ineligible to vote;
8. Avoid delays in counting votes by making sure the returning office or those responsible for counting votes prepare as much as they can before the meeting;
9. Never raise your voice or lose your temper–the meeting will take its tone from the chair;
10. Thank people for their attendance and contributions and name any outstanding contributors;and
11. Encourage some form of fellowship following the closure of the meeting to encourage community spirit

Perhaps the single most important thing a committee can do is appoint, or recommend the appointment of, a strata management company.

A strata management company collects levies, pays bills, effects insurance, keeps the books and records and convenes, attends and minutes meetings. But what about the individual employed by the strata management company appointed to a particular building?

Their role is far more people focused than the process of strata management. A good Strata Manager/Body Corporate Manager will be the glue that holds the strata community together.

Some of the qualities needed for this role are:

• A big heart with kindness, compassion, empathy and understanding of different people with different perspectives about sharing common property;
• A logical and ordered mind that can remain organised and sort the important issues from the apparently urgent ones;
• A good working knowledge of the law and best practice of strata management;
• An ability to listen and be heard on important issues; and
• A good sense of the difference between right and wrong.

One of these qualities above all else needs to be understood well both by Strata Managers/Body Corporate Managers and by the committees and communities they serve
–empathy

From the Strata Manager’s/Body Corporate Manager’s perspective this means:

• Understanding the constraints of the strata concept and process;
• Respecting the voluntary nature of the role of committee members; and
• Assisting with the induction and learning of new members.

From the Committees’ perspective understanding empathy in strata management means:

• Understanding that strata management can be a difficult and thankless role;
• Understanding the range of relationships the Strata Manager/Body Corporate Manager has to manage; and
• Not expecting more from the Strata Manager/Body Corporate Manager than is reasonable given the fees agreed for the services specified in the contract

Mutual feedback is also a matter that can benefit the relationship between the Strata Manager/ Body Corporate Manager and the committee. The Strata Manager/Body Corporate Manager might offer practical guidance on ways in which the committee might help. The committee might give encouragement for some tasks done well and constructive review and critique of organisational progress.

As with any relationship, both the Strata Manager/Body Corporate Manager and the committee will benefit from the clarity of the parties’ respective jobs.

A clear sense of direction is fundamental for the running of a company and especially a not-for-profit organisation, but rarely is it a consideration for strata communities.We believe strata communities should have a strategic plan which is a process of setting objectives and deciding how to accomplish them.

As strata communities struggle to find people to volunteer, we have developed a pro-forma strategic plan as a starting point for any strata community, no matter how large or small.

In terms of converting strategy into action we used a balanced scorecard approach to focus our attention on four key areas for our strata communities:•

• People and learning;•
• Internal procedures;•
• Owner’s perspective; and•
• Financial perspective.

Peter Drucker, a world leader in strategy, reminds us “one prays for miracles but works for results”. He says strategies lead you to work for results. They convert intentions into action and busy-ness into work

A clear statement of the role and responsibilities of any group can be the biggest step towards improving effectiveness and satisfaction.

While there are some legal differences between the role of a Committee, council or executive of a strata community (as they are variously called), this role is likened to that of a company board. The Executive Committee (Committee) should propose a plan to owners at the AGM outlining the strategic goals for the upcoming year. In setting these goals, the Committee is also required to listen carefully to the owners, as well as taking the advice of the Strata Manager/Body Corporate Manager with regard to practicalities using their professional experience.

Drawing on the board analogy, the practical functions of the Committee of a strata community are these:

• Articulate the strata community’s mission and values;
• Provide strategic direction;
• Confirm and monitor the strata community’s programs and services;• Select the Strata Manager/Body Corporate Manager;
• Support the Strata Manager/Body Corporate Manager and review their performance;
• Ensure that adequate resources are available and that they are managed effectively;
• Enhance the strata community’s image within the strata community;• Resolve conflicting priorities;
• Resolve conflict between members of the strata community;
• Ensure compliance with the law;
• Assess the committee’s own performance; and
• Work with the Strata Manager/Body Corporate Manager to ensure that common propertyis suitably repaired and maintained in accordance with the law.

Some self-analysis by most Committees would show some gaps against this checklist of functions.

This series of training notes in 12 parts will address these issues in the following order:

1. The job of the Committee (this note);
2. The mission, vision and values of a strata community;
3. The relationship between the Strata Manager/Body Corporate Manager and the Committee;
4. Purposeful committee meetings;
5. Chairing meetings;
6. Risk management;
7. Compliance with legal obligations;
8. Financial planning and control;
9. The committee and extraordinary expenditure;
10. Measuring progress;
11. Relations with other strata communities; and
12. Recruitment and succession planning.

The series will draw on and adopt the work of David Fishel, The Book of the Board; Effective Governance for Non Profit Organisations (The Federation Press 2008)

The committee of a strata community holds the corporate memory for the organisation. It is essential that this be entrusted to the right group and that the entire group does not leave at the same time.

Thinking ahead to the unofficial term of a committee member’s tenure will help with three problems common to strata communities. Firstly, the turnover of members will avoid small cliques. Secondly, unofficial terms provide a way of fare welling under performing members without unpleasant confrontation. Thirdly, if the expectation of the period of service is reasonable, then new members may be attracted.

Strata communities are elected each year but a process of recruitment by the existing members can help maintain and enhance the committee and the community’s corporate memory.

From the candidates’ perspective a form of induction should be expected which might perhaps include a meeting with the strata manager to clarify roles and expectations.

Legislation governing strata communities does not address this important issue.Enlightened committees will take it upon themselves to plan for the future by reaching agreement as to how long they will serve and how they will over a number of years progressively retire and be replaced by others with suitable skills so that the corporate memory stays alive and well for the benefit of the strata community

The annual general meeting of an owners corporation is the most important event for your strata community each year. For most strata property owners,the annual general meeting is the one occasion they will actually participate in the process of managing the affairs of the owners corporation. It is the unimportant that it be a success.

A well-run annual general meeting will create a positive sense of community and encourage strata property owners to participate in the functioning of the owners corporation. People will be more likely to volunteer for service as executive committee members or to undertake specific tasks if the annual general meeting is run well.

At the very least, owners who attend a well-run annual general meeting will be more likely to follow the rules, pay their levies on time and be civil to others in their community if they leave the annual general meeting with respect for the process and respect for the elected leaders of their strata community.

Conversely a ‘bun-fight’ will do nothing for community spirit. The last thing sensible people want is a hostile living or investment environment because the annual general meeting provided a forum for the disaffected few to poison their community with negative attitudes and unacceptable behaviour.

Experienced strata and community title managers will have seen their share of good and bad strata community meetings. The difference between the good and the bad comes down to three things—attention to detail in the preparation of the meeting,understanding the formal requirements of the legislation concerning the process, and good leadership and communication skills of the executive and the strata manager advising them.

Risk management is the process of managing an organisations potential exposure to liabilities or loss. Risk management reduces and manages risk, compliance (our next topic)seeks to eliminate or prevent risk.

In the context of a strata community, some risks are obvious. This list starts with the less obvious but equally important.

1. Fraud–in most states and territories there is no requirement to be licensed to be a strata manager and to handle in some cases millions of dollars in administrative and maintenance fund fees. Without licensing, the risk of fraud or embezzlement is high. Strata communities should take care to entrust their funds to a reputable Strata Manager/Body Corporate Manager and one that is insured not only for professional negligence but also fraud.
2. Investment risks–where is the strata community’s savings invested? This is the most topical of risks facing strata communities today. Not all banks are equal anymore and a strata community must select its investment accounts wisely, not just based on the best interest rate available.
3. Breach of statutory duty to repair and maintain common property–this is the most under rated risk. Strata communities are under strict statutory duties to repair and maintain common property. The legislation does not say that common property should be fixed when it suits or when the strata community can afford it–the law is absolute, if it’s broken, then it has to be fixed. Fines and imprisonment can flow to individuals who fail to observe this duty. Directors and officer’s insurance may be available to mitigate this risk
4. Reputational risk–most prudent purchasers will conduct a search of the records of a strata community before making a purchase. This is the way to find out if the community is riddled with troublemakers and is an unhappy governing body. This is every bit as important as a pest inspection. More important really because a pest controller can rid your building of pests,but a strata manager can’t rid your building of a trouble-maker.It is important to remember that everything written is available for inspection by the purchasing public. Be careful what is written and manage trouble-makers well so they do not inflame minor disputes and dominate your strata community.
5. Property damage and destruction-this form of risk is well understood,and insurance is commonplace. However, the question is whether the insurance held is enough.Replacement valuations should be taken out every three years for large and small buildings. Some legislation only makes this compulsory for large buildings, which defies logic. In the case of total or partial destruction the risk of personal loss is the same no matter if you live in a high rise or a duplex.Each year between valuations the insured sum should be increased.

   Don’t fall into the trap of doing this based on the prevailing consumer price index movements. The consumer price index measures the increase in the cost of goods not building materials.In some parts of Australia last year,the price of building materials rose 17% yet hardly any strata communities would have used this as the basis for the increase in their insured sum.

6. Public liability risk–this covers the strata community for slips and trips. The minimum amount of insurance is set by law and this makes assessing this risk and doing something about it easy. This is the risk that everyone focuses on when thinking risk management in a strata community, yet it is the easiest to cover.More attention needs to be given to the other risks set out above which may not be covered by insurance.

For years our client surveys have told us that effective communication is the number one issue for lot owners when it comes to assessing the performance of their strata managers. Communication between committees and their broader communities is just as important. Our second series of training notes for 2013 will therefore focus on effective communication. This first note is about verbal and non verbal communication.

Tips for Verbal Communication:

• Pace–Do I speak so rapidly or slowly that others have trouble understanding what I am saying?
• Tone–What emotion(s) is my voice communicating? Is there enough variation inmy tone to hold other people’s attention?
• Volume–Do I speak so loudly or softly that people have difficulty or discomfort listening to me?
• Pitch–Do I speak on such a high or low note that people have difficulty or discomfort listening to me?
• Word choice–Is my choice of words appropriate for the situation and my listener(s).

Tips for Nonverbal Communication (Body Language)

WHAT DOES YOUR BODY LANGUAGE SAY?

The Australian Standard on Compliance (AS3806:2006) defines compliance to mean:Adhering to the requirements of laws, industry and organisational standards and codes,principles of good governance and accepted community and ethical standards.

In the context of a strata community, this means more than meeting the statutory requirements of the legislation governing your strata community–although that is part of strata compliance. The broad spectrum of legal obligations with which a strata community must comply includes these:

• The general common law and statutory obligations of honesty, good faith and duties of care and diligence;
• Special laws and rules about your strata community–the governing legislation including regulations and rules of your strata community; and
• The wider body of statutory laws applicable to all bodies in Australia whether for profit or not for profit such as a strata community.It is the last category above that is often forgotten or not understood in strata communities.

These laws include:

• Tax compliance;
• Occupational/workplace health and safety–all common property is a work place because employees or contractors of the strata community inevitably must enter upon the common property to do work;
• Anti-discrimination laws; and
• Privacy laws.

There is a misconception among committee members of strata communities that they are absolutely immune for personal liability for bad decisions that harm the interest of the strata community. This is wrong on two fronts.

Firstly, they are liable for bad decisions that harm the organisation because they did not exercise care and diligence in reaching a decision.

Secondly, even if immune personally as a committee member because they did take care and diligence but still got it wrong, the strata community itself has unlimited liability and as member of that body, they will be exposed to their share of the damages (spread among owners according to entitlements set out in the subdivision plan).

In the face of these realities, strata communities need to adopt a compliance culture that goes beyond the specific strata laws applicable to them. This involves starting a conversation about compliance at a broader level. Some good habits in this regard include leaving compliance as a standing item on agendas. Make a simple checklist of the main obligations. Nominate someone on the committee as the owner or leader on compliance issues. Make an annual calendar of compliance obligations

Question:
The place next door is having parties with noise that lasts well into the early hours of the morning. I know it’s the season for celebration, but surely, I have rights too?

Answer:

• Noisy neighbours and their friends are a fact of close proximity. And while there is no legal limit to the number of guests in a private residence, congregating in common areas is a potential hazard for the entire property. Party guests can cause damage to common property or, potentially worse, in-jury for which owners corporations may be liable.
• Damage to common areas or neighbouring properties is the responsibility of the person who did the damage, not the party host or landlord of the party host.However, owners, lessees and occupiers are bound by the rules of an owners corporation which can result in an owners being accountable for the actions of a guest. Evidence of responsibility for damage can be someone who saw the damage take place and is prepared to swear it in an affidavit.
• This is usually enough to convince the guilty party to pay up and avoid court action. Neighbours are within their rights to complain about noise to the police or council,and police have the power to ensure that music is turned down, or even to confiscate music equipment. If a person continually has noisy or disruptive parties or uses the common areas for large gatherings, Owners Corporations can take action to have them cease immediately or compel an owner to take steps leading to their eviction.
• As with all relationships, open communication and courtesy to others is the best way to avoid greater trouble later

In strata management there are three options for a committee faced with the responsibility of funding major capital works.

• Save progressively by making contributions to a separately levied sinking fund each quarter;
• Strike a special levy when required; and
• Borrow funds in the name of the strata community.

The most common method is the first. Most states compel five to ten-year forecasts for capital works and some states require this to be funded progressively.

This is the fairest way for apportioning costs between new and old owners. If sinking fund levies are not funded annually, then new owners are disadvantaged.They are forced to pay for the neglect of the former owners.

Special levies are always inconvenient for most owners. As an aging society with many older people who are asset rich but cash poor, special levies are traumatic for strata communities and their members. Usually, work can’t start until all of the money is received and it may take some time to recover money from unhappy or impecunious owners.

Borrowing involves finding a lender who will lend to a strata community without security.Almost all legislation prohibits a strata community from giving security over common property. Some lenders will lend to a strata community on an unsecured basis because there is a statutory liability on the strata community to levy with fees that are necessary to meet the obligations of the strata communities. In the event of a default the lender could have an administrator appointed to levy and recover the funds necessary to repay the loan. Funding will come at a premium to normal borrowings because of the unusual nature of the security. The borrowing costs may be tax deductible for letting owners.

Although borrowing is a relatively new option very few strata communities use this option.Most find the best method is to pay progressively and update forecasts annually to take account of inflation. This avoids the need for special levies when the work needs to be done.

Strata newsletters are a valuable and important way to communicate with owners corporations. Newsletters are distributed through various mediums–mail, email, intranet or websites. Each method has its pros and cons (cost, ease of distribution, etc) which should be carefully considered. To be most effective the newsletter should be written by  a member of the community, i.e. an owner. Here are some tips that will help those who choose to build their community in this way.

Tips for a Successful Newsletter:

• Be positive–A newsletter that is really about the things you can’t do is not fun to read.
• Legality–If the newsletter states that it is the official communication of the company,check the content carefully. If only a specific article is intended to be an official communication, the article should be clearly identified as such. If advertising appears,include a statement that disclaims company responsibility for the goods and services advertised. Think about the minimum level of verification required before publishing.
• Establish a clear purpose–Is the goal of the strata newsletter to inform? To provide official notices to owners? Establishing these ground rules will ultimately make your job easier.
• Make sure news is timely–People want to know about events when they happen.Make sure the information you print is timely.If your newsletter’s content is considered“old news”, people may not read it.
• Use informative headings–A heading should accurately describe the content of the article or section that follows.
• Use action verbs–Write, “The contract specifies that work will begin by May 1st.”Instead of “The specification in the contract is that work will begin by May 1st.”Use short sentences–This makes it easier for the reader to grasp ideas and concepts.
• Masthead–Always use an easily recognisable one.
• White space–Remember to use margins around text. White space sets off important information and tells readers where different parts begin and end.
• Type–Try not to use more than two different fonts at a time and avoid extensive use of capital letters.
• Graphics–Use as a way to signal the type of article presented. Use standard graphics for standard information or articles. Too many graphics or inappropriate ones will distract from your content.
• Paper–Avoid flimsy paper that may not hold up and avoid fancy paper that may distract from content or be considered inappropriate or extravagant by recipients.
• Use of pictures–People like to see some pictures.
• Size–Use A4 paper. It is the easiest to hold, store, post and produce on a printer or copier
• Colour–Use a neutral or soft colour as they are easiest on the eyes.
• Length of a line–Use no more than 50-70 characters per line for ease of scanning.
• Spacing between lines–Be consistent in your spacing within a paragraph, between paragraphs, and between articles.
• Boxes–Box information to emphasise or draw attention to it. Don’t overuse it.
• Layout–Avoid the cluttered or busy look to a page. This makes it harder to locate and read information.
• Don’t be too ambitious–The world is littered with newsletters volumes 1 & 2 but not many issues beyond that. If you are going to start a newsletter,make sure you are committed to a reasonable duration and then evaluate its effectiveness after that period

Strata newsletters are a valuable and important way to communicate with owners corporations. Newsletters are distributed through various mediums–mail, email,intranet or websites. Each method has its pros and cons (cost, ease of distribution, etc)which should be carefully considered.

To be most effective the newsletter should be written by a member of the community, i.e. an owner. Here are some tips that will help those who choose to build their community in this way.

Tips for a Successful Newsletter:

• Be positive– A newsletter that is really about the things you can’t do is not fun to read.
• Legality– If the newsletter states that it is the official communication of the company, check the content carefully. If only a specific article is intended to be an official communication, the article should be clearly identified as such. If advertising appears, include a statement that disclaims company responsibility for the goods and services advertised. Think about the minimum level of verification required before publishing.
• Establish a clear purpose – Is the goal of the strata newsletter to inform? To provide official notices to owners? Establishing these ground rules will ultimately make your job easier.
• Make sure news is timely – People want to know about events when they happen.Make sure the information you print is timely. If your newsletter’s content is considered“old news”, people may not read it.
• Use informative headings – A heading should accurately describe the content ofthe article or section that follows.
• Use action verbs– Write, “The contract specifies that work will begin by May 1st.”Instead of “The specification in the contract is that work will begin by May 1st.”
• Use short sentences – This makes it easier for the reader to grasp ideas and concepts.Masthead–Always use an easily recognisable one.White space–Remember to use margins around text.
• Type – Try not to use more than two different fonts at a time and avoid extensive use of capital letters.
• Graphics –Use as a way to signal the type of article presented. Use standard graphics for standard information or articles. Too many graphics or inappropriate ones will distract from your content.
• Paper – Avoid flimsy paper that may not hold up and avoid fancy paper that may distract from content or be considered inappropriate or extravagant by recipients.
• Use of pictures – People like to see some pictures.
• Size –Use A4 paper. It is the easiest to hold, store, post and produce on a printer or copier.
• Colour – Use a neutral or soft colour as they are easiest on the eyes.
• Length of a line – Use no more than 50-70 characters per line for ease of scanning.
• Spacing between lines–Be consistent in your spacing within a paragraph,between paragraphs, and between articles.
• Boxes – Box information to emphasise or draw attention to it. Don’t overuse it.Layout–Avoid the cluttered or busy look to a page. This makes it harder to locate and read information.
• Don’t be too ambitious – The world is littered with newsletters volumes 1 & 2 but not many issues beyond that. If you are going to start a newsletter make sure you are committed to a reasonable duration and then evaluate its effectiveness after that period.

One of the difficult things about the management of strata communities is the“uneconomic“ nature of the activities of the committee of management.

If the committee was a commercial service provider and the owners were the client, then the owners would go elsewhere if the best outcomes of the strata community were not being met.

Due to the voluntary community service nature of the role of a committee of a strata community, the owners might feel they can’t speak up about poor performance or if they do, the criticism is often taken very personally.

In these circumstances a committee then has a responsibility to make an additional effort to listen to comments about improving services and should implement some system of reviewing their performance. This should be provided to the owners for review. A logical time to do this is at the annual general meeting of owners. Some states compel this,and the others should.

Some of the benefits of monitoring performance include:

• Educating owners about the importance of the work done by the committee;
• Recognising achievement to reward those responsible and to encourage others to serve; and
• Averting major problems by identifying them at an early stage.

What then should the committee of a strata community monitor? Levies are an obvious one,but successful organisations are concerned with more than just money. There are issues relating to the sharing of knowledge, compliance with laws and building internal process to better serve the owners that are equally as important as financial management.

We are building our process and systems around these areas and suggest a simple form of monitoring performance as follows:

1. Can the committee can identify one piece of communication to owners beyond the statutory requirements that improves the knowledge of owners about their;rights and responsibilities as owners within a strata community (e.g. a leaflet, a booklet about living in the community, a website–work your way up to this year by year);
2. Can the committee demonstrate that it has complied with all its statutory requirements(e.g. Use a simple compliance checklist and attend to any items of noncompliance);
3. Can the committee identify the implementation of a process or standard procedure to help owners access services from the strata community or manager in a more satisfactory or timely way (e.g. a web accessed form for changing owners’details or a standard way of applying for permission to make an improvement to a lot; and
4. Can the committee demonstrate that it has caused the strata community to have saved the required amount to meet its maintenance or sinking fund plan for the year. (e.g.measure compliance with a 10-year sinking fund or maintenance plan).

   A great truism of business is that “if it can’t be measured, then it can’t be managed “. If this were applied to strata management, then not only would committees need to monitor performance in some way, but also evaluate their own performance in delivering these outcomes. This means taking corrective action if any targets are not met. This might mean outsourcing the task, forming a subcommittee with some new co-opted owners to serve on that committee that are not members of the management committee or changing the way the committee functions.

The enemy of this process is complacency–particularly when there is a strong chairperson who takes care of it all and is resistant to new ideas and methods. This person makes an enormous contribution but if not careful can also place the community in a position of distress when the chairperson can no longer do the work

Traditionally, committees have focused well on budgets and financial planning. Some times this is to the detriment of other aspects of the management of strata communities. Other times the focus is on reducing fees and levies rather than budgeting for appropriate expenditure. Seldom, if at all do committees focus on financial control.

The budgeting process typically happens in the last quarter of the financial year prior to the AGM. Last year’s accounts are taken as the base and some rudimentary calculations are applied to increase the sums thought to have increased over the year.

Budgeting for administrative expenses is not hard. It is budgeting for capital items that presents more challenging items and test the strength of the committee. Most agree that it is fair and reasonable that owners of the day should save annually for the repair and replacement of capital items. However, not all committees back this up with adequate savings.

A budget for capital items should be reviewed annually using a quantity surveyors report about the cost and useful life of all capital items. Simplistically, if a fence costs $10,000 to replace and has a life of 10 years, then $1,000 should be put away each year to replace the fence. This should be reviewed annually to take account of inflation so that if suddenly the cost of timber rises,and the total replacement cost will be more than$10,000 a catch up payment will be made and future contributions will be increased accordingly.

Strata communities that work on this premise will have adequate funds to pay for repairs and replacements as required, will avoid the trauma of one-off special levies and will find their apartments attractive to purchasers because of a healthy reserve account.

In terms of monitoring the expenditure of funds, again, strata communities usually perform this function quite well. Usually accounts are monitored monthly or quarterly to ensure that spending is in line with the budget.

An area that requires more attention is precautionary financial control procedures. Most strata communities entrust their administrative and sinking funds to strata managers with little or no investigation into how the strata manager handles financial control internally.Three principles underpin good financial control within a strata management company:

• Segregation of duties-dividing duties between individuals increases the degree of protection against fraud, error or oversights. For example, if one person records incoming cash and another checks bank statements, it becomes easier to detect dishonesty.Segregation of duties is one of the fundamentals of tenets of robust control. Smaller organisations are disadvantaged in this regard;
• Qualification of staff and advisors–the committee should ensure that the strata managers are competent and properly trained;and
• External audit–some committees are legislatively forced to have audits prepared annually, others have a discretion. More often than not those with discretion choose not to have externally audits performed. This practice is to be discouraged. If costs are an issue, then perhaps an audit every three years could be considered

Written Communication

Writing is the foundation of all communications. Every communication requires, at some level, that something be written. Even when we talk, we first compose the structure and choose the words–we “write” in our minds before we speak.

Tips to Make Your Writing Easier and More Concise:

1. Know your audience–Are you writing to a member of the committee? Knowing your audience is crucial to conveying your message–whatever it may be. Depending on content, some audiences need more background information than others.
2. Use active voice–Try writing, “Panorama Tower wins architectural award,”instead of “Architectural award is won by Panorama Tower.” This ensures that your message will be clear and won’t get bogged down in extraneous words.
3. Always check your spelling and grammar–Nothing is more embarrassing than sending a letter, proposal or email with incorrect spelling or grammar.
4. Practice–Like any skill, writing gets better with practice and as you become more comfortable with the task. Your basic objectives should be clear, accurate and brief.
5. Be positive, polite and professional–Always write with a positive tone. State what is, rather than what is not. This helps your writing to be honest and open. Also,avoid labels and biased,loaded words.

Listening and Understanding

This second note in the Effective Communication series is about listening and understanding. Active listening is a way of reflecting back on what the other person has said, to let him or her know you are listening and to check your understanding of what he or she means. It assists with understanding the person’s total communication; the verbal message and accompanying feelings.

Tips for Effective Listening

1. Listen before you speak–This helps you gain the other person’s confidence and avoid mistakes.
2. Hear what is not said–Listen for what the speaker leaves out of the conversation–or only hints at. “Read” the person’s nonverbal communications.
3. Show your interest–Use nonverbal communication to demonstrate that the speaker has your full attention.
4. Do not interrupt until the speaker finishes his or her thoughts–Interrupting sends the message that you do not value the speaker’s remarks.

YOU’RE NOT LISTENING

Listening is critical part of communicating. Poor listening habits will shut the door on meaningful exchange

Using Questions in Conversation:

• Questions are a great way to determine if you truly understand what a person is saying. Using this method, you can not only show others that you are listening, but also that you are interested in learning more about the subject you are discussing with them