A End of the Financial Year Overview
The End of the Financial Year for the strata scheme marks the close and start of the owners corporation’s official financial reporting period. It represents the close of the financial outcomes that reflects the past 12 months of activity and the creation of a budget that reflects activities expected/planned for the next 12 months. So, during this time, your strata managing agent is responsible for preparing financial statements, coordinate with auditors as required and developing the budget to create a financial roadmap for the coming year
There is significant interdependency between past and future financial reports. To deliver a good budget the past 12 months financials need to accurately reflect what, where and why the levies were spent. Much of this will be determined by the effective review of the financials during the year. In Strata Sense’s case we produce quarterly financial reporting with the goal of a timely review that enables the required adjustments to be made progressively.
To achieve a good financial outcome the budget must be developed with accurate inputs including the previous year spend, and one-off vs recurring expenditure. The budget is a guide against which the owners can question and challenge differences and the implications of this on the ultimate financial outcomes for the year. It is critical that the budget against which these comparisons are made are based on solid assumptions.
Strata Sense’s Early Preparation Process
At Strata Sense, we differentiate ourselves by initiating the full year financial review and budget preparation process early. Starting from the first week of the last month of the financial year, the Strata Sense accounts team and the strata managing agent undertake a general ledger review to confirm income and expense allocations and create an initial draft budget spreadsheet for review by the building manager, ensuring that the Treasurer and the strata committee are kept informed throughout the process. The strata accountant and strata managing agent will continue to closely monitor the financials during this period until the end of the financial year end, as payment and levy activity may occur; however, significant changes to the final figures are not anticipated.
Following the financial year end, the financial accounts are completed and, if relevant, the 3rd party audit package is prepared. In addition, a detailed draft budget spreadsheet will be emailed to the committee, and a meeting will be organized with the strata committee and the building manager to gather further input and finalize the proposed budget.
An additional linkage between closing the past year and budgeting for the new year is the timely scheduling of the Annual General Meeting to enable levies to be approved and cashflow to be maintained. At Strata Sense we are always seeking to proactively manage our schemes so the strata managing agent will also confirm the date for the upcoming Annual General Meeting, which will be scheduled within two months following the end of the financial year.
Why This Milestone Matters
The end of financial year makes a critical marker in the financial reporting cycle for the Owners Corporation, while a point in time it is heavily reliant on diligent management of the financials during the year and a proactive and well thought out plan for the coming year.