If you own an apartment or unit in a strata scheme, you’ll receive financial statements at least once a year — usually before the Annual General Meeting (AGM). Most owners glance at them and move on. But buried in those numbers are early warning signs of trouble, and clues about whether your building is well-managed or heading for a special levy.
Here’s what to actually look for.
The Two Funds You Need to Understand
Every strata scheme in Australia operates two separate funds:
Administrative Fund (Operating Fund) — This covers day-to-day running costs: insurance, cleaning, gardening, lift maintenance, building manager fees, and general repairs. Think of it as your building’s current account.
Capital Works Fund (Sinking Fund) — This is the savings account for major future expenses: roof replacement, painting, waterproofing, lift upgrades, pipe relining. Money goes in gradually via levies so the scheme isn’t hit with a massive bill all at once.
Both funds should have healthy balances. If either is running low, that’s your first red flag.
What to Check First: The Balance Sheet
The balance sheet shows what the scheme owns and owes at a specific date. Here’s what matters:
Cash at bank — Is there actually money in the accounts? Compare this to the total of both funds. If the cash balance is significantly lower than the combined fund balances, find out why. Money might be tied up in term deposits (fine) or there could be unpaid levies dragging things down (not fine).
Levies in arrears — This line tells you how much owners owe in unpaid levies. A small amount is normal — someone’s always a quarter behind. But if arrears are climbing year over year, or represent more than 10% of the annual budget, your scheme has a collection problem. That means less money for maintenance, which means deferred repairs, which means bigger bills later.
Liabilities — Does the scheme owe money? Outstanding invoices are normal, but watch for loans. A strata scheme that has borrowed money is one that didn’t plan well enough, or faced an emergency it couldn’t cover.
The Income and Expenditure Statement
This is your building’s profit and loss. It shows what came in (levies, interest, maybe laundry income) and what went out over the financial year.
Red Flags to Watch For
Actual vs. budget variance — Most statements show budgeted amounts alongside actuals. Look for line items that consistently blow the budget:
- Insurance jumping 20%+ year-on-year suggests claims history problems or building risk factors
- Repairs and maintenance consistently over budget means the building needs more work than the committee is planning for
- Legal fees appearing or growing — this could mean disputes with owners, builders, or neighbours
Capital works spending vs. the 10-year plan — Every scheme should have a capital works fund plan (sometimes called a sinking fund forecast). Compare what was actually spent from the capital works fund against what the plan predicted. If spending is outpacing the plan, future levies will need to increase. If money is sitting unspent while the plan shows upcoming major works, check whether those works are being deferred.
“Sundry” or “miscellaneous” expenses — Small amounts are fine, but if a significant chunk of spending is categorised vaguely, ask the strata manager for a breakdown. Transparency matters.
The Capital Works Fund Plan
This is arguably the most important document, though it’s technically separate from the financial statements. It forecasts major expenses over the next 10 years and calculates how much needs to be saved annually to cover them.
Key questions:
- When was it last updated? Plans older than 5 years are unreliable. Building costs have changed dramatically.
- What’s the projected shortfall? Many plans show a funding gap in future years. That gap is your future special levy.
- Are the cost estimates realistic? A plan that estimates $50,000 for a full external repaint of a 10-storey building was probably written by someone who hasn’t gotten a quote lately.
Special Levies: Reading Between the Lines
Special levies happen when the capital works fund can’t cover a major expense. They’re not inherently bad — sometimes unexpected things happen. But frequent special levies suggest chronic underfunding.
Look at the AGM minutes from the past 3–5 years. If special levies keep appearing, the regular levy structure isn’t adequate. Either the committee is keeping levies artificially low (popular but irresponsible) or the capital works plan is outdated.
What Good Looks Like
A well-managed strata scheme’s financials will show:
- Growing capital works fund balance that tracks the 10-year plan
- Low levy arrears (under 5% of annual budget)
- Actuals close to budget in the admin fund
- No loans or minimal liabilities
- A recently updated capital works plan (within 3 years)
- Insurance costs that are stable or growing modestly
What to Do If Something Looks Wrong
- Ask questions at the AGM — Financial statements are presented for a reason. If something doesn’t make sense, ask. The strata manager should be able to explain every line item.
- Request the capital works fund plan — If you haven’t seen it, ask for a copy. You’re entitled to it.
- Compare year-on-year — One year’s statements tell you a snapshot. Three years tell you a trend. Trends are what matter.
- Consider a strata inspection before buying — If you’re purchasing into a scheme, get the financials reviewed by someone who reads them regularly. The $300–500 for a strata report can save you from a $20,000 special levy surprise.
The Bottom Line
Your strata levies are one of the biggest ongoing costs of apartment ownership. The financial statements tell you whether that money is being managed well. Spending 30 minutes reading them before each AGM is one of the highest-value things you can do as an owner.
Don’t just check the levy amount — check where the money goes, how much is saved for the future, and whether the plan matches reality.