1. Regulatory Compliances and Financial Controls for MCSTs

2. Preparing Books of Accounts
Building Maintenance & Strata Management Act, Cap. 30C, Section 38 (10)
A management corporation shall:
cause proper books of account to be kept in respect of moneys received or expended by the management corporation showing the items in respect of which the moneys were received or expended; and
cause to be prepared, from the books referred to in paragraph (a), a proper statement of accounts of the management corporation in respect of each period commencing on the date the management corporation was constituted or the date up to which the last previous such statement was prepared and ending on a date not earlier than 4 months before each annual general meeting.

3. Auditing Books of Accounts
Building Maintenance & Strata Management Act, Cap. 30C, Section 45
Subject to section 134, the books and accounts of every management corporation in respect of each financial year of the management corporation shall be audited.
The audit of the books and accounts of a management corporation shall be carried out only by a person who is a public accountant within the meaning of the Companies Act (Cap. 50).
The auditor shall be appointed by:
the management corporation at its annual general meeting; or
the council of the management corporation within 90 days after the annual general meeting is concluded if no auditor is appointed during that annual general meeting,
and the auditor shall hold office until the conclusion of the next annual general meeting of the management corporation.

4. Management Fund
Building Maintenance & Strata Management Act, Cap. 30C, Section 38 (1)
A management corporation shall establish and maintain a fund as its management fund.
Building Maintenance & Strata Management Act, Cap. 30C, Section 38 (2)
A management corporation shall pay into its management fund:
all moneys received by it in respect of contributions determined under section 39(1);
the proceeds of the sale or other disposal of any movable property of the management corporation;
all moneys received by it from the Collector of Land Revenue as an award of compensation under the Land Acquisition Act for any non‑lot acquisition relating to its strata title plan;
any fee received by the management corporation under section 47;
any amount paid to the management corporation by way of discharge of insurance claims; and
interest received on any investment belonging to the management fund.

5. Management Fund
Building Maintenance & Strata Management Act, Cap. 30C, Section 38 (3)
A management corporation shall not disburse any moneys from its management fund otherwise than for the purpose of:
meeting its liabilities referred to in section 39(1);
carrying out its powers, authorities, duties or functions under this Act; or
transferring moneys therein not required to meet the liabilities of the management fund to the sinking fund.

6. Management Fund
Building Maintenance & Strata Management Act, Cap. 30C, Section 39 (1)
The management corporation shall, from time to time at a general meeting, determine the amounts which are reasonable and necessary to be raised by contributions for the purpose of meeting its actual or expected liabilities incurred or to be incurred within the period (not exceeding 12 months) specified in the determination in respect of:
the regular maintenance and keeping in good and serviceable repair pursuant to section 29 of parts of the parcel being the common property, fixtures, fittings and other property (including movable property) held by or on behalf of the management corporation;
the common expenses of the management corporation (except those in subsection (2)(a) to (d));
the payment of insurance premiums; and
all other liabilities incurred or to be incurred during that period by or on behalf of the management corporation in carrying out its powers, authorities, duties and functions under this Act other than liabilities referred to in subsection (2).

7. Sinking Fund
Building Maintenance & Strata Management Act, Cap. 30C, Section 38 (4)
A management corporation shall also establish and maintain a fund as its sinking fund.
Building Maintenance & Strata Management Act, Cap. 30C, Section 38 (5)
In addition to any moneys transferred under subsection (3)(c), a management corporation shall pay into its sinking fund:
all moneys received by it in respect of contributions determined under section 39(2);
any amount paid to the management corporation by way of discharge of insurance claims and not paid to the management fund;
all other amounts received by the management corporation and not paid or payable into the management fund; and
interest received on any investment belonging to the sinking fund.

8. Sinking Fund
Building Maintenance & Strata Management Act, Cap. 30C, Section 38 (6)
A management corporation shall not disburse any moneys from its sinking fund otherwise than for the purpose of:
meeting its liabilities referred to in section 39(2); or
carrying out its powers, authorities, duties or functions under this Act.

9. Sinking Fund
A MCST may transfer monies from accumulated Management Fund to Sinking Fund, S38(3)(c), but not vice versa.

10. Sinking Fund
Building Maintenance & Strata Management Act, Cap. 30C, Section 39 (2)
The management corporation shall, also from time to time at a general meeting, determine the amounts which are reasonable and necessary to be raised by contributions for the purpose of meeting its actual or expected liabilities incurred or to be incurred in respect of:
painting or treating of any part of the common property which is a structure or other improvement for the preservation and appearance of the common property;
major repairs and improvements to, and maintenance of, the common property and boundary wall;
the renewal or replacement pursuant to section 29 of parts of the parcel being the common property, fixtures, fittings and other property (including movable property) held by or on behalf of the management corporation;
the acquisition of movable property;
any non‑lot acquisition related expenses of the management corporation; and
such other liabilities expected to be incurred at a future time where the management corporation determines in a general meeting that the whole or part thereof should be met from its sinking fund.

11. Determining Contribution Rates
Market practice in determining contribution rates is by way of preparing a 12 month budget, for both management fund and sinking fund.
Budgets prepared should be as detailed as possible.
Past case studies:
Certain management are inclined to present a positive results of its operations and utilise sinking fund to finance minor replacement costs when an MCST’s operations run into an operating deficit and / or accumulated management fund deficit.
MCST should push to reduce operating cost and / or increase its contribution rate to rectify that deficit / accumulated deficit.
When the MCST’s intended cause to recognise a sinking fund expenditure is not detailed within its sinking fund budget even though is approved in an general meeting, no expenditure is allowed.
When an MCST worked out a sinking fund budget but decides to levy contributions at a rate lower than its required, the MCST is at the risk of running into cash flow constrictions if and when it needs to utilise its sinking fund but unable to finance it. The issue becomes harder to rectify when the cause is effect is accumulative over years.

12. Common Faults of Internal Control
Delays in collating and submitting or banking in of monies received, checks and / or cash.
Ie. Cash collection held in site safe box or held in trust of property officer for up to 2 weeks before submission – subjected to higher risk of lost of monies, from actual lost or siphoned.
Lacking in documented certification of cost incurred and approval of payments in records.
Ie. Lacking of job certification creates a “job not completed” mindset and delays required follow up when necessary or timeliness of payment.
Ie. Lacking of payment approval may result in approval miscommunicated, double payment may surface.

13. Common Faults of Internal Control
Delays in submitting collection summaries / checks / cash / supplier invoices / delivery orders / service reports prior to month end closing
Resulting in delays of month end closing work, or requiring additional time to revise monthly accounts to correct issue, or understatement of income, receipts, expenses to be accrued etc
Delays in collating and submitting of petty cash claims, may result in reduced capability of management in validating purpose and cost.
Ie. Can a management satisfy itself of transport claims made after 30 days.
Ie. Can or should a staff use his / her own monies to pay in advance for the MCST.

14. Regulatory Compliances and Financial Controls for MCSTs
Philip Teo
Philip Teo & Associates
Public Accountants and Chartered Accountants