Question: Our strata manager doesn’t employ a qualified bookkeeper, and our financial reports contain errors. What level of financials can our council demand?
Our strata manager doesn’t appear to employ a qualified bookkeeper, and our reports contain what appear to be accounting errors. Our council also lacks the technical understanding to know what to look for.
What can we expect our council to demand by way of monthly reconciliations and supported annual reports?
Answer: The Act does not require a qualified bookkeeper or accountant to prepare financial statements, but it clearly requires financial records to be accurate, complete, properly maintained, and capable of verification.
There is no requirement under the Strata Titles Act 1985 (the Act) that a qualified bookkeeper or accountant must prepare financial statements. The Act does not prescribe qualifications; rather, it imposes outcome-based obligations regarding the accuracy, completeness, and integrity of financial records and reporting.
section 101 – Accounting records and statement of accounts
Under section 101 of the Act, a strata company must:
- Keep proper accounting records of its income and expenditure; and
- Prepare financial statements for each financial year, showing:
- A statement of income and expenditure; and
- A statement of assets and liabilities.
These requirements establish that financial records must be accurate, complete, up to date, and capable of explaining the financial position of the strata company.
Accordingly, while no specific qualifications are mandated, the financial information produced must be reliable, reconcilable, and capable of verification.
If financial reports contain errors, cannot be reconciled to underlying records (including bank balances), or cannot be clearly explained, this may indicate that the requirement to maintain proper accounting records under section 101 has not been satisfied.
section 148 – Operation of accounts
section 148 of the Act provides that:
- A strata manager (other than a volunteer strata manager) must pay all money received on behalf of the strata company into one of the following:
- A separate ADI trust account for the strata company;
- A pooled ADI trust account for strata companies managed by the strata manager; or
- An ADI account of the strata company, where authorised.
- A volunteer strata manager must ensure that all money received is paid into an ADI account of the strata company.
- A strata manager must be able to account separately for money received on behalf of each strata company.
- Payments may only be made from such accounts for amounts properly payable by the strata company.
- Trust account funds are protected and are not available to creditors of the strata manager.
These provisions require that all funds are properly recorded and traceable, transactions are accurately allocated, and the financial position of the strata company can be clearly identified at any time.
section 149 – Accounting information
section 149 provides that a strata company may, by written notice, require the strata manager to provide detailed financial information, including:
- Bank account names, numbers, and balances;
- Details of unpresented cheques and pending transactions;
- Records of receipts and payments;
- Details of how money has been handled or disposed of; and
- Information relating to specific transactions.
The strata manager must comply within a reasonable time, and in any event within 7 days.
This establishes a clear obligation for transparency and accountability and requires that financial records be maintained in a form that allows detailed verification.
section 150 – Audits
Where a strata company has appointed an auditor, section 150 requires that the strata manager:
- Provide access to bank account statements; and
- Provide all documents and information reasonably required by the auditor relating to money received or paid on behalf of the strata company.
This reinforces the requirement that financial records must be properly maintained, fully supported by documentation, and capable of independent verification at any time.
Role and expectations of the strata manager
A professional strata manager acts as the agent of the strata company. Where financial functions are delegated, the strata manager is expected to ensure that the strata company can meet its obligations under the Act.
This includes:
- Maintaining proper accounting records;
- Recording all income and expenditure with supporting documentation;
- Preparing compliant financial statements;
- Ensuring funds are correctly handled and accounted for; and
- Maintaining records that are audit-ready and verifiable.
These obligations are not satisfied by the mere production of financial reports. The strata manager must be able to explain the strata company’s financial position, demonstrate how the reported figures are derived, and provide supporting documentation upon request.
Financial reports must be accurate and internally consistent, prepared in a timely manner, transparent and capable of reconciliation, and clearly explained to the council of owners.
Reports should clearly distinguish between the administrative fund and reserve (capital works) fund and include, at a minimum, an income and expenditure statement and a statement of assets and liabilities.
While the Act does not explicitly prescribe the frequency of reconciliations, regular reconciliation of bank accounts and accounting records is necessary to ensure compliance with section 101 and to support reliable annual financial reporting.
If the council of owners is unable to understand the financial position of the strata company, or if reports contain errors or inconsistencies, this may indicate that the strata manager is not adequately fulfilling their role as agent.
Where the council of owners does not have the expertise to verify financial records, the strata company may resolve to appoint an auditor. The Act supports this process by requiring full cooperation from the strata manager and access to all relevant financial records.
While the Act does not require financial statements to be prepared by a qualified bookkeeper, it clearly requires that financial records and reports be accurate, complete, properly maintained, and capable of verification. Failure to meet these standards, regardless of who prepares the accounts, may result in non-compliance with the Act.
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 #792.
Marietta Metzger
magixstrata
E: marietta@magixstrata.com.au
P: 08 6559 7498
Thankyou so much Marietta, your explanations are truly exactly on point in plain english and have specifically blacked in some slightly grey areas in the details we needed. Very grateful.
So if the strata manager can’t carry out a basic function of their job, the strata company’s only real option is to spend even more money (and time) to appoint an auditor? We are going through the same issue right now – with the end of the financial year approaching I am spending hours of my time trying to understand the mess that the strata manager has made of our accounts. Our account “balances” in theory – but there are errors throughout. What exactly does their training course cover? They provide numerous reports that just confuse the matter – seems to be a deliberate tactic to drive people to despair so they give up.
Hi Ren, is your Strata Manager qualified? Ours started up only about 2 years ago and apparently doesn’t need to be qualified yet. So (s)he may not know what the Bookkeeping requirements are. Landgate is fixing this as from Nov I think when the qualifications must be held. , But meanwhile it’s possible to personally look at the actual bookkeeping under S107 i think. If it’s not looking good you can call Landgate helpline. They suggested to us an application to the SAT to “Compel Compliance.” Just finding out how to do that.
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 (WA) as amended, 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 prior of 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.
Are there any genuine consequences for “non-compliance with the Act”?