04 Jan Village Operators Abuse Capital Works Funds
A major issue affecting retirement village residents is the abuse of their Capital Works Fund contributions by village operators. Under current legislation, these funds are not sufficiently protected from unlawful activities (such as using the money for other purposes).
What are the current requirements?
At present, village operators are required to list and include details of proposed capital maintenance projects for the upcoming financial year. They must include any quotes that have been obtained, as well as include provisions for urgent capital maintenance. However, this legislation does not apply to funding for medium and long term capital maintenance that extends for more than one fiscal year.
Lack of clarity leads to abused funds
The absence of details concerning medium and long term funds can easily lead to abuse of the money. This is due to the fact that often villages end up with a surplus due to poor long term planning. When situations like this arise, the intended purpose of the funds becomes unclear, raising concerns that excess funds may be “dipped” into for other, unapproved purposes.
A good example of “dipping” is in the 5th Petition example of Tribunal issues. Here the village operator has been charging residents $66 per month per resident for Capital Work Funds. It appears it was never really intended for Capital Works funds and instead was used to reduce deficits of $400,000 in the 2016 financial year.