SINKING FUND RELATED

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 Update Discrepancy found in 2018/19 Account -Sinking Fund Contributions

Update Dec 10, 2019:  This origins of the 680 discrepancy mentioned below appears to have now been identified by the managing agent and reported on in the Minutes of the committee meeting held on December 10, 2019 - details can be viewed here, however the statement giving the explanation for the origins of this discrepancy is rather odd and does not ring true:

"the error was caused by Land Registry having the date of purchase incorrect"

The date of purchase registered with the Land Registry has nothing to do with the error - how could that have created the discrepancy?   The managing agent's statement is purely nothing more than an attempt to make it appear a legitimate and plausible explanation for the discrepancy of 680 in the first place.

Do the managing agent, director and committee really believe that the residents are so gullible they will just accept any explanation given without question!!!

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During the meeting with the managing agent on Thursday October 3, 2019, it was confirmed that there was a discrepancy of 680 in the Sinking Fund Contributions stated in the annual account, and that steps were being taken to recover this amount - no further explanation was given as to how this will be achieved as the sale of the property concerned is completed and it is highly unlikely that the original sellers will pay the difference in the Sinking Fund which is now 18 months after the event. 

Questions remain - 1) who made the error in the first place, and 2) why was this not picked up prior to the annual Landlord's Statement of Account being compiled and published? 

The managing agent made a committment during the meeting of 3/10/19 that she would do everything she could to resolve any issue residents might have - this particular matter falls into that category and it is hoped that she will find answers to these questions and report back to the residents as soon as possible.

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The Annual Account Service Charge Statement 2018/19

Sinking Fund Contributions

Attention is drawn to the Sinking Fund Contributions included in the Service Charge Statement 2018/19 which will be open for discussion at the upcoming AGM on October 1, 2019. 

There is a shortfall in the amount stated, during year 2018/19 there were 3 properties sold and accounted for in the Statement: 

Value of the 3 Properties sold during the accounting year - 250,000

5% Sinking Fund on the total amount is 12,500 and NOT 11,820 as stated

The director and committee are being given a heads-up on this discrepancy - one of our residents may raise the matter at the upcoming AGM, and it would be a good idea to have a full explanation ready as to why there is a difference of 680 and what happened to it!

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As far as can be determined the Sinking Fund up to 31/3/18 was being held in an account which does not pay any interest (this may still be the case), if so then the question has to be asked once again WHY? 

Section 4, Clause 4.2 states:

"The sinking fund shall be invested in such a manner as the Lessor shall reasonably think fit and all dividends and interest earned thereby shall accrue to and from part of the fund".

In the Annual Account for year 2017/18, there had been no interest earned on the Sinking Fund, this is in direct contravention of the regulations above as laid out in the Lease.  It's worth pointing out here that in fact the Sinking Fund had been receiving interest prior to 2016 - so why the change? 

In Section 4, item 4.1 of the Lease it clearly states that the Sinking Fund:

shall be utilised for depreciation and the anticipated costs of renewal, replacement, upgrading and improvement to the scheme and other items of future contingent capital expenditure

 Clause 6.8 of the Lease states: 

Apply all sums received by it in respect of the service charge and as contributions to the sinking fund solely for the purposes referred to in this Lease in respect of the Scheme subject (so far as same applies) to the provisions of Schedule 19 to the Housing Act 1980).

It does not say that it should, or can be used, to subsidise the Service Charge.  Are the director and committee making the rules up as they go along to avoid having to make difficult decisions?

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 2018 AGM:

Sinking Fund - the managing agent stated that the company was a Charitable Organisation - that we cannot gain interest on the sinking fund account due to the company being a non-profit organisation.

For the past couple of years the Sinking Fund monies have been held in a trust account which did not pay any Interest, this was stated by the Accountant at a meeting with him February 2018 and queried at the time because in 2015, 2014 and probably earlier, the Sinking Fund account was held in an account which was in fact paying interest.

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2016 AGM:  When the 2016 AGM was held the matter was mentioned by the accountant during his statement on the accounts for the year 2015/16

"The Bank Interest was down as is all interest at the moment.  During previous years the association had held Nat West high interest accounts".

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AGM 2016:  The director proposed that the Sinking Fund charge be put back up to 5% with effect from 1st April 2016 due to the fact that the Sinking Fund level was down, this motion was seconded by the secretary.  The accountant/managing agent put it to the floor to vote with the result of 16 in favour, 13 against.

 

February 17, 2020

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