How to Protect Your Strata’s Money: Financial Controls Every Council Should Use
Most strata councils trust the people handling their finances.
That trust is important. But it should never replace good financial controls.
A well-run financial system creates simple checks that help prevent mistakes, identify unusual activity and make it easier for council to understand exactly where the strata's money is going.
The good news is that councils do not need to become accountants to provide effective financial oversight.
Here is how to build a practical system.
Step 1: Make Sure More Than One Person Is Involved
One of the simplest financial safeguards is to avoid having a single person control an entire transaction from beginning to end.
For example, the same person should not ideally be responsible for entering an invoice, approving it and making the payment without any additional review.
The Province of BC's financial best-practice guidance recommends having at least two people formally responsible for reviewing and approving expenses and signing cheques.
The objective is not to create unnecessary bureaucracy.
It is simply to create another set of eyes.
For larger expenses, council should be able to answer:
Was the expense authorized?
Was the work actually completed?
Does the invoice match what was approved?
Is the amount being paid from the correct fund?
Simple questions can prevent expensive mistakes.
Step 2: Review the Bank Statements Every Month
Financial statements are important, but council should also review the actual bank activity.
BC's financial best-practice guidance recommends that strata councils review bank statements every month, monitor owner payments, review the treasurer's report and confirm that expenditures were properly approved.
Council does not need to investigate every routine transaction.
Instead, look for anything that deserves an explanation.
For example:
A large payment you do not recognize.
An unusual transfer between accounts.
A duplicate-looking payment.
A cheque that has remained outstanding for a long time.
A payment to an unfamiliar supplier.
A withdrawal from the CRF that council does not remember approving.
Most unusual transactions will have perfectly reasonable explanations.
The important thing is that somebody notices them and asks.
Step 3: Make Sure the Bank Accounts Actually Reconcile
A bank reconciliation compares the strata's accounting records with the bank's records.
In simple terms, it answers:
Does the money our accounting system says we have agree with what is actually in the bank?
Differences can occur for completely normal reasons, such as cheques that have been issued but have not yet cleared.
The concern is when reconciliations are not being completed regularly or unexplained differences remain unresolved.
Where a licensed strata management brokerage holds strata funds, BCFSA requires monthly bank statements and reconciliations for the applicable trust accounts.
Council should expect to receive clear financial reporting and should ask questions if balances do not make sense.
Step 4: Keep Different Types of Money Separate
Not all strata money is intended for the same purpose.
Operating funds pay the regular costs of running the property.
The Contingency Reserve Fund is intended primarily for expenses that occur less frequently and individually approved by the owners.
Special levy money is collected for the specific purpose approved by the owners.
Keeping these funds clearly separated makes financial reporting easier to understand and reduces the risk that money intended for one purpose is unintentionally used for another.
The Province recommends separate bank or credit-union accounts for operating, CRF and special levy funds as a financial best practice.
Where a licensed strata management brokerage holds these funds, BCFSA requires separate trust accounts for operating funds, contingency funds and special levy funds when applicable.
For brokerage-held CRF and special levy trust accounts, BCFSA also requires at least two authorized signatories for withdrawals.
Step 5: Verify Invoices Before Paying Them
An invoice arriving in the inbox does not automatically mean it should be paid.
Someone should confirm that the work was actually performed or that the goods were received.
BC's financial best-practice guidance specifically recommends checking invoices against work completed and goods received.
This becomes particularly important when dealing with larger projects.
If a contractor submits an invoice for $15,000, council should be able to connect that invoice to the work that was authorized.
There should be a clear trail:
Approval.
Contract or quote.
Completed work.
Invoice.
Payment.
That documentation becomes extremely useful if questions arise six months or three years later.
Step 6: Be Extra Careful When Banking Information Changes
Some of the most effective financial controls involve slowing down when something changes.
Suppose a contractor who has worked with the strata for years suddenly emails new banking instructions.
Do not simply update the banking information and send the next payment.
Verify the change independently using contact information already on file.
The same principle applies to unusual payment requests, unexpected transfers and requests
that involve urgency or secrecy.
Financial controls work best when the process makes unusual transactions stand out.
Step 7: Review the Financial Package, Not Just the Bank Balance
Seeing $300,000 in the bank can feel reassuring.
It does not necessarily mean the strata has $300,000 available to spend.
Some of that money may belong to the CRF. Some may have been collected for a special levy. There may be unpaid invoices, approved projects or other commitments.
Each month, council should look at the bigger picture.
That means reviewing the operating results, CRF activity, owner receivables, unpaid bills, bank balances and significant budget variances together.
The goal is to understand not only how much money the strata has, but also what that money is already expected to pay for.
Do Not Assume Professional Management Eliminates Council's Role
Hiring a professional strata management company adds expertise and financial systems, but council still has an oversight responsibility.
BCFSA explains that strata councils can delegate many responsibilities to a management company, including collecting strata fees, paying bills and preparing financial reports.
However, council remains responsible and accountable to owners for ensuring the strata corporation's duties are carried out.
That does not mean council needs to redo the manager's work.
It means council should understand the reports, review the information provided and ask questions when something is unclear.
A good management relationship should make that easier, not harder.
What Should Council Ask Each Month?
A useful monthly financial review does not need to take hours.
Council should be able to answer a handful of basic questions:
Do the bank balances make sense?
Are there significant expenses we did not expect?
Are any owners falling behind on payments?
Are there unpaid invoices that need attention?
Are actual expenses significantly different from the budget?
Have any unusual transfers or withdrawals occurred?
Were significant payments properly approved?
If council cannot answer those questions from the financial information it receives, the reporting may need improvement.
Good Financial Controls Should Feel Routine
The strongest financial controls are usually not complicated.
They become part of the normal monthly routine.
Invoices are reviewed.
Payments are approved.
Bank accounts reconcile.
Funds remain properly separated.
Financial statements are reviewed.
Questions are asked.
Decisions are documented.
None of this suggests that council should distrust its strata manager, bookkeeper, treasurer or contractors.
Good controls protect everyone involved.
They reduce the chance of mistakes, create a clear financial record and give council greater confidence that owners' money is being handled properly.
And ultimately, that is what good strata financial management should provide: clarity, accountability and confidence.
Coming Next: Does every strata need full-service management, or could accounting-only strata management be a better fit?
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