05 August 2025
Strata End of Year Financial Reviews - Pt. 2
Part 2 of our 2 part guide to reviewing year end strata financials
This is part two of a two-part guide prepared in response to a common question we receive from strata managers: What should I be checking when reviewing a property's financials at year end? The process can be broken into two clear phases. First, confirming the accuracy of the financial data, and second, analysing the results to identify trends, explain variances, and prepare for the year ahead. Both steps are important in ensuring reliable reporting and confident decision-making.
How to Analyse Strata Financials After Verification
Once the financial data for a strata company has been verified, the next step is to interpret the numbers. Phase two is about turning accurate financials into useful insights—comparing actuals to budgets, identifying variances, and preparing for future planning. This stage allows strata managers to support committees with meaningful financial commentary and budget preparation.
Compare Actuals to Budget
The most immediate analysis involves comparing the income and expenditure reports to the budget approved at the prior AGM.
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Line-By-Line Review
Review each income and expense line for material variances. A good rule of thumb is to look for items that exceed both a percentage threshold (typically 20%) and a dollar threshold (for example, $1,000). If both are exceeded, a variance should be explained. For instance, overspending $300 on a $200 budget fails the percentage test but not the dollar test—so no action may be required. Similarly, a 2% overspend on a $50,000 insurance policy fails the percentage test and therefore doesn’t warrant follow-up either. -
Categorising for Clarity
Rather than relying solely on the chart of accounts, it can be helpful to group similar expense types outside the system and compare the actuals totals to their budget totals. For example, combine actuals for general, plumbing, and electrical repairs into a total repairs and maintenance figure, and compare that to the combined budget for those same accounts. This gives a high level picture of how overall categories are tracking, without getting bogged down in immaterial 'over and under' spends at the line tem level.
Check Against AGM Resolutions and Legal Limits
AGM minutes often include approvals for specific expenses or levy adjustments. These should be reviewed to ensure that actual expenditure aligns with what was authorised. If not, an explanation should be available.
In Western Australia, strata legislation requires that total expenditure does not exceed the approved budget by more than $500 per lot without further approval. Confirm that total actuals remain within these limits, or that additional approvals were obtained if necessary.
Verify Contractual Rates
Management fees and other contracted services should reflect the current agreements in place. CPI-based or fixed-percentage increases are sometimes missed, leading to undercharging. Checking these against agreements should be a standard part of your year-end review process.
If a rate increase is due but hasn’t yet been processed in the system, it’s worth considering an accrual at year end so that the expense is correctly reflected in the reporting year. This ensures financials show the true obligation, even if the invoice arrives later.
Prepare for Next Year’s Budget
Once actuals are reconciled and variances understood, you can provide valuable input into the next budget cycle and propose levies that can look after the building moving forward. The combination of accurate financials and thoughtful commentary helps councils understand past performance and make informed funding decisions for the year ahead.
Quick Takes
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Focus on variances that exceed both a material dollar and percentage threshold
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Group actual and budgeted expenses outside the system for broader comparisons
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Cross check financial results against AGM resolutions and legal requirements
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Consider year end accruals for unprocessed contract adjustments