Associations and Owners Corporations

Owners Corporations

Risks to lot owners

As a lot owner, you risk financial and legal consequences through poor financial management of your owners corporation (formerly body corporate).

An owners corporation is responsible for actions taken on its behalf by delegates, such as a professional manager or committee member. It can pass on costs incurred by these actions to members by raising fees. As a lot owner, there is no limit to your financial and legal liability for actions of your owners corporation or its delegates.

Your owners corporation should seek professional help to manage its financial responsibilities.

Financial statements at annual general meetings

Your owners corporation must present its financial statements at each annual general meeting. Financial statements should give a summary of all transactions during the financial year, including income, expenditure, assets and liabilities records and penalty interest charges.

Financials for prescribed owners corporations

Prescribed owners corporations must:

  • prepare financial statements in accordance with standards set out in the Owners Corporations Regulations 2018
  • have these financial statements audited at the end of the financial year.

Auditing financial statements

Prescribed owners corporations must have their financial statements audited at the end of each financial year. If your owners corporation is not prescribed, lot owners can decide at the annual general meeting whether to get the financial statements audited.

Consumer Affairs Victoria recommends that all owners corporations have their accounts audited.

Statements must be audited by either:

Associations Corporations

Three tiers of associations

Under the Associations Incorporation Reform Act 2012 (the Act), an association falls within one of three tiers according to its total revenue:

  • Tier 1 - less than $250,000
  • Tier 2 - $250,000 to $1 million
  • Tier 3 - more than $1 million.

Total revenue refers to the association’s total income from all its activities during its financial year, before deducting any expenses including the cost of goods that it sold.

Preparing financial statements (all tiers)

As soon as practical after the end of your incorporated association's financial year, the committee must ensure that financial statements are prepared.

An association must present its completed financial statements to members at the annual general meeting (AGM), which must be held within five months after the end of the financial year. You must lodge these with us within one month after the AGM, along with the appropriate signed declarations.

The financial statements of an incorporated association must give a true and fair view of its financial performance and position during and at the end of the year.

Financial statements must contain:

  • income and expenditure (Income Statement) for your association’s financial year
  • assets and liabilities (Balance Sheet) at the end of its financial year
  • other documents required by accounting standards, such as a cash flow statement
  • notes to the account, which must include:
    • information required by the accounting standards
    • information necessary to give a true and fair view
    • information required by the provisions of the Act and its regulations.

In the notes to the account, you must disclose:

  • any mortgages, charges and securities of any description affecting any property of the association at the end of its financial year
  • any trust, held on behalf of the association by a person or body other than the association, in which funds or assets of the association are placed
  • for each trust your association was a trustee of during any part of its financial year, any:
    • income and expenditure (Income Statement) of the trust during that period
    • assets and liabilities (Balance Sheet) of the trust during that period
    • mortgages, charges and securities affecting any property of the trust at the end of that period.

Auditing and reviewing requirements

Tier 1 associations do not have any additional reporting requirements. They do not need to have their financial statements externally reviewed or audited unless:

  • their rules state otherwise (audit or review)
  • a majority of members vote to do so at a general meeting (review only), or
  • the Registrar of Incorporated Associations directs them to do so.

Financial statements lodged with us from associations in tiers 2 and 3 may be inspected by the general public. They must be prepared in accordance with the Australian Accounting Standards issued by the Australian Accounting Standards Board. The statements may be either:

  • general purpose financial statements, which are appropriate for larger entities whose financial health may be of interest to a range of external stakeholders (including funding bodies), or
  • special purpose financial statements, which provide a less comprehensive set of disclosures than general purpose financial statements, and are appropriate for smaller entities with few or no external stakeholders.

The committee of the association determines which type of statement should be prepared. It should do so in line with the ‘reporting entity’ concept defined in the Australian Accounting Standards.

Tier 2

The financial statements must be reviewed by an independent accountant, in accordance with Auditing Standards on Review Engagements.

An independent accountant must be:

  • a member of, and hold a current practising certificate issued by either CPA Australia, the Institute of Chartered Accountants in Australia or Institute of Public Accountants, or
  • any other suitably qualified person approved by the Registrar of Incorporated Associations for this purpose, such as a members of the Association of Taxation and Management Accountants holding a current practising certificate.

If the rules of your association state that its financial statements must be audited. The auditor’s report may be submitted, together with the financial statements, to members at the AGM. The association does not also need to have its accounts reviewed by an independent accountant.

The audit must comply with the Australian Auditing Standards.

Tier 3

The financial statements must be audited by an independent auditor in accordance with the Australian Auditing Standards.

The independent auditor must be:

  • a registered company auditor or firm
  • a member of, and hold a current practising certificate issued by either CPA Australia, the Institute of Chartered Accountants in Australia, or the Institute of Public Accountants, or
  • any other suitably qualified person approved by the Registrar of Incorporated Associations for this purpose.

The independent auditor must not be:

  • a member of the association’s committee
  • an employer or an employee of a member of the committee
  • a member of the same partnership as a member of the committee
  • an employee of the association.

Sporting Associations

Experience in auditing sporting clubs reveals certain qualities about clubs that must be considered if the audit it to be optimised. Those factors include:

  • Strong financial literacy on the committee cannot be assumed;
  • Performance at the AGM is a factor for the auditor as well as the committee;
  • Value for money ranks high on the list of qualities for the auditor;
  • An informative and engaging auditor’s management letter is often a help to the treasurer when they front both the committee and the AGM;
  • Separation of duties can be trying in an environment when often one employee is having to wear many hats as part of their job;
  • Often the audit adjustments provide a less profitable position than the committee and members might have been expecting; and
  • Trading Statements are required to be separately shown in the financial statements, a process which will require the allocation of costs across such profit centres as Bar sales, Kitchens/Galleys, equipment rentals etc

At BHT Partners, our team has had years of experience in tackling a great range of issues that often arise within sporting clubs. Committees should be confident that when you engage BHT Partners Audit, the occurrence of a Sporting Club specific issue will not result in a drawn-out audit due to a lack of experience on the auditor’s behalf.

    If you’re in need of an auditor, please get in touch with us on (03) 9431 1827.
    Contact Us