Bank accounts

Summary: Bagamoya has three accounts where our cash lies and give the best snapshot of our financial position. Our Standard Bank savings account, our Standard Bank reserve account, and our balance of funds held in Steer’s trust account

Bagamoya's three cash accounts

Bagamoya's three cash accounts

Steer calls it

Document to review

How to review it

Notes

Savings account

CURRENT ACCOUNT BAGAMOYA BODY CORPORATE

Ask Steer for Savings account bank statement

Open

Reserve account

CURRENT ACCOUNT BAGAMOYA RESERVE FUND

Ask Steer for Reserve account bank statement

Open

Trust account

Bagamoya Property Cashbook (funds held in Steer’s trust account)

Ask Steer for Property Cashbook

Open

There are no rows in this table

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It’s important to understand the flow of money and where the block might be exposed to risk.

Money received

The block receives money for the following:

Sectional title levies (our main source; calculated per square metre per unit)

Garage levies

Garden EUA levy

Deck EUA levy

Parking income (this is currently classified —and taxed— as income until it is declared an EUA)

Bank interest income

Late payment interest income

Electricity payments collected

Note that levies are not subject to income tax, but that income —non-EUA parking and interest received— is. Electricity is just the settlement of usage by each unit plus the common property.

Managing Agent’s Trust account

All of these payments are made into our MA’s trust account. The MA has multiple sectional titles, so they collect debit orders and other payments from all the various owners into that one trust account. This is why it is important for owners to make sure they use the right reference number if they don’t have debit orders on their account.

This is a legal way of collecting these funds, as below, but it does expose the block to accounting risk, since we don’t have control over what the MA does with that money.

Source: STSMA

"The body corporate must ensure that all money received by the body corporate is deposited to the credit of an interest-bearing bank account—

(a) in the name of the body corporate; or

(b) that is a trust account opened in terms of either the Estate Agency Affairs Act, 1976 (Act No. 112 of 1976), or the Attorneys Act, 1979 (Act No. 53 of 1979)."

Administrative and Reserve accounts

All bodies corporate are required to have two separate bank accounts: and administrative (day-to-day) and reserve (a.k.a. savings) account.

Source: STMSMA

A body corporate must— keep separate books of account and bank accounts for its administrative and reserve funds referred to in sections 3(1)(a) and (b) of the Act;

After the month’s payments have been made to settle expenses —vendors, water, electricity, staff, and so on— from their trust account to Bagamoya’s administrative and reserve account.

Rent roll

The MA provides the trustees with the monthly Rent Roll. This document shows the incoming amounts due from owners, and if they have settled into the MA trust account in full or not.

See:

Backups of rent roll here⁠

Cash flow statement

At the same time as the above, they share the monthly Cash flow statement. This document shows all the expenses incurred and settled in the month, which could include:

Audit fees

Accounting fees

Management fees

Bank charges

Electricity

Refuse

Water

Sewerage

Recycling

Insurance

Salaries (Farrington)

Payments to vendors (gate repair, maintenance, etc.)

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Backups of Cash flow statements here.⁠

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Room for error and review 👀

These are things where the trustees need to keep a keen eye on:

Is money regularly and sufficiently being moved from Steer’s trust account to our bank accounts? (There is a risk that too much of our money, beyond 1-2 months’ needs, remain with them and they can be declared insolvent or other scenarios outside of our control. We need to request the Property Cashbook from Steer every quarter to see how much we have in their trust account. Charlie to own this process.)

Do the transferred funds from Steer’s trust account actually reflect in our bank accounts? There is a risk in just trusting a PDF that Steer sends us to say how much they transferred. We need to inspect the actual bank account statements every quarter, to confirm that transferred amounts actually reflect. Charlie to own)

How much money do we actually have? (This is based on the sum of our administrative bank account, our reserve bank account, and the amount held in Steer’s trust account. We need to do monthly reconciliation/check-in’s to keep an eye on how this amount is changing over time. Charlie to own this process.)

Did Steer actually collect all the income that was due to us in a month? (They say that they “automatically” contact owners with late payments, but we know for a fact this is not the case — Werner now checks it monthly and notifies them of payments not received. If an owner stops paying their electricity and levies, Steer will still have to pay the electricity bill from the block’s funds, meaning the one owner now owes the other eleven owners of the block the amount of money, which can quickly escalate out of control. Werner to own this process.)

Did Steer pay all our vendors in the month and, importantly, did they only pay our vendors? (We noticed a mistake in the past where they paid one of our vendor’s from another body corporate’s account; meaning they can pay another block’s expenses from our account. Werner and Charlie to own this process)

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