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BMSMA
2004,
S45(1) of the Act states that “the books and accounts
of the Management Corporation in respect of each financial
year of the management corporation shall be audited”
Insight of what
an auditor looks for when examining the accounts of an MCST
- All
resolutions of meetings that affecting the financial position
should be
carried out.
- Assets,
liabilities, income and expenditure items are fairly stated in
the accounts.
- Any
material variances in income and expenditure items between last
and current year are justified.
- Cash-flow
position
- Long
outstanding material items needs to clear up.
- Segregation
of Sinking Fund expenditure and Repair and Maintenance expenditure
- Contingencies
i.e. legal cases AGAINST MCST to be disclosed
- Events
occurring after year-end which affects audit year “Post
Balance
Sheet review”
- Does
the Management Council regularly review the financial statements?
- Are
set procedures adhered to? Action to recover unpaid contributions
- Ensure
carrying out of resolutions that affect financial position
- Are
internal controls adhered to:
- Approval
limits for expenditure
- Calling
for tenders/quotations for major expenditure
- Reviewing
quotations
- Disclosure
of interest in contracts
- Every
member of council who directly or indirectly, interested
in a
contract or proposed contract with the Management
Corporation shall as soon as practicable after the relevant
facts have come to his
knowledge declared
the nature of his interest at a meeting of the council (BMSMA,
S 60))
Necessary documentation
required for an annual audit
- Financial
statements, including Trial Balance, Balance Sheet, Income and
Expenditure Statement, Bank Reconciliation.
- General
and sub-ledgers print out by month and total
- Supporting
Schedules for Balance Sheet and Income & Expenditure
itemsDraft
tax computation information
- All
original supporting invoices /receipts attached with
payment vouchers,
bank statements, etc
- Notices
of Assessment and correspondence between the MA and IRAS
- Legal
correspondence file
- Minutes
of meetings, AGM, Council Meeting and Sub-council meetings
- Other correspondent
files
- Services
Contracts
Fees
Generally, fees
are charged on time based or pre-agreed base on number of units
and kind of project. Generally, commercial is higher than the residential
because
the issues are more complex.
Materiality Concept
Materiality
is a relative factor, and any decision to set a materiality limit
will require
a “base” factor to be selected.
Basically, do
not worry too much about “small things”! We do not want
to waste resources checking why telephone expenses increased from
$135 to $150.
Instead, we would require an explanation on why utilities have increased
from $25,000 to $35,000 – was there a leaking pipe during
the year ?
Then again,
this applies only to “normal MCSTs” – other council
members may
want to question everything under the sun!
Management Letters
This is the
result of our review of the financial statements and deriving some
comments and recommendation for improvements.
Our review is
not solely for the purpose of detecting fraud but is a “by-product” of
our audit. We therefore cannot guarantee that our audit has uncovered
all
weaknesses or fraud.
The following
are typical comments:
- Management/Sinking
fund in deficit
- Long outstanding
items in the accounts e.g. accruals, unidentified renovation deposits.
- Unpresented
cheques dated more than 6 months still unpresented
- Major Sinking
Fund expenditure not resolved at meetings
- Payments
without authorized/supporting documents to support
- Waiver of
late interest not been approved
- C/f
balance does not tallied with b/f in new accounting year· GST
not accountable for or GST Form 5 reported amount not tallied
with
the GL account
- Wrong
classification of expenses accounts · Legal claim
not reflected in the account
- Non-existence fixed assets not written off,
and no fixed assets register is maintained and no yearly inspection
is conducted
- Lack of tax information
- Contributions
failed to comply with BMSMA 2004 S(39) (1), S(39) (2)
- Tax
over assessed
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Building and Construction Authority
