Home Owners Association - Annual Financial Statements

Lashie130

Well-Known Member
Joined
Aug 25, 2015
Messages
130
Hi There fellow MyBB Readers

I was recently approached by a neighbor due to concerns about our Annual Financial Statements (AFS). I took a look and some numers truly does not add up. Theres issues with reserves, we now have an Accumulated Loss sitting in the Statement of Changes in Equity in comparison to a R1 million Retained Earning in 2018, expense budgets are extravagantly over budgeted. Cash on Call account has decreased by R2 million with no explaination on the Cash and Cash Equivalents note as to what the money was used for.

The one of the the many concerns right now is actually the Accounting Fees, which is outsourced. For the year ended 28 February 2022 the Outsourced Accounting fees was R432 000 (2021 Financial Year was R415 380).This excludes the Administrative and Consulting Expenses which is dealt with by the same accounting firm.

But alas the damage is done and now looking forward I wanted to perhaps gain some insight from anyone on this forum who can compare these costs and information to their Home Owners Association (HOA).

1. What is the annual or monthly Accounting Fees?
2. Are the AFS audited?
3. Is the Accouting insourced or outsourced for your HOA?
4. Do you keep track of the Monthly Management Accounts and AFS of your HOA

Just a bit of further information:
- There are about 650 houses in the estate I reside in
- 2018 AFS, Accounting Fees was R195 000 with no Admin or Consulting Fees
- I do not yet have the 2020, 2021 AFS to work through (They have been requested)
- Yes, I was complacent and had no concern about estate finances until it was brought to my attention
- The Annual General Meeting is due to take place at the end of this month
- HOA is registered as a Non-Profit Company

Thank you in advance for any feedback on the matter.
 

soload00

Active Member
Joined
Jan 4, 2014
Messages
68
Do you have a Managing Agent for your HOA?

Who collects the levies, pays the bills etc?

They will have answers to your questions.
 

quovadis

Executive Member
Joined
Sep 10, 2004
Messages
7,376
Hi There fellow MyBB Readers

I was recently approached by a neighbor due to concerns about our Annual Financial Statements (AFS). I took a look and some numers truly does not add up. Theres issues with reserves, we now have an Accumulated Loss sitting in the Statement of Changes in Equity in comparison to a R1 million Retained Earning in 2018, expense budgets are extravagantly over budgeted. Cash on Call account has decreased by R2 million with no explaination on the Cash and Cash Equivalents note as to what the money was used for.

The one of the the many concerns right now is actually the Accounting Fees, which is outsourced. For the year ended 28 February 2022 the Outsourced Accounting fees was R432 000 (2021 Financial Year was R415 380).This excludes the Administrative and Consulting Expenses which is dealt with by the same accounting firm.

But alas the damage is done and now looking forward I wanted to perhaps gain some insight from anyone on this forum who can compare these costs and information to their Home Owners Association (HOA).

1. What is the annual or monthly Accounting Fees?
2. Are the AFS audited?
3. Is the Accouting insourced or outsourced for your HOA?
4. Do you keep track of the Monthly Management Accounts and AFS of your HOA

Just a bit of further information:
- There are about 650 houses in the estate I reside in
- 2018 AFS, Accounting Fees was R195 000 with no Admin or Consulting Fees
- I do not yet have the 2020, 2021 AFS to work through (They have been requested)
- Yes, I was complacent and had no concern about estate finances until it was brought to my attention
- The Annual General Meeting is due to take place at the end of this month
- HOA is registered as a Non-Profit Company

Thank you in advance for any feedback on the matter.
You can formally request all the information you need from the HOA - just do it in writing formally. If they fail to respond then ask for it to be raised as an item at the next meeting, do a formal paia request or approach the ombud
 

Lashie130

Well-Known Member
Joined
Aug 25, 2015
Messages
130
So we’ve managed to get a few home owners together to bring up these issues.

To answer the above questions:
1. The Accounting firm (small practice) is acting as a ”Managing Agent” hence the exorbitant fees and increases but this is due to the fees being compared to the likes of a company like Trafalgar. The MOI is the main issue here as the board was ofcourse able to appoint the firm without a shareholders resolution.

2. Who collects the bills - The accoutning firm collects this bills, sends out levy statements, does the hand over to lawyers and debts collector if necessary (FYI this was all done in house prior to the change in 2017)

3. They answer the questions according to homeowners we have now engaged with, to create a strong front at the AGM, but these questions are met with “Highly vague answers with no actions taken thereafter”

4. Our levies are R1180 per month (Yes I am aware this is relatively low in comparison to other estate)

5. I have requested all this information and more but unfortunately with a full time job I have only managed to work through the financial statements and MOI. Nothing on the minutes from the prior AGMs so these concerns may have been raised before.

Further information I have uncovered:
- Accounting Fees 2017 = R100 000, 2018 R195 000, 2019: 350 000
- There are not Non-Current Asets listed for the entity, yet there are Motor Vehicle and Computer Expenses
- We are sitting with a Tax Payable Liability even though we have run at loss for the last 3 years
- The buildings which houses the security guards as well as the few admin staff is also not listed under Non-Current Assets
- Fixed investment (10% p.a) from a money market was pulled and invested in Stanlib which caused us to lose 5% interest p.a since 2019
- I have received quotes from other accounting firms and the maximum based on my workings should be R100 000 for accounting fees p.a
- There are 632 free standing houses within the estate. (Plot sizes ranging from 500 - 700 square meters)
- At the AGM the AFS need to be approved we are going to vote against the approval and request a forensic audit if necessary
- Out of the 12 of us homeowners that have had this meeting 3 of us will send in nominations to be on the Board of Directors
- I looked at the last few AGM packs and it seems like only 30 - 50 people attend each year
- Our biggest problem is the MOI as the Board has the power to engage with and appoint any professional service required by the estate, my plan is to change this to be a limit of up to R300 000 annually. Any cost above this must require a shareholders vote (I guess this was why we got Vodacom Fibre instead of any other service provider back in 2016)
 

rh1

Executive Member
Joined
Aug 5, 2011
Messages
5,123
So we’ve managed to get a few home owners together to bring up these issues.

To answer the above questions:
1. The Accounting firm (small practice) is acting as a ”Managing Agent” hence the exorbitant fees and increases but this is due to the fees being compared to the likes of a company like Trafalgar. The MOI is the main issue here as the board was ofcourse able to appoint the firm without a shareholders resolution.

2. Who collects the bills - The accoutning firm collects this bills, sends out levy statements, does the hand over to lawyers and debts collector if necessary (FYI this was all done in house prior to the change in 2017)

3. They answer the questions according to homeowners we have now engaged with, to create a strong front at the AGM, but these questions are met with “Highly vague answers with no actions taken thereafter”

4. Our levies are R1180 per month (Yes I am aware this is relatively low in comparison to other estate)

5. I have requested all this information and more but unfortunately with a full time job I have only managed to work through the financial statements and MOI. Nothing on the minutes from the prior AGMs so these concerns may have been raised before.

Further information I have uncovered:
- Accounting Fees 2017 = R100 000, 2018 R195 000, 2019: 350 000
- There are not Non-Current Asets listed for the entity, yet there are Motor Vehicle and Computer Expenses
- We are sitting with a Tax Payable Liability even though we have run at loss for the last 3 years
- The buildings which houses the security guards as well as the few admin staff is also not listed under Non-Current Assets
- Fixed investment (10% p.a) from a money market was pulled and invested in Stanlib which caused us to lose 5% interest p.a since 2019
- I have received quotes from other accounting firms and the maximum based on my workings should be R100 000 for accounting fees p.a
- There are 632 free standing houses within the estate. (Plot sizes ranging from 500 - 700 square meters)
- At the AGM the AFS need to be approved we are going to vote against the approval and request a forensic audit if necessary
- Out of the 12 of us homeowners that have had this meeting 3 of us will send in nominations to be on the Board of Directors
- I looked at the last few AGM packs and it seems like only 30 - 50 people attend each year
- Our biggest problem is the MOI as the Board has the power to engage with and appoint any professional service required by the estate, my plan is to change this to be a limit of up to R300 000 annually. Any cost above this must require a shareholders vote (I guess this was why we got Vodacom Fibre instead of any other service provider back in 2016)
An accounting firm that cannot manage cost is very suspicious. Complain to SAICA and/or SAIPA.
 

Lashie130

Well-Known Member
Joined
Aug 25, 2015
Messages
130
Okay so this next part is going to be a bit rant. Out of 670 homes (67 people required for Quorum). Only 50 showed up to the AGM People even left before voting could be cast.

All I can say simply is “Financial Illiteracy“!!! I can’t stress this enough. Our Accounting firm is clearly running the show of our Home Owners Association. From debtors collection, to lawyer letters, sitting in on board meetings, accounting, admin. No independency or segregation of duties whatsoever. I kept being stopped during my questioning and cut off when raising points (by the Accounting firm who is also a home owner).

The presentation only showed the good side of our books and did not truly reflect the actual financial position of the NPC. The directors according to them are comparing this small little accounting firm to a company like Trafalgar, saying the service we reap is 10 times better than what we’d receive from Trafalgar for a lower fee (not by much I assume haven’t seen the quote from Trafalgar)

In simple words we have a Managing Agent/Accounting Firm but they refuse to deem themselves a Managing Agent. Even the damn software that they use is licensed to our NPC yet if I want a damn levy statement I need to drive to the firms place of practice whereby 6 years ago I could walk to the admin building and request a statement.

As these financial statements are ”Audited”. I will be looking for further clarity from the Accoutning firm and Chairman. Sending all queries via e-mail and the responses will be noted. Once done so I my plan will be to seek the relevant steps necessary to approach IRBA and SAICA on the matter.
 

beefymoocow

Expert Member
Joined
Jun 19, 2006
Messages
1,305
Okay so this next part is going to be a bit rant. Out of 670 homes (67 people required for Quorum). Only 50 showed up to the AGM People even left before voting could be cast.

All I can say simply is “Financial Illiteracy“!!! I can’t stress this enough. Our Accounting firm is clearly running the show of our Home Owners Association. From debtors collection, to lawyer letters, sitting in on board meetings, accounting, admin. No independency or segregation of duties whatsoever. I kept being stopped during my questioning and cut off when raising points (by the Accounting firm who is also a home owner).

The presentation only showed the good side of our books and did not truly reflect the actual financial position of the NPC. The directors according to them are comparing this small little accounting firm to a company like Trafalgar, saying the service we reap is 10 times better than what we’d receive from Trafalgar for a lower fee (not by much I assume haven’t seen the quote from Trafalgar)

In simple words we have a Managing Agent/Accounting Firm but they refuse to deem themselves a Managing Agent. Even the damn software that they use is licensed to our NPC yet if I want a damn levy statement I need to drive to the firms place of practice whereby 6 years ago I could walk to the admin building and request a statement.

As these financial statements are ”Audited”. I will be looking for further clarity from the Accoutning firm and Chairman. Sending all queries via e-mail and the responses will be noted. Once done so I my plan will be to seek the relevant steps necessary to approach IRBA and SAICA on the matter.

Sounds like a Balwin estate. Accounting fees are usually like a percentage of revenue. It will be incomparable to compare other estate accounting fees to your one. Accounting fees usually around 15k but that’s from a cheap audit firm for like 80 units. If you bring audited by these big tier audit firms. A 1st year trainee could charge around 2.5k per hour of work and audit partners around 7-10k per hour.
 
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