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Topic
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Last year I took a break from my role of Treasurer in a 38 unit Central Coast complex. This year I'm back and some things are concerning me about the events of last year.
Our EC committed to a Garden Makeover last year. It was approved on the basis of a verbal estimate of “about $10k” from our regular gardening contractor. No other quotes were initially considered.
The job total came to $17k, and there was a lot of controversy among many owners because:
a) committee had breached their $10k general limit imposed the owners at every AGM;
b) this garden makeover was not in our budget nor had it been approved by owners at any AGM or EGM;
To complicate things further, one member obtained an independent quote that was significantly cheaper and more comprehensive, and the overwhelming opinion of owners is the gardener did a very bad job. We no longer use this contractor's services and are now in the process of taking this contractor through the CTTT but we're not hopeful of getting much back.
Now the crux of my question: when our financial reports were distributed earlier this year with the AGM papers, I noticed the Garden Makeover sinking fund expense was significantly less (about half) than what I knew to be the total actual cost, making it appear to be under the $10k limit.
I questioned this at the AGM. Our strata manager's response was “Oops, that's my mistake. The balance of the cost is under the 'Driveway Repairs' expense.” and she became very uncomfortable when I questioned her about this. I voted for an audit to be conducted on the accounts, but this motion was defeated – by people, I believe, were either not interested or did not understand how serious this was. An updated sinking fund expense report was mailed to the OC along with the AGM minutes.
I later learned from one EC member that our Strata Manager offered this as a “workaround” at a discussion at a meeting prior to the AGM “to lessen concerns about the EC breaching their spending limits”. This discussion is not minuted anywhere, and the Strata Manager denies making this offer.
To me it all seems very strange and convenient, so I can only come to the conclusion they tried to hide the real cost of this job from the Owners Corporation by misallocating it as 'Driveway Repairs' on the reports, effectively misleading the Owners Corporation.
How 'serious' is it to misrepresent spending on a financial report?
Do you think this sort of thing is serious enough to be pursued through the CTTT or is it just not a big deal and just get on with life? We're in the process of arranging an EGM to change strata managers, perhaps I should use this EGM as an opportunity to highlight this as an EGM motion and ask again that an audit be undertaken in light of the misallocated spending?
Thanks.
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Hi webwrx
I did a CTTT application involving a large SP over spending a budget by over 50% and as far as I know no quotes were ever sought; the company just started work. The main beneficiary of the spending was a building company operated by the SP's Chair. CTTT did not raise an eyebrow. The spending requirements for large SP’s are very clear but this “little no no” was let go by CTTT.There appears to be issues in your SP but OC's often get excused for most “oversights”; even significantly overspending a budget as long as it didn't cripple the finances.
If you make an application and it has the support of a majority of owners then you may have better luck than just pursuing the matter solo because you believe something dodgy went on but if majority of owners support pursuing the matter then you should not have trouble replacing the agent or getting an audit at the EGM.
CTTT accepts a certain level of errors; unfortunately the amount and type of errors is not published so who knows where the line in the sand is.
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.Hi easty;
That is beautiful; it is very, very nice and i applaud that you have shared that with us. A lovely system.I really like the concept that owners should be able to access the information any time. I personally feel fees (s109 fees) for owners who want to see OC records should be abolished if the strata is self managed.
thank you for such a quality post
webwrx said:
…….. I would have thought misleading the OC would be a serious matter.
You would be surprised at what is not considered a serious matter.
There are 3 general types of misrepresentation (misleading), innocent, negligent and fraudulent.
My EC are comfortable with all 3 types of misrepresentations. It is very common in the EC minutes and nobody seems to think that is serious.It is not until the misleading material is hiding something that is itself a serious matter that notice is taken and even then the misleading material becomes somewhat inconsequential relative to the seriousness of the what it was the misleading material was hiding. It is as if misleading is fine.
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