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All money spent by the OC is lot owners money and should only be spent if it is preceded by the issuing of a purchase order (PO) or the expenditure can be related back to a contract. PO and contracts before approved must have the necessary supporting documentation e.g. quotes, EC approval.
The OC may exempt small purchases (say up to $250 as an example), statutory charges and utilities and have a system of confirmation orders in the case of emergencies but generally the principle of POs, contracts and certification of accounts as correct for payment should be followed by all strata plans.
To support and review this system all cash accounts of the plan should be reconciled monthly and a reconciliation report provided to the EC with details of all each individual receipt and payment. This gives EC the opportunity to query any item.
It goes without saying that all payment records comprise the invoice, approved and signed PO and a certification that the work has been done or goods received. Suppliers to the plan need to be under no allusion
that if they intend to do work over and above a contract or the approved
purchase order they have to get approval first or they won’t be paid for the additional work.
To further ensure probity in the system no cheques or monies should be able to drawn from the plans accounts unless two signatories or two passwords are used. Certification of accounts for payment should not be made by the person who authorised the PO.
It is not a difficult system; does take a little time to set up and requires fiscal discipline but ensures all money spent can be accounted for. It
provides an audit trail and should be available not only to EC members but also any lot owner to inspect at any time if they wish.
It is important to remember that audits ensure compliance with accepted accounting standards and won’t pick up poor purchasing procedures
including contract variations, cost overruns, poor quotation or tender
procedures etc. You cannot rely on audits to determine the judicious spending of funds.