Owners Corporation Audits

You are likely to be a member of an Owners Corporation if you own a flat, apartment or unit. Since an owner’s corporation is generally managed by a third party manager who holds a real estate agent’s license and uses a trust account for the OC’s bank accounts, there may be a need for an annual audit of these trust accounts each year.

The OC Manager acts on behalf of the committee of Management which comprises of lot owners or proxies of lot owners. The committee resolves on various financial matters pertaining the management of the common property and provides directions to the OC manager to act via minutes of the meetings. The OC Manager then acts on the committee’s guidelines and performs the tasks assigned.

The management of the OC is governed by a contract of appointment of the manager and services are provided by the various contractors who in turn hold contracts with the OC towards services such as cleaning and maintenance of the common property.

Sometimes mixed use buildings may have multiple OC’s and hence the need to audit multiple trust accounts arises. Cost allocations and record keeping becomes the major focus of such an audit into the financial affairs of the OC Manager’s maintenance of the trust accounts on behalf of the lot owners as well as compliance with the OC Act.

The Owners Corporations act came into force in 2006, the law sets out the duties and power of the Owners Corporation. As a member, you have a legal and financial responsibility to the Owners Corporation.

The Owners Corporation’s responsibility includes managing the common property, repairs and maintenance. They also have to prepare the financial statements and keep proper financial records.

Once the Owners Corporation act came into force in 2006, it took effect on 31st Dec 2007, all body corporate organizations became Owner Corporation’s.

Prescribed Owners Corporation have a mandatory requirement to audit their financial accounts every year. Prescribed OC’s are those that have more than 100 lots which includes; apartments, storage, parking lots, retail as well as commercial offices.

Even if your Owners Corporation is not a prescribed Owners Corporation, an audit of the financial statements provides peace of mind & assurance to the owners and managers of the owner corporation on the financial management of the corporation. While not being a mandatory audit, the committee may choose to have a voluntary audit conducted to ensure a degree of confidence in the financial matters of the running of the OC.

These benefits of an Owner’s corporation audit are as follows:

  • Obtaining an independent, expert opinion regarding the truthfulness & fairness of the financial statements.
  • Detection of any errors.
  • Ensuring compliance with accounting principles & standards.
  • Detection & prevention of any fraudulent activity.

In order to complete an effective and efficient audit, the following may be required:

  • General Ledger or access to accounting software used.
  • Income and Expenditure Statement.
  • Balance Sheet.
  • Copy of the prior year’s audit report.
  • Trial Balance
  • Receipts/Invoices for revenue earned during the financial year being audited.
  • A copy of the plan of subdivision
  • Members Register
  • Invoices paid during the financial year.