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In
general, the following should be performed before the start of
the new financial year’s accounts:
- Browsing
through the minutes of last AGM or EGM or any council minutes
for matters of any financial importance, e.g:
- Increase
of insurance coverage
- Additional
levy
- Approval
of major repairs and maintenance
- Increase
of monthly contractual fee for certain expenses
- Release
of certain money
- Any management
point recommended by auditors need to be cleared
- Opening
balances should agree to the last financial
year’s
audited accounts
in addition
- Accounts
should always be updated periodically and supported with relevant
schedules
- If possible,
budgets are to be prepared and incorporated into the financial
statements
- Hard copy
of accounts should include all transactional entries and essential
financial statements filed in month sequence
Review
and Interpretation of Financial Statements
- Balance
Sheet Items
- Fixed
Assets
- do
not capitalise small fixed asset items
- depreciation
should be consistently applied
- major
expenditure should be minuted and approved
- Accounts
receivable
- course
of action taken for long o/s receivable
- SP
aging report should segregate type of funds receivable
- Late
interest levied correctly
- Treatment
of late interest waivers
- Council
normally queries on increase in SP balances
- Bank/Fixed
Deposit Balances
- Normally,
higher balances are better, but this may not be
the case when funds are tied up in SP balances
- Higher
funds may be due to contracted expenses not paid
i.e. accrued expenses are also higher
- Bank
balances may contain an element of SF reserves,
therefore TRY not to encroach on different fund
- To
review bank reconciliation
- Prepayments
- Usually
insurance but may include other expenses, licenses
- Other
Creditors and Accruals
- Normally
for operating expenses
- May
include SG expenditure not paid but incurred
- Major
expenditure NOT incurred but contracted/committed
must be disclosed in the accounts (NOT to be accrued)
- Long
outstanding items can be written off provided it
is resolved, if material
- Income
and Expenditure
- Income
- Normally,
constant income is expected.
- MF
must be correctly accounted for and pay particular attention
when rates are revised just after the AGM.
- Late
Interest
- S42
(10)(b)
of the Act, …if contribution is not
paid within 30 days, it shall bear interest at
the rate determined by MC, …unless
MC determines
that unpaid
contributions
shall bear
no late
interest.
- Late
interest normally not an issue unless rate charged
is abnormally high. The base for computation is
either 360 or 365 days.
- Beware
of cases
of late interest
waivers. Situations
would not arise unless
when SP talks among
themselves
and find
out that the other
SP had late interest
waived
whereas his was not.
- In
addition, there must be a correlation between late
interest charged and SP balances due.
Expenditure
- The accounts
department must not duplicate work when producing schedules
to both auditors and property management staff.
- When entering
data, the description of the transaction should be clear enough
to be used as a schedule itself.
- Therefore,
when schedules are needed, the accounting system
should produce the required I & E schedule, without
the accounts staff having to prepare them on a spreadsheet
separately.
Caution:
Expenditure
list should NOT include
- Entertainment
- Legal fee,
unless not relating to SP arrears recovery
- Large repair
and maintenance expenses, unless it is an old estate
- Professional
fees always require clarification
Updated
January 2006
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