Reading Your Body Corporate's Financial Statements: A Plain-English Guide
Financial statements are handed out at every AGM, but few owners actually read them closely. Here's what each section tells you – and the questions worth asking.
PPSP Team
Professional Property Solutions Provider
Financial statements are usually the thickest document in the AGM pack – and the one most owners skim past. A few minutes learning what each section actually means pays off every year.
The Income Statement: Where the Money Went
This shows income (levies, interest earned, other charges) against expenditure (utilities, maintenance, insurance, agent fees) for the year, split between operating and reserve funds. Look for:
- Whether actual expenditure tracked reasonably close to the budgeted figures
- Any single expense category that grew significantly year-on-year
- Whether the operating fund ran a surplus or deficit, and why
The Balance Sheet: What the Scheme Owns and Owes
- Assets: Cash and reserve fund investments, and amounts owed to the scheme (levies receivable / arrears)
- Liabilities: Amounts the scheme owes (creditors, deposits held, accrued expenses)
- Accumulated funds: The net position of the operating and reserve funds combined
Notes to the Financial Statements
The notes are often where the real detail lives – arrears aging (how much is 30, 60, 90+ days overdue), related-party transactions, and the basis on which reserve fund figures were calculated. A financial statement that looks clean on the surface can hide a growing arrears problem buried in the notes.
The Auditor's or Accounting Officer's Report
Depending on the scheme's size, financial statements may be audited, independently reviewed, or compiled. Check which applies, and read any qualifications or emphasis-of-matter paragraphs carefully – these flag specific concerns the reviewer wants owners to be aware of.
Questions Worth Asking at the AGM
Good Questions to Bring
- What is the current total arrears figure, and how much is over 90 days old?
- How does the reserve fund balance compare to the 10-year maintenance plan's requirements?
- Were there any budget variances above 10%, and what caused them?
- Are there any related-party transactions (e.g. contracts with a trustee-linked business) disclosed in the notes?
Financial Literacy Is Owner Protection
You don't need an accounting qualification to read a body corporate's financials meaningfully – just an understanding of what each section is telling you, and the confidence to ask about anything that doesn't add up.
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