Another year has almost passed and many businesses are considering audits.
Here we look at a few of the most common mistakes companies make with their management rights audit… but first a quick industry update.
Management rights: Industry update
From our perspective the industry is still maintaining a healthy level of activity.
I think everyone would agree it has subsided from the lofty heights of the past couple of years but this reduction in activity has been driven by a number of factors: in particular, banks have tightened their lending criteria.
Purchasers can still get finance but the process seems to be a little longer and purchaser analysis is more stringent – not necessarily a bad thing.
Body corporates have become more aware of their power in the purchasing process and are exercising it more readily now. Some would say ‘over zealously’ at time, but this is the world we live in now.
Lastly, the oversupply to the market, especially in the inner city suburbs of Brisbane, has forced a slowdown. This was expected and will rectify in time. However, there will be casualties along the way. If you are located in these areas, get ready to bunker down for the long run!
4 common mistakes with a management rights audit
Audit is sometimes regarded as just something we have to do to maintain our licence. But taking the right approach to a management rights audit is important; otherwise it can waste a lot of your time.
Licensees have various opinions and approaches to audits and audit visits. We believe it should be a very positive process that allows for education as well as compliance outcomes.
Most of our lessons come from mistakes we have made and as long as we learn from these we can move forward.
So we have compiled a list of the most common mistakes we are finding with management rights audits this year:
- Non-trust money not being withdrawn
Funds collected into the trust account that do not relate to the agency relationship between you as manager and the owner of the unit are classed as ‘non-trust money’.
These funds must be withdrawn from the trust account to your general account within 14 days of receipt.
An example of this is gardening charges that you charge a tenant, which they deposit as part of the weekly rent.
(Act reference – Agents Financial and Administration Act 2014 section 18 No other payments to trust account).
- Late EOM reconciliation
Your EOM reconciliation must be prepared within five days after the end of the following month. The date for the end of month reconciliation must also be the last day of the month – not the day the reconciliation is prepared.
(Act reference – AFA Regulation 2014 section 17 Trust Account Cash Book Reconciliation)
- Bank transaction receipts not printed
We find many cases of bank transaction receipts not being printed when funds are disbursed from the trust account. A bank transaction receipt must be printed and filed for auditing purposes.
(Act reference – AFA Regulation 2014 section 14 Payments By Electronic Funds Transfer)
- Trust account receipts with incorrect information
Licensees are forgetting to sign the receipt upon completion and a lot of the receipts are missing two dates on the receipt: when the trust money was received and when the trust account receipt was completed.
(Section 9 – AFA Regulation 2014)
If you would like to discuss your upcoming management rights audit or any of issues relating to your business or the industry, please don’t hesitate to contact your auditor or our management rights team: 07 3421 3421.