Committee Member Payments and Reimbursements – What’s the Difference?
October 14, 2019
Have you ever noticed a line item in the financial statements listing Committee Payment, Reimbursement or similar and wondered what this amount is for? As strata managers we get this question quite often when it first appears so we thought it would be beneficial to put together all of the answers about what the amount is for, how its authorised and the difference between a payment and a reimbursement; which are often confused as the same thing.
We will start of with an explanation of committee reimbursements which is the most common cost we see and has the lowest approval threshold. There is no definition of what a reimbursement means in the legislation so we refer to the commonly known meaning of reimbursement which is:
“The action of repaying a person who has spent or lost money or a sum paid to cover money that has been spent or lost.”
So what does the legislation say about reimbursements? Section 100 of the Act “Power of committee to act for body corporate” refers to restricted issues for Committees in the module. In the module (in this example we are looking at the Standard Module however the wording is the same in the Accommodation Module) Section 43 “Exceptions to restricted issues for committee” states:
“(2) Also, a decision to pay expenses to a member of the committee is not a decision on a restricted issue for the committee if—
(a) the decision is for the reimbursement of expenses of not more than $50 incurred by the member in attending a committee meeting; and
(b) the reimbursement would not result in the member being reimbursed more than $300 in a 12-month period for expenses incurred by the member in attending committee meetings.”
This means that the committee members can approve a reimbursement claim made by another committee member, provided the claim is less than $50 and strictly related to attending meetings. The basis for the claim should be submitted with evidence of how the cost has been incurred such as parking, travel, meals, disbursements etc. The Committee can approve the reimbursement claim submitted by another committee member totalling no more than $300 p.a.
This type of payment is less common, likely due to the Ordinary Resolution approval threshold imposed which is also found in Section 43 of the Module and states:
“(1) A decision to pay remuneration, allowances or expenses to a member of the committee is not a decision on a restricted issue for the committee if—
(a) the decision is made by ordinary resolution of the body corporate stating—
(i) the full amount of the remuneration, allowances or expenses; and
(ii) if the payment relates to expenses—the reason the expenses were incurred; and
(b) an explanatory schedule stating full details of the remuneration, allowances or expenses accompanied the relevant voting paper.
For a payment relating to a mileage allowance, full details would include the distance travelled, the date of travel, the cost per kilometre and the reason for travel.”
This means that at the Annual General Meeting when the Committee is elected, a motion must be approved for the amount that is to be paid to the Committee member. When nominating for the Committee, the nominee is also required to declare the amount sought when submitting their nomination form as per section 18 of the Module “Requirements for Nominations” which states:
“(e) details of any payment to be made to, or to be sought by, the candidate from the body corporate for the candidate carrying out the duties of a committee member.
Example of a payment for paragraph (e)—
payment of the candidate’s expenses for travelling to committee meetings”
If the motion is approved, the committee will then have authority to approve the payment when sought by the committee member up to the amount stated when nominating and in the approved motion. Payments of this type are commonly for the same items listed as reimbursement but they can exceed the limits imposed of $50 per claim and not more than $300 p.a. There is also the option for committee members to seek payment for carrying out their committee duties which can also include payment for their time spent volunteering and gaining education on how to compliantly carry out their committee duties.
The Body Corporate should include the full amount paid in the financial statement and also include who the payment was made to in the notes to the financial statements for full transparency. Claims, receipts and invoices should be kept in the same manner as any other expense paid and made available upon request of records.
Conflicts of Interest
The final piece of this puzzle we thought should be covered is conflicts of interest that often gets raised in these situations. In summary there is no conflict of interest when voting at a general meeting however there is at committee meeting which we previously covered in detail Here.
Committee member reimbursement and payments should not be treated as a taboo subject as they are clearly legislated however; the correct process must be followed at all times when approving payments. Budgeting provisions should also be made, particularly if the reimbursement or payment is substantial which will ensure that the Body Corporate financial position is not diminished due to lack of forward planning.
This article was submitted by Grant Mifsud, Partner – Archers the Strata Professionals.
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