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Home COFSAB Forum Finances Financial audits and audit of condo manager Reply To: Financial audits and audit of condo manager

  • Karen

    Administrator
    February 5, 2022 at 2:15 pm

    @emjayel

    There is nothing in the Act or Regulation requiring that financial statements be audited, just that they be prepared according to GAAP (generally accepted accounting practices), which really should be ASNPO (Accounting standard for not‑for‑profits) as that brings in the concept of a restricted account, e.g. our Reserve funds, which can only be used for the purposes defined.

    Condominium Property Act

    Annual general meetings

    30(4) Subject to the regulations, the corporation shall (a) prepare financial statements, in accordance with Canadian generally accepted accounting principles, for the corporation’s preceding fiscal year, an annual report on the reserve fund and an annual budget for the corporation’s fiscal year that immediately follows the corporation’s preceding fiscal year, and

    Note that too many Corporations are not preparing an annual report on the reserve fund, as required. See the Regulation for specifics.

    Check your by‑laws.

    ‑ Ours state that The Board must retain a qualified accountant who shall prepare audited financial statements at least once each year within one hundred and eighty (180) days of the end of the fiscal year of the Corporation.

    ‑ Ours also state that The Board shall on written application of an Owner or mortgagee, or any person authorized in writing by him, make the books of account available for inspection at all reasonable times.

    Please be aware that Condominium Corporation audits are not as rigorous as those I’m used to in my former professional life dealing with SOX audits. One auditor that won’t be working for us again tried to simply rubber‑stamped the accounting of our previous condominium property manager, who we knew was not doing an acceptable job, which meant additional effort to get to the correct results.

    No Corporation can have accurate, complete financial statements without accurate complete processes, including data entry (GIGO), Receivables processing & Payables processing.

    Things to ensure an auditor gives attention to should include:

    Bank reconciliations: CPAs typically start with bank reconciliations to ensure that the Corporation’s bank account balances are the same as the amounts found in the financial statements.

    Budget: This part involves a comparison between the Corporation’s budget and its revenue and expenses. The CPA will look out for mis‑coded entries and make sure that the numbers balance each other out.

    Cash disbursements and cash receipts: This is to ensure that incoming funds and outgoing funds are accounted for. This includes things like resident assessments for the former and petty cash or bills for the latter.

    Insurance: The Corporation should have insurance cover for board member liability, general liability, property & casualty as well as fidelity bond coverage.

    Vendor contracts: It’s important to ensure that the figures reflected for long‑standing contracts match with the corresponding payments.

    Reserves: The Corporation’s reserve account should be properly funded according to the reserve study.

    As the Treasurer on our Board, I have a process I follow whereby I check all the reports against the “Balance Sheet” or Statement of Financial position. I also have access to a data export of our financial statements and I check / attest for keying errors and/or completeness, as that makes more sense to clean things up as they are found instead of waiting for the audit.

    Condominium accounting is very simple: we are collecting condo & other fees (e.g. pet fees) to be used for annual Operating expenses and to save/set aside for future capital expenditures (Reserve fund). It’s essentially a household on steroids: there are no complexities such as foreign exchange etc. I continue to be disappointed as to how many times I’ve experienced and heard about poor accounting practices in the condominium world. Hopefully we can work together to get that changed!

    Agree that there should be a formal annual review of the condominium property manager, per COF’s Guidelines for choosing a condominium property manager.

    Please spread the word!
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