Question: Our auditor has flagged an anomaly in our financial statements because our budget year differs from our financial year. How do we resolve this?
Our auditor has flagged an anomaly in our financial statements. Revenue appears consistently underreported because our budget year runs from October to September, while our financial year runs from July to June.
How does levy and budget phasing work in a strata audit, and is a catch-up levy the only way to fix this?
Answer: Underreporting is usually a budget column mismatch, not an actual levy shortfall.
Although it looks like levies were raised incorrectly, this is usually not the case. In these circumstances, the budget column is usually wrong. The budget column should only reflect levies with due dates within the audit year. This is often the fourth quarter of last year and the first, second and third quarters of this year, though sometimes it runs third, fourth, first and second.
Best practice is to ensure the AGM approved budget figures have due dates for all four quarters falling within the coming financial year. If the due dates don’t line up, the budget column figure will differ from the AGM approved amount, which can look like underreporting when it isn’t.
If a quarter of levies was genuinely missed, there is no getting around the fact that levies have been insufficient and a catch-up is probably needed.
This post appears in Strata News #808.
Matthew Faulkner Matthew Faulkner Accountancy PTY LTD E: matt@mattfaulkner.accountants P: 0438 116 374
