Benefits of having your Owners Corporation’s Financial Report Audited Annually
1. Protections of owners
The audit is an opportunity to ensure that those entrusted with the smooth operation of the Owners Corporation are delivering that service; specifically, it provides an independent review of the annual financial transactions of the Owners Corporation managed by the Registered Manager.
2. Insurance
The process is insurance by owners that all is well with the financial administration of the owners corporation, it is no good some years after the event discovering a problem that could have been corrected, or losing any opportunity to properly deal with a current situation or opportunity. Further, the actual insurance policies in place on the assets of the Owners Corporation are reviewed as part of the process to determine that appropriate level of cover is in place.
3. Looking over the shoulder
When a Registered Manager knows their work will be independently reviewed, it results in higher quality outcomes for the owners. When one knows that there is 'someone looking over their shoulder' a different management culture is established within the Registered Manager’s operations and procedures. An audit gives owners peace of mind that the owners corporation's operations are in order.
4. Accuracy and completeness
The accuracy and completeness of records is ensured and thus this ensures the most accurate reporting of the financial administration results when a periodic audit is undertaken.
5. Improved service from the Registered Manger
The management service is improved to the client via the audit process assisting in suggesting ways in which the internal processes of the Registered Manager can be improved. These improvements are good for the Registered Manager’s clients.
What does an auditor do to ascertain the financial report is free from any material misstatement?
- Review and reconcile all current insurance claims and any claims outstanding.
- Review and reconcile Levies for the year including any special levies struck and ensuring they are consistent with the resolution of the owners at the prior year's AGM.
- Review of the Owners Corporation’s minute book for completeness and other significant resolutions made throughout the year.
- Review and analysis of expenses for the year including reviewing individual contractor invoices for correctness and comparison to prior year expenses and budgeted within the same category.
- Review of the Bank Reconciliation including obtaining a bank audit confirmation of the balance of all bank accounts held by the Owners Corporation at year end and any additional investments held by the Owners Corporation and any interest earned thereon.
- A review of the GST account of the Owners Corporation to ensure that GST has been correctly treated and reconciling these amounts with the Business Activity Statements lodged for the year to ensure compliance with the relevant taxation laws.
- The auditor will sight the current insurance policy ensuring that adequate insurance coverage exists for the audited period.
Examples of what auditors discover
1. Building Underinsured - the insurance coverage may be inadequate when compared to a recent independent valuation of the building. Adequate insurance is a major cause for concern and an audit can reassure owners that the policy is reviewed independently for appropriateness.
2. Recent Valuation - the Owners Corporation is required by legislation to have an independent valuation of the building at least every five years. The auditor will bring this requirement to the attention of the Registered Manager to ensure that this requirement is met.
3. Double Paid Expenses - contractor expenses when reviewed can often reveal an overpayment of invoices issued twice or overcharged amounts in excess of the agreed quote for the job.
4. Unclaimed Insurance items - often the expenses that may be legitimately claimed under insurance claims have not all been claimed. Uncovering these items and receiving the resulting insurance refund results in a cash windfall for the Owners Corporation often in excess of the entire audit fee for the year.
5. Unclaimed GST - if the Owners Corporation is registered for GST our audit program often uncovers GST unclaimed on various expenses throughout the year. The audit reassures the owners that they are receiving all the GST credits to which the Owners Corporation is entitled to receive. For a guide to taxation and GST issues affecting Owners Corporations please click here.
6. Owners Corporation in deficit - the Owners Corporation may be in a deficit position in which it cannot fund ongoing expenses. The auditor will always produce a letter to the owners in this case to ensure that the Owners Corporation can continue to operate as a going concern. Failure to do this will place the Owners Corporation in contravention of relevant legislation.
MWB Accountants performs over 100 Owners Corporation audits each year and has developed systems and processes that enable us to provide a comprehensive audit in a cost effective manner. This has enabled us to be able to offer our services at a fixed cost eliminating the uncertainty of the cost of an audit each year. We have tailored our services with the owners’ needs and requirements in mind, allowing us to report on the issues that concern and are relevant to you, the owners.
At MWB Accountants our audits are performed by qualified Chartered Accountants with over 10 years’ experience in the industry. MWB Accountants pride themselves on our high level of knowledge, expertise and standard of work. This is demonstrated by the fact that MWB Accountants is the preferred auditor used by 2 of Victoria’s 3 largest Registered Owners Corporations Managers.
If you would like to discuss your Owners Corporation’s audit needs, please feel free to contact our office on (03) 9252 2020.
