THE LAUREL SPRINGS INVESTIGATION
FOR ACCESS TO DOCUMENTS RELATING TO THE INVESTIGATION OF
THE LAUREL SPRINGS RETIREMENT VILLAGE
PLEASE SELECT FROM THE LINKS BELOW
FINANCIAL INVESTIGATION
DETAILS OF FINDINGS
Details of Findings
6.Misused Maintenance Reserve Fund (MRF) contributions 2017-2018
18. Defrauded residents who bought new unit - structure unfit for purpose, and unconscionable exit terms
19. Deceived residents - renaming of Village to Resort

6. Misused Maintenance Reserve Fund (MRF) contributions 2017-2018

The scheme operators unlawfully increased the monthly Maintenance Reserve Fund (MRF) contributions by 50% in 2017-2018, to cover a shortfall in the General Services budget. This defacto increase in General Services Fees is a breach of clause 3.1.3 of the Residence Contract and Service Agreement. Furthermore, the misuse of the Maintenance Reserve Fund is an offence under sections 97 and 100 of the Retirement Villages Act.

6.1 Budgeted and invoiced vs received vs banked

6.1.1 During the 2017 AGM the scheme operators announced that there would be a fee increase of $10.00 + GST per month for all units:

Evidence Document D6.6 - 03

The scheme operators did not specify at the AGM which part of the village fees, General Services or Maintenance Reserve Fund, that this increase was to apply to.

6.1.2 According to the monthly fees tax invoices for Unit 10 for 2016-2017, the Maintenance Reserve Fund contribution for that financial year was $22.00 + GST per month:

Evidence Document D6.6 - 06

6.1.3 According to the monthly fees tax invoices for Unit 10 for 2017-2018, the Maintenance Reserve Fund contribution for that financial year was $33.00 + GST per month:

Evidence Document D6.6 - 06

6.1.4 According to the Budget for 2018-2019, the 2017-2018 budgeted MRF contributions were $30,096, whereas the actual MRF contributions received were only $26, 806:

Evidence Document D6.6 - 02

6.1.5 The increase in the monthly Maintenance Reserve Fund contribution to $33.00 + GST per month, shown on the monthly fees tax invoices for Unit 10 for 2017-2018, is consistent with the budgeted total MRF contributions of $30,096 for 2017-2018 and 2018-2019 i.e. $33.00 per month x 12 months x 76 units = $30,096.

6.1.6 According to the 2018 General Services Fund report, actual received MRF contributions were $26, 806 whereas, according to the 2018 Maintenance Reserve Fund report, only $19, 523 was contributed to the MRF account:

Evidence Document D6.6 - 01

Top

6.2 Contravention of the Retirement Villages Act

6.2.1 If the total actual MRF income of $26, 806.00 was not ever paid into the MRF then, according to s100 of the Retirement Villages Act 1999, this is an offence:

6.2.2 If the total actual MRF income of $26, 806.00 was paid into the MRF and then used for purposes other than maintaining or repairing of the village’s capital items, or paying the quantity surveyor or paying tax then, according to s97, this is an offence:

Top

6.3 The scheme operators False Explanation - Accounting Error

6.3.1 In their response to my questions, on 16 October 2018, the scheme operators gave the following false explanation:

Evidence Document D6.6 - 05

6.3.2 In their submission of 10 April 2019, in QCAT OCL075-18, the scheme operators gave a similar false explanation that was, unfortunately, accepted by the Tribunal:

Evidence Document D6.6 - 08

6.3.3 In their submission of 13 June 2019, in QCAT OCL075-18, the scheme operators gave a further false explanation:

Evidence Document D6.6 - 09

6.3.4 The above bank statement shows that, on 2 July 2018, the scheme operators transferred the $2,758.50 February 2018 MRF contributions into the MRF account. On the same day, the scheme operators transferred the $10, 962.60 March, April, May and June 2018 MRF contributions into the MRF account.

6.3.5 According to the scheme operators in their statements cited above, there was not enough money in the CRF account at the end of June 2018 to transfer the funds into the MRF account, so they loaned the shortfall to the village on 2 July 2018.

6.3.6 The scheme operators' explanation is false because, if the money had not been used for GSF expenses, the MRF money would still have been in the GSF account at the end of June 2018.

6.3.7 If, as asserted by the scheme operators, MRF funds in the GSF account were not used for GSF expenses, what were those MRF funds used for?

Top

6.4 The scheme operators false justification - the Quantity Surveyor Report

6.4.1 In their response to my questions, on 16 October 2018, the scheme operators refused to give me a copy of the most recent MRF Quantity Surveyor Report:

Evidence Document D6.6 - 05

6.4.2 Because the scheme operators refused to give me a copy of the most recent MRF Quantity Surveyor Report, I relied on the one contained in the PID that was provided to me when I bought the unit. The report, dated 04 June 2010, recommended a total MRF contribution of $24, 304 for the 2017-2018 financial year: This works out to $26.65 per unit, for each of the 76 units, per month:

Evidence Document D6.6 - 06

6.4.3 The 50% increase in monthly MRF contributions, from $22.00 + GST to $33.00 + GST, cannot be justified by the MRF Quantity Surveyor Report of 2010.

6.4.4 In their submission of 10 April 2019, in QCAT OCL075-18, despite having previously refused to provide me with a copy, as shown above, the scheme operators relied on a new MRF Quantity Surveyor Report dated 7 April 2019:

Evidence Document D6.6 - 08

6.4.5 I have reasonable grounds to believe that there was collusion between the report author and the scheme operators because:

1. There is no explanation for how the report author arrived at the new recommended total yearly MRF contribution for all units of $30,096.00 from the data provided. This total amount results in the monthly MRF contribution of exactly $33.00 per unit i.e. $30,096.00 / (12 months x 76 units). This is too conveniently an exact 50 % increase on the previous contribution of $22.00 per month.

2. There is no explanation for how the report author decided that there should be an annual contribution increase of 5 %, particularly taking into account then current yearly CPI increase of 1.7 %.

3, The recommended 5 % MRF increase is too conveniently the same as the “grandfather” minimum increase in singles GSF contributions, announced at the 2017 AGM, as shown in the 2017-2018 and 2018-2019 budgets.

4. There is no explanation for how the report author decided that there should be an advised MRF fund balance of $13,052.

Top

6.5 No justification for increased MRF contributions

6.5.1 The predicated MRF expenses in the new 2017 MRF QS Report bear no resemblance to the actual expenses reported in the Financial Statements. For 2017 - 2018, the predicted expenditure is $26,105 whereas the actual expenditure was $12,139.

Evidence Documents D6.6 - 10 and D6.6 - 01  

Top

6.6 The "Grandfather Clause" applies only to GSF

6.6.1 In the footnote to the 2018-2019 budget, it states:

Note Grandfather clause on existing single fees at 2017 Minimum 5% increase per year Now $187.30. New singles after 1 July 2017 will be at 228.20 Rate (plus GST) all will be one rate regardless of single or double 2019 new GF rate is 197 plus GST

Evidence Document D6.6 - 02

6.6.2 The “Single Grandfather 5 %” refers to a statement made by the scheme operators during the 2017 AGM that, instead of immediately increasing the rate for existing single residents to the rate for all new residents (single and double), their fees would be increased by a minimum of 5 % per year until they were equal to the new rate.

6.6.3 The “Single Grandfather 5 %” was not referred to in the original Minutes of the 2017 AGM but, after this was raised by a resident at the 2018 AGM, the 2017 minutes have now been amended to include this on page 2 of the Minutes of the 2018 AGM:

Evidence Document D6.6 - 04

6.6.4 The minimum 5% increase in fees can only apply to GSF because all residents, singles and doubles, have always paid the same MRF contributions.

6.6.5 Therefore, although the 2017-2018 fee increases were budgeted and invoiced as increases in MRF contributions, they were intended to be used, and actually used, to pay for GSF.

6.6.6 The defacto GSF invoiced for 2017-2018 = stated GSF + stated MRF contribution = $154.27 + $11.00 = $165.27 +GST. The GSF invoiced for 2016-2017 = $36.00 + $94.00 +$95.00 = $155.00. Refer to invoices shown in 6.12 and 6,13 above for sourced of data.

6.6.7 The percentage increase in defacto GSF = 100 x ($165.27 - $155.00) / $155.00 = 6.6%.

6.6.8 The $10.00 per month increase in fees, a defacto 6.6% increase in GSF for singles, was more than three times greater than the 1.7% increase in CPI.

6.6.9 The 2017-2018 minimum 5% increase in fees was therefore a breach of s3.1.3 of the Residence Contract and Service Agreement: and a breach of s103 and s106 of the Retirement Villages Act. Refer to 3.1 and 3.3 on page 3 for details.

Top

This web site is owned, designed and maintained by Paul Henry Golding of Nambour, QLD, Australia. © 2007-2021