Question: If a strata manager can’t get the basics right, is an audit really our only option?
This is a follow-up question to our earlier article, WA: Strata manager accounting errors. What are the financial reporting obligations?
Our strata manager doesn’t seem to be carrying out a basic function of their job. With the end of the financial year approaching, we’re spending hours trying to understand the mess that’s been made of our accounts. The account “balances” in theory, but there are errors throughout, and we’re given numerous reports that just confuse the matter. At times it feels like it might be a deliberate tactic to make people give up.
If the strata manager can’t carry out a basic function of their job, is the strata company’s only real option to spend even more money and time appointing an auditor? What exactly does a strata manager’s training course cover?
Answer: Confusing reports don’t excuse a strata manager from their duty to keep accurate, understandable financial records.
The concerns raised are understandable, particularly where owners or council members are spending considerable personal time attempting to reconcile inaccurate or unclear financial records.
Under the Strata Titles Act 1985 (the Act), a strata company is required to keep proper accounting records and prepare financial statements for the scheme. section 146 of the Act specifically requires a strata manager to exercise a reasonable degree of skill, care and diligence in the performance of their functions. This includes maintaining accurate financial records, properly accounting for levy income and expenditure, and providing information to the strata company in a transparent and comprehensible manner.
Where accounting records contain errors, inconsistencies or omissions, the strata company is entitled to seek clarification and supporting documentation from the strata manager. The existence of numerous reports that are difficult to interpret does not remove the manager’s obligation to ensure the records themselves are accurate and capable of being understood by the strata company.
In circumstances where confidence in the financial records has been compromised, the appointment of an independent auditor may be appropriate. However, owners are correct that this can impose additional cost on the strata company. Importantly, the need for an audit does not relieve the strata manager of their obligations under section 146.
Owners also have inspection rights under section 107 of the Act, including access to accounting records and supporting documentation upon payment of the prescribed fee. An application to the State Administrative Tribunal (SAT) compelling compliance with the Act should be the last resort, and we do recommend that legal advice is sought before doing so.
In relation to qualifications, the staged introduction of mandatory educational requirements for strata managers in Western Australia is intended to improve industry standards. However, regardless of qualification status, all strata managers remain bound by their statutory duties under the Act, including the duties imposed by section 146.
Ultimately, a strata manager is engaged to assist the strata company in fulfilling its obligations, not to create uncertainty around the scheme’s financial position.
The above information is general in nature and should not be considered legal advice. As we are not familiar with the specific circumstances of the strata scheme, you may wish to seek independent legal advice.
This post appears in Strata News #802.
Marietta Metzger magixstrata E: marietta@magixstrata.com.au P: 08 6559 7498
