I ask this question, as I have become aware that the Operator has allocated large expenses, in excess of $280,000 to the 'Capital Works Fund' (CWF) commonly referred to as the 'Sinking Fund' during the 2021-2022 financial years, without so much as an advice to the residents of the village.
Editor's Note:- The expenses I refer to above, do not include the additional cleaning costs associated with the COVID-19 pandemic and the Ministerial Orders that may have been in force at the time. During the pandemic, additional cleaning for common areas was advised and supported by Ministerial Orders in force at the time. Still, the operator had to seek residents' consent, before they could allocate such expenses to the capital works fund.
Management used various means of communication to seek such consent from residents, before they could legitimately access the CWF for those additional expenses.
This clearly showed Management's understanding, that residents' consent was required before allocating expenses to the CWF.
The following information has been sourced from the Finance Sub-Committee that was in office at the time. The Operator has allocated large expenses ($288,000) to our CWF, yet we are unable to find a single instance where the Operator has sought and obtained the consent of residents to do so.
Residents may ask, What other large expenses are you referring to?
Set out below is a list of withdrawals/expenses allocated to our CWF by the Operator, totalling $288,612.57. The period in question - 2020 to 2022:
- Upgrade to electrical metres $77,684.00 various invoices dated 30/6/21 and 1/7/2021 from SATEC, Nulux and KC Power – see Attachment 5
- Stage 1 ceiling repairs $71,402.54 various invoices JLD Group, HT Building Group, Image Painting Group and KC Power date range 1/7/2021 to 30/5/2022 – see attachment 5
- Stage 1 garden beds replacement $32,840.50 various invoices - Just Diggin 30/5/2022 (see attachment 5) David Hillyer Plumbing 3/8/2022, Water Control P/L 30/8/2022, Create Building Solutions 1/9/2022 – see attachment 8
- Interlinked – Managed Access Point $31,665.53 (4 Interlinked invoices dated 20/7/20, 30/4/20, 16/6/20, 15/11/21) – see Attachment 5
- Managed 24/7 Tech Solutions P/L $75,020.00 – see Attachment 12.
If you, as a resident, were unaware that such large expenses had been allocated against our Captial Works Fund (CWF), from 2020 to 2022, then your not alone.
For the Operator to allocate expenses to our Capital Works Fund (withdraw money from the CWF to cover the cost of capital maintenance repairs) he MUST first obtain residents consent to do so. The Operator cannot access the CWF without the consent or approval of the residents.
By what means can the Operator access funds from the CWF
There are numerous ways in which the Operator can obtain 'residents' consent' to use money from the CWF to pay for the cost of repairs to items of capital, which the residents of the village are responsible for.
- Via the proposed budget - If the Operator had included his intent to fund capital maintenance projects in their proposed budgets (from 2019 to 2022) with appropriate costs and quotes attached to the said budgets, and those budgets were subsequently approved by the full resident body, the Operator could then assert that he had obtained resident approval (consent) via the acceptance of such budget/s.
He would then have justification to carry out such maintenance repairs to capital items, that the residents are responsible for, and allocate those costs to the CWF. As this was NOT the case, not a single mention of any proposed capital maintenance projects from 2019 to 2023 in any of the Operator's proposed budgets, then clearly, no approval or resident consent was obtained via the acceptance of those proposed budgets. - Via an amended budget - Again, the Operator is to show residents his intent to fund capital maintenance projects in his amended budget (from 2019 to 2022) with appropriate costs and quotes attached to the said budgets. If such amended budgets were subsequently approved by the full resident body, the Operator could then assert that he had obtained resident approval (consent) via the acceptance of such budget/s.
- Call a meeting of residents, seeking approval via a special resolution to access the CWF for the maintenance of capital items, for which the residents are responsible. For this to happen, the Operator must set out the reason, costs and/or quotes for such approvals and then by way of a special resolution, a 75% vote in favour must be obtained to allow the Operator to allocate such expenses to our CWF. No meetings of residents have been called by the Operator or Residents Committees in office during those years, seeking residents' consent or approval to allocate large expenses against our CWF from 2019 to 2023.
So, where, if at all, did the Operator obtain residents' consent to allocate the above-listed expenses to our Capital Works Fund?
Additionally
There has been no communication from the Operator/Management during the 2020 to 2022 financial years, advising residents that the above-mentioned expenses had been allocated to (money withdrawn from) our capital works fund, to fund capital maintenance projects.
What is even more disturbing is the fact that when the Operator distributes his end-of-year financial reports to the residents, there is no mention of any expenses that the operator has allocated to CWF. The Operator has only shown the deposits made by the resident's recurring fees and the closing balance of the CWF.
While this form of reporting may be sufficient if the Operator has NOT allocated expenses (withdrawn money) from the CWF in a given financial year, it is contrary to the requirements of the Retirement Villages Act if he has.
This is like your bank sending you your monthly credit card statement, showing your deposits and then your closing balance, with no reference at all to any expenses or purchases you've made for that month.
The Retirement Villages Act 1999, by which this village is governed, is clear:-
Part 7 Financial Management of Retirement Villages
Division 2 Capital Maintenance and replacement - 98 - Capital Maintenance to be included in proposed budget
(1) This section applies only if -
(a) the operator of the retirement village is required to supply the residents of the retirement village with a proposed annual budget, and
(b) the operator proposes to use any recurrent charges or any part of the capital works fund (if any) for the retirement village to fund capital maintenance.
(2) The operator of a retirement village must, in the proposed annual budget -
(a) list each item of capital maintenance that is proposed to be carried out, and
(b) specify, in respect of each item, the expected cost, and
(c) include, in respect of each item, any quotes that the operator has obtained, and include provision for urgent capital maintenance.
Conflicting advice provided by the Operator
The immediate past Residents Committee, had asked the Operator, (who was present at numerous Residents Committee meetings during this period of time), "Who was paying for the Stage 1 Ceiling/Building Repairs?", the Operator replied, "I am". The Operator was also asked, "Who was paying for the garden bed replacement in Whaling Street?", again the Operator replied, "I am".
You can imagine our surprise, when we've learnt that the above mentioned expenses were allocated to the CWF, contrary to the advice supplied by the Operator.
Were there any Ministerial Orders in place at the time that allowed the Operator to access the CWF without residents consent?
The Operator has previously mentioned that their were various concessions granted to Operators of Retirement Villages, during Covid-19, because gathering in large numbers and/or conducting meetings of large numbers was also discouraged, during the pandemic.
Fair Trading was contacted again on the 8 December 2023 and asked if there had been any Ministerial Orders in force during the pandemic, that provided relief of any sort, to Operator's of Retirement Villages, to access residents capital works funds without (consent) resident approval.
Fair Trading's reply:-The relief provided via Ministerial Orders was that face to face meetings could be restricted or relaxed, because of the virus, but resident approval or resident consent was still required as per the RV Act and it's Regs. Whether consent is sought through the proposed budgets, by conducting a meeting of residents, seeking consent and obtaining such consent by a special resolution, with a vote of 75% in favour, or by some other means of communication with residents (eg electronic voting) specifically seeking their consent to allocate expenses to our CWF. This did NOT happen during the period indicated, 2020 to 2023.
Question to the Operator/Management
Where, if any, did the Operator obtain resident consent/approval to allocate the large expenses set out above, to our capital works fund (CWF) ?
This issue first raised it's head at the 2022 Annual Management Meeting
At this meeting, a resident (Mr.Sadlo) expressed concern to Ms. Jennifer Stuart Smith (Chair) that the current 'Capital Works Fund' balance appeared to be well short of calculations made, considering the limited information supplied by the Operator/Management in their end of year financial statements.
Using end of year balances for the Capital Works Fund supplied by the Operator/Management, it became evident to the Finance Sub-Committee that there must have been large expenses allocated against the capital works fund, which would be the only logical explanation for such discrepancies in the balances for the CWF, put forward by management.
Ms. Stuart Smith advised residents that all expenses allocated against the capital works fund (CWF) had been approved. However, she failed to indicate how such approvals were made and by who.
This prompted Mr. Sadlo to have further communications with Ms. Stuart Smith, seeking answers to specific issues, such as, who approved such large expenses allocated against our capital works fund for the last couple of years?
In reply to Mr. Sadlo's questions, Ms. Jennifer Stuart Smith supplied the following information (letter). Ms. Stuart Smith freely provided this letter to Mr. Sadlo, in answer to his questions, about the CWF and the village finances. No restrictions, either verbally or in written form, were advised by Ms. Stuart Smith as to the supplied letters use. Mr. Sadlo provided this letter to the 2022-23 Residents Committee, for the information and benefit of all residents and other interested parties.
From the attached letter (shown below) on PKF letterhead, it would appear that Jennifer Stuart Smith had sought information from PKF(NS) Tax P/L in answer to Mr. Sadlo's questions regarding the capital works fund, and this letter is in response to the information sought.
Page 1 of the letter dated 21 December 2022.
It is clear from the above correspondence that Mr. Porvaznik, Director of PKF(NS) Tax P/L, Paul Singer, and a member or members of the Residents Committee in office at the time, attended such meetings, where the Operator/Management was seeking approval to allocate expenditure against the residents 'Capital Works Fund'.
Editor's Note: Resident Committe's do not possess the power or authority to approve requests from management to allocate expenses against the resident's capital works fund. Issues and matters that require resident consent, must be dealt with and voted on by the residents. A Resdient Committee, cannot make that decision for the residents.
Fair Trading website states:- 'Residents committees cannot make decisions on behalf of residents on matters that require residents’ consent.
Those Meetings
The actions by Mr. Singer, to call a meeting seeking approval from a member or members of the residents committee, for large expenses to be allocated against the capital works fund is indeed puzzling. The Retirement Villages Act 1999 (RV Act) is clear, the Operator and his employees are to be fully conversant and or educated in relation to the RV Act, by which they are governed.
As Mr. Singer has been acting as the Operator of the village for many years, it would be a reasonable assumption he would have an extensive knowledge of the RV Act and its Regs.
This gives rise to several questions which need to be put to the Operator/Management
Q1. As Mr. Singer would be aware; a residents committee member, members or the whole committee, have no power or authority to approve expenses to be allocated against the resident's capital works fund. So why seek approval in such a manner?
Q2. One would assume both Mr. Singer and Mr. Porvaznik would be well aware of the parameters in which they should be operating, set out under the Retirement Villages Act and its Regs. Both should be aware that 'Residents committees' cannot make decisions on behalf of residents on matters that require residents’ consent. Again, why call a meeting, seeking consent knowing they do not have the authority to provide it?
Q3. Ministerial Orders as a result of the Covid 19 pandemic, did not provide relief to the Operator/Management of a retirement village to access the resident's capital works fund via approval from a member or members of a residents committee. How many meetings have been conducted in this manner and what other approvals have been sought and granted by these members of a residents committee?
Q4. At best, such approvals appear to be unauthorized, and any expenses allocated against the resident's capital works fund in this manner, would certainly appear to be in breach of the Retirement Villages Act. Is the Operator prepared to reimburse the residents capital works fund for any and all expenses approved in this manner.
Additional information still required
While Mr. Porvasnik, Director of PKF(NS) Tax P/L, has made it abundantly clear that upper management of HTR were present at these meetings, he fails to name those residents committee members who attended and provided approval for the allocation of expenditure against the resident capital works fund.
So, who were these members of the residents' committee that have certainly overstepped their authority and provided such approvals?
First, a quick examination of page 2 of the letter, supplied by Jennifer Stuart Smith.
Page 2 of the letter dated 21 December 2022.
Referencing item 4 in the table above - 'statement inferring that $186,147.07 is unauthorized expenditure. In the response column to the right, states - 'These works were approved by the Residents Committee. Note, that the $186,147.07 represents the sum of all the expenses ($309,937.82) less the VIP cleaning charges ($123,795.75)'.
If 'these works ($186,147.07)' were approved by a member or members of the Residents Committee in office at the time, and not previously mentioned, proposed and/or approved by the residents as part of the budget (proposed capital works expenditure) for that year, and, no meeting of residents called to seek consent for such expenses to be allocated to our CWF, then again, at the very least, such approvals would be unauthorized and certainly in breach of the Retirement Villages Act.
As mentioned earlier, no proposed capital works expenditure has been advised by management in any of their proposed budgets, prior to the 2023-24 budget. These budgets are available for your examination, simply follow the links provided below: -
- To see the proposed budget for the 2019-2020 budget year, click here.
- To see the proposed budget for the 2020-2021 budget year, click here.
- To see the proposed budget for the 2021-2022 budget year, click here.
- To see the proposed budget for the 2022-2023 budget year, click here.
Approval by a member or members of a Resident Committee, but no advice provided to residents? Why?
If, as indicated by Mr. Porvaznik in his correspondence, the residents committee at the time had provided such approvals for $186,147.07 worth of expenses to be allocated against our capital works fund, then surely some advice from either the residents committee at the time and/or management would follow. No such advice appears to have been made by either.
Search for Residents' Committe Minutes and or advice from Management
A search of all residents committee minutes could not find a single reference to such meetings with management and could not find any advice to residents of the village, that such large expenses had indeed been approved by the residents committee in power at the time, on behalf of the full resident body.
No meetings had been called by the Residents' Committee in office at the time, or by Management, seeking permission via special resolution, to allocate expenses against our capital works fund. A requirement under the Retirement Villages Act.
The only questions which remained unanswered, was which committee and which committee members attended these meetings and provided such approvals?
Mr. Sadlo sought this additional information from Ms. Jennifer Stuart Smith via Email correspondence. A part extract of the response email correspondence from Ms. Stuart Smith, dated 22 December 2022, is shown below: -
Ms. Stuart Smith's email response to Mr. Sadlo's questions, clearly indicates (highlighted in yellow above) that Mr. Casey and Mr. Hennessey were the two resident committee members, who attended the said meetings and provided such approvals to the Operator/Management to allocate hundreds of thousands of dollars of expenses against our capital works fund.
Ms. Stuart Smith also states - 'We do not have minutes of the meetings that occurred'.
Q5. Why would the Operator/Management not minute a meeting, specifically designed to seek approval for exceptionally large expenses to be allocated against our capital works fund? At the very least it appears to be poor work practice, involving large sums of money.
Q6. Why would the Residents Committee members attending these meetings (obviously more than one meeting), not take minutes of such meetings? As Mr. Hennessey was the Secretary of the Residents Committee at the time, one would assume he would take minutes of such meetings. If not, why not?
Q7. Why has this particular Residents Committee failed to disseminate relevant and important information discussed with the Operator/Management and subsequent approvals provided by these committee members, to allocate very large expenses against the resident's Capital Works Fund?
The new Residents Committee needs to establish how many approvals were provided to the Operator/Managment, by the Casey/Hennessey Residents Committee, so that residents can be appraised of the situation and are totally aware of what expenses could be applied against our CWF in the near future.
Further, does Management intend to use any of the approvals gained and/or provided by the Casey/Hennessey committee for future access to our capital works fund.
Next - To examine those expenses that were approved by Mr. Casey and Mr. Hennessey. Please click here....
