It is my good fortune that one of my best friends also happens to be my accountant. Naturally this means that on any given day I hit my longsuffering friend up for some free advice about all things financial. There is however one noticeable caveat to this arrangement; during the months of July / Aug I can forget about speaking to my friend regarding financial matters, or anything else!
This is because he is busy preparing and auditing the accounts of all of his clients. Obviously every one of these clients will submit a tax return, and a significant number will also have their accounts audited (many will have mandatory audits such as is required for a Self Managed Super Fund).
Over a beverage or two the subject of audits for Owners Corporations has come up between my friend and I. The question of why OC’s don’t have their financial statements audited as a matter of course has been put to me on many occasions. Frankly speaking, I don’t have a particularly good answer. The simple fact is that routine audits of an Owners Corporations accounts is not mandatory, and therefore has not historically been a standard practice in the ACT.
The status quo has arguably been perfectly adequate for the majority of Owners Corporations over time. However, times have indeed changed and it is well worth pausing to consider if past practices are appropriate for todays needs.
When I started my career in strata I managed a portfolio of almost 100 buildings, each with an average number of units probably at around 10 or less. It was once the case that a development of one hundred units or more was the exception; now it is more frequently the rule.
As the buildings that we manage become larger in scale and more diverse in complexity, the operating budgets to manage these facilities increases exponentially. It is now quite common for an Owners Corporation to control the flow of many hundreds of thousands of dollars annually. In some cases the figure will be in the millions.
In the absence of any statutory requirement for the accounts to be audited by a qualified third party there can be no doubt that an Executive Committee is exposed to risk of financial mismanagement if it does not take reasonable steps to protect itself and the Owners Corporation.
At Vantage Strata we insist that consideration be given at each Annual General Meeting to appoint an independent auditor to review the accounts, and we give our strong recommendation that such an exercise is undertaken no less than every three years at a minimum. For larger buildings dealing with greater volumes of money, we recommend this exercise take place every year.
Given that it is the start of a new financial year, perhaps it is timely to consider if your Owners Corporations accounts could benefit from a little scrutiny.