By Juan Addison, Financial Manager at FMS Property Managers
As we approach the February financial year-end for many HOAs, POAs and Body Corporates, Trustees often find themselves under pressure to ‘close the books’. In reality, this period is also a valuable opportunity to strengthen your scheme’s financial health and governance for the new financial year.
Based on my experience working closely with Trustees across a range of residential, commercial and mixed use community schemes, here are the seven key areas that deserve focused attention as you prepare for year-end and plan forward.
1. Take a hard look at your reserve fund
As well as a regulatory requirement, the reserve fund is the backbone of long-term sustainability. Trustees should assess whether the current balance is sufficient for upcoming maintenance, repairs and capital projects as well as the future years. Ask whether anticipated expenses, such as roof repairs, road resurfacing or major equipment replacements, are adequately provided for. If not, this needs to be addressed early in the budgeting process to avoid sudden special levies down the line.
2. Plan future expenditure with intent
Year-end is the right time to identify critical projects that will impact the next financial year’s budget. This includes both planned maintenance and projects that have been deferred. Aligning these expenses with realistic timelines allows Trustees to budget proactively rather than reactively.
3. Review insurance cover carefully
Insurance is often renewed annually but not always reviewed in detail. Trustees should confirm that coverage levels still reflect replacement values, current risks and any changes within the scheme. Under-insurance can expose owners to significant financial risk, while over-insurance can unnecessarily inflate premiums.
4. Understand over- and under-expenditure
Variances between budgeted and actual spend should never be ignored. Trustees should review any over- or under-expenditure and determine whether there were valid reasons for these differences. This insight is invaluable when compiling a more accurate and realistic budget for the new financial year.
5. Ensure tax compliance is up-to-date
Before year-end, confirm that the prior period’s final tax payable has been correctly submitted to SARS and fully paid. Outstanding tax liabilities can create complications later and may reflect poorly on the scheme’s governance and financial management.
6. Set and review the administrative budget as a team
Budgeting should never be a box-ticking exercise. Trustees should collectively review administrative expenses and revisit the services the scheme is paying for including security, armed response, CCTV, access control and other operational contracts. This is an ideal time to ask whether current services remain fit for purpose, competitively priced and aligned with the community’s needs.
7. Clean up your balance sheet
Finally, review your latest community or financial report in detail. Control and suspense accounts should be cleared so that only relevant and material balances remain. Clean, well-supported balance sheet accounts make audits smoother and give Trustees clearer visibility of the scheme’s true financial position.
Remember, a well-managed year-end is not just about closing off the past but about setting your community up for a stable, well-funded and well-governed future. With the right preparation and collaborative decision-making, trustees can enter the new financial year with confidence and clarity.