Blog PostSeptember 2, 2021 - Educational
Pesky Questions about Pests from the Auditor
Finally done! I filled out that year-end checklist and the auditor should have everything they need. Ugh, there is another email from them.
“Can you explain why your pest control costs have tripled in the current year?”
Oops… I forgot to tell the auditor that we had a killer bee invasion at the condominium corporation in 2020 which drove up our pest control costs. Luckily, there were no lawsuits or injuries from the attack of the killer bees and the situation was dealt with quickly.
When the budget was set, this corporation had not planned on a killer bee invasion and thus did not budget for the related pest control costs. The same can be said for many other unexpected or emergency expenses. Most corporations had not considered the impact a pandemic could have on their financial situation. The COVID 19 outbreak has brought about many changes in condominium communities and has resulted in unexpected spending for many corporations, whether it be increased cleaning or higher utilities costs. In “normal” years it is important to explain why the expenses varied from the budget, but even more so in the current year.
As an auditor, we strive to understand these variances as they provide us with an understanding of what happened during the year and what effect they had on the condominium’s funds. These explanations are also used at the Annual General Meeting to describe the financial situation to the unit owners. If increased expenses resulted in an unexpected bump in monthly fees or a special assessment, these explanations help the owners understand why more cash is needed. While the auditor can gather information from the general ledger, invoices, and the director’s minutes, the property managers and board can provide further insight from their day-to-day management of the corporation.
Some of the most common variances in 2020 and 2021 have been:
- Increased water consumption due to more people staying home.
- Increased office expenses for access to hold AGMs virtually.
- Increased costs of cleaning and sanitization.
- Increased costs of waste removal to clean up the unattended waste from the explosion of new dog owners or large items from owners who are participating in the “pandemic purge”.
- Decreased repairs and maintenance costs due to delaying projects until the next year, a result of rising costs, unavailability of materials, and/or access restrictions for construction workers.
- Less landscaping costs due to delaying additional work until reserve projects have been completed after the pandemic.
While the auditor may be able to speculate on the differences between the budget and actual expenses, additional details of what happened during the year are key to providing accurate support for the financial statements and the owners.
Jennie Buerkle CPA, CGA
Senior Accountant at RLB LLP