For Management Rights owners, remaining compliant with governing standards is an essential business and licensing requirement – regardless whether you are a seasoned operator or new to the industry.
As operators, your business is required to be audited twice per year in accordance with the Property Occupations Act 2014 and the Agents Financial Administration Act 2014, therefore a lack of systemisation to support this process or failing to identify & rectify mistakes which commonly occur can be a costly & lengthy endeavor.
We’ve highlighted some of the common mistakes we come across on Trust Account audits, helping ensure similar issues don’t arise for your business in the future.
- Not Having a Checklist in Place ahead of an Audit
It may be straight-forward thinking to utilise a checklist to mitigate the occurrence of minor errors, however surprisingly many Management Rights businesses don’t have one in effect.
By having a checklist you can refer back to, you ensure the business remains compliant with regulations, avoid common mistakes, and have all the necessary information available to an external advisor throughout an audit.
If you are taking over from a previous manager, it is likely you will receive an audit checklist during the handover period, however, if not an accountant such as Archer Gowland Redshaw can work with you to formulate one for future use.
- End-of-Month Reconciliations
One of the most common mistakes which arises during an audit are issues surrounding End-of-Month (EOM) reconciliations – specifically confusion involving dates, bank balances, and transaction history.
According to the Agents Financial Administration Regulation 2019 – Regulations 15-16, your End-of-Month reconciliation must be completed within five business days following the end of the month. Where the date falls on a weekend or public holiday, you have five days from the next business day.
A common mistake among many owners is to complete the reconciliation on the last day of the month, rather than waiting until the month finishes.
Additionally, it is important to check that you are using the End-of-Month Date (rather than the Bank Statement Date); and the correct ending Bank Balance without transactions pending (as opposed to with ‘transactions pending’) – when completing your reconciliations.
Whilst the above mistakes are administrative in nature, we recommend adding comments to the final audit report provided to the Office of Fair Trading to avoid penalties. However, it is important to note that reoccurring issues can result in formal warnings from the OFT in the future.
- Failing to update the Regulatory Bodies on changes
A collective mistake uncovered during an engagement is the failure of owners to notify regulatory bodies, such as the Residential Tenancies Authority (RTA) or Office of Fair Trading, on any updates / changes; or speed in processing payments.
Both the RTA and Office of Fair Trading are taking proactive measures to ensure compliance – potentially issuing new warnings & penalties for any late notifications or lodgments.
To avoid penalty, it is important you update these bodies on a regular basis & refer to the guidelines available online via their respective websites.
- Not maintaining digital records – alongside hard-copies
Whilst some governing bodies still require hard-copy of any reports, in recent years, the Management Rights industry has seen a transition to more digital reporting and the introduction of various cloud-based platforms.
As such, it is important you save required reports as digital files alongside keeping hard-copies of final End-of-Month reports. A lack of a digital backup saved each month is a common issue which can occur, therefore being mindful to keep digital records is important. We recommend saving copies of all files to different locations (ie. USB hard-drive, another computer, etc).
To assist in this, transitioning to an online/cloud-based platform could be worthwhile investment. Whilst it can be a daunting process, a digital platform & workflow can have tremendous benefit – helping to support day-to-day operations and creating a well-systemised and documented business. Furthermore, whilst some cloud-based software providers allow for historical viewing of records/reports, it may be worth keep hard-copies of these, as required by the OFT for a minimum of five years'.
If you are unsure about how to transition to a digital/cloud-based platform, we can help assist you in selecting the right Management Rights software tool appropriate to your business needs.
For More Information
For more information on preparing your Management Rights business for Audit or strategies to help support you through an engagement, please contact Greg Rankin – Senior Accountant & Management Rights Specialist on (07) 3002 2699 or via email (gregr@agredshaw.com.au).
%20-%20HubSpot.png)
