Budget 2003

BUDGET 2003 – GEAR ECONOMY TO TAKE ON CHANGE

Highlights of the Budget 2003 is especially extracted for you in this section. It is equipped with detailed information concerning your business, enabling you to keep yourself up-to-date to the latest economic news and newly implemented rules and regulations of the Government.  The changes are in tune with the ERC’s recommendation report and show the Government’s determination to restructure the economy.  It also allows you to find out how your business had been affected by the new Budget announcement.  From there, you would then be able to formulate strategic plans to make essential changes and leverage on it to your company’s advantage.  Below are the five strategies that the Government has undertaken to keep Singapore’s economy to move ahead. 

It includes:

• The key highlights of Budget 2003 in two languages (English version / Chinese version);
• Maiden issue of Registry of Companies and Businesses’ (RCB) legal digest;
• The Economic Review Committee’s (ERC) report of recommendations for Singapore;
• Information on Severe Acute Respiratory Syndrome (SARS) and its relief packages;
• Inland Revenue Authority of Singapore (IRAS) One-Tier Corporate Tax System and Group Relief Scheme;
• Advantages of investing in audit (English version / Chinese version);
• Our corporate services; and
• Relevant links.

Budget 2004

BUDGET 2004

The 2004 budget includes a comprehensive package of measures to create a ‘best for business’ environment that supports creativity and enterprise, and attract talent and investments to Singapore.

• Competitveness And Flexibility
• Foreign Workers
• Skill Development Levy
• Entreneurship And Singapore Companies 

Budget 2005

Prime Minister and Minister for Finance, Mr Lee Hsien Loong delivered the 2005 Budget Speech in Parliament on 18 February 2005. This year's budget is set in the background of in improved economy arising from a strong economics growth of 8.4% in Financial Year 2004. As a result, the fiscal position offers a budget surplus in contrast to last year's deficit.

The Budget focused on promoting an economy brimming with opportunities and on fostering a stronger sense of community among Singaporeans.

In view of the economic recovery, the Prime Minister also announced an additional 3% cut in the budget caps for all ministries except the Ministry Of  Defence for Financial Year 2005 on top of the 2% cut last year.

• Business Changes
• Worker
• Central Provident Fund and other changes
• Non-Trade Income
• Capital Allowances and Tax Exemption
• Enhancement Tax Incentives
• The carry-back relief system
• Tax Changes : Corporate Tax
• Tax Changes : Personal Tax
• Tax Changes : Stamp Duty
• Tax Changes : Goods and Services Tax
• Tax Changes : Estate Duty
• Tax Changes : Betting Duty

Companies with S44 balance @ 31.12.2005 can remain under th eimputation system up to 2 years. You can utilised S44 balance to pay franked dividends.

Updated January 2006

Budget 2006

Budget 2009

Accounting consideration

In general, the following should be performed before the start of the new financial year’s accounts:

Review and Interpretation of Financial Statements

Income

• Normally, constant income is expected
• F must be correctly accounted for and pay particular attention when rates are revised just after the AGM.
• Late Interest
• S42 (10)(b) of the Act, …if contribution is not paid within 30 days, it shall bear interest at the rate determined by MC, …unless MC determines that unpaid contributions shall bear no late interest.
• Late interest normally not an issue unless rate charged is abnormally high. The base for computation is either 360 or 365 days.
• Beware of cases of late interest waivers. Situations would not arise unless when SP talks among themselves and find out that the other SP had late interest waived whereas his was not.
• In addition, there must be a correlation between late interest charged and SP balances due.

Expenditure

• The accounts department must not duplicate work when producing schedules to both auditors and property management staff.
• When entering data, the description of the transaction should be clear enough to be used as a schedule itself.
• Therefore, when schedules are needed, the accounting system should produce the required I & E schedule, without the accounts staff having to prepare them on a spreadsheet separately.

Caution:

Expenditure list should NOT include

• Entertainment
• Legal fee, unless not relating to SP arrears recovery
• Large repair and maintenance expenses, unless it is an old estate
• Professional fees always require clarification



Updated January 2006

Audit consideration

BMSMA 2004, S45(1) of the Act states that “the books and accounts of the Management Corporation in respect of each financial year of the management corporation shall be audited”

Insight of what an auditor looks for when examining the accounts of an MCST

Necessary documentation required for an annual audit

Fees

Generally, fees are charged on time based or pre-agreed base on number of units and kind of project. Generally, commercial is higher than the residential because
the issues are more complex.

Materiality Concept

Materiality is a relative factor, and any decision to set a materiality limit will require a “base” factor to be selected.

Basically, do not worry too much about “small things”! We do not want to waste resources checking why telephone expenses increased from $135 to $150.

Instead, we would require an explanation on why utilities have increased from $25,000 to $35,000 – was there a leaking pipe during the year ?

Then again, this applies only to “normal MCSTs” – other council members may want to question everything under the sun!

Management Letters

This is the result of our review of the financial statements and deriving some comments and recommendation for improvements.

Our review is not solely for the purpose of detecting fraud but is a “by-product” of our audit. We therefore cannot guarantee that our audit has uncovered all weaknesses or fraud.

The following are typical comments:

BMSMA 2004

MCST Auditing

Pre-MCST Constituted – Developer to establish Maintenance Fund Account

• Relevant Statute – “Buildings and Common Property” (Maintenance and Management) Act (Chapter 30)
• Sect. 9 – Developer has to establish a Maintenance Fund Account upon issuance of the Temporary Occupation Permit (TOP).
• Sect 10(5) – Developer shall keep proper books of accounts Developer shall appoint an auditor to for annual audit
• Developer shall file the audited accounts to the Commissioner

 Necessary documentation required for an annual audit 

MCST Formation 

Annual General Meetings (“AGM”) 

Necessary documentation required for an annual audit 

Fees

Appointment of auditors

Relevant Links

Managing your estate from System and Control Perspective

Perculiarity of MCST enviroment -

1. MA contract is renewal yearly
2. Treasurer in office is short term
3. Treasurer may not understand how MA managing their accounts in terms of system used and operation control
4. MA high turnover of staffs
5. Audit fee is low to perform a good job

Efficient and proven accounting system -

MC has it peculiarity in operation. One specific requirement is to generate recurring interest monthly for arrear of payment after 30 days, and some estate has even applied two tier of interest charge for overdue accounts after specific period, which made it even more complicated to maintain its software.

System also must be able to churn out all Interest Charge Journal showing specifically the late payment invoices and number of days charged.

An efficient system would save a lot of manpower in maintaining the accounts systematically and remotely.

Competent and responsible accounting staffs -

Data entry staff does not have to be qualified but familiar with the MC accounting function. However, competent supervisor is required to oversee the work done by entry staff is accordance to expectations. Recurring billings, late payment interest charge, month end adjustment on expired expenses; depreciation and FD interest income, read minutes and coordinate with management staffs to ensure events or matters affected the accounting transactions resolved by the management council and in AGM & EOGM are taken into accounts.

A good internal control system is required to ensure that cash transactions are duly taken in, internal audit may be required to carry spot check of petty cash and ensure record is properly maintained.

Monthly or periodically analytical review of transactions to detect expenses posting errors is required, the common error is the wrong posting of expenditure between MF & SF account.

When taking over project -

Do a financial review of account in details rather than standard audit. Transfer of balances must be reconciled with the accounts taken over, report to Management Council what course of action shall take for those accounts are ‘in suspense’. Such as all kind of refundable deposits are keeping the accounts for years, conduct stock take of all fixed assets to reconcile with items shown in accounts etc …… This exercise will ensure that the MC accounts will be cleaned up not withstanding the change of MA.

For commercial projects that generated car park and other income, review the tax assessed vs tax computations to ensure that tax is charged correctly. I propose MA to take up this proposal to protect their interest. MA can be sued if they do not exercise their professional care.

As auditors in the past 25 years, I have observed most of the MCs have overlooked this area and underestimate the complexity of this aspect. The result is paying excessive tax based on the gross income rather than the net chargeable income; overlook some of the deductible expenses not claim. Generally, not all auditors are familiar with tax in MC environment and even those have the knowledge, if they are not engaged to perform tax review and services in additional to their audit engagement, they will not be providing the extra service.

I have seen wrong tax computation made by auditors resulted the MCST has underprovided huge amount of tax in the last 6 years. Once the taxman is ‘awaken’, additional tax assessments will be revised and MC is required to pay within 30 days.

Common Errors in the accounts -

1. Long un-presented cheque not write off
2. c/f balance does not tallied with b/f in new accounting year
3. Payment vouchers not authorised
4. GST not accountable for
5. GST Form 5 reported amount not tallied with the GL account
6. Waiver of interest without approval
7. Wrong classification of expenses accounts
8. SP ledger total not tallied with GL
9. Legal claim not reflected in the account
10. Non-existence fixed assets not written off
11. No fixed assets register is maintained and no yearly inspection is conducted
12. Lack of tax information
13. Long outstanding accruals not written off
14. Maintenance contribution failed to revise according to resolution passed in AGM

Accounting data control -

Accounting data is perpetual and most important record of any organisation, notwithstanding the change of MA, the system should be in place and should not be changed when MA is changed. I suggest all the accredited MAs should work together to design a good software system and enter into a contract to allow data to be transferred amongst the MA when the project changes hand.

MAs or its association can join hand to develop a more comprehensive internet based system not only to provide basic accounting information, also full maintenance history and allow members to log on to check their account balance remotely. If this is achievable, it would save cost and give a lot of convenience for SP to pay their due on time. We are in the 21st century and the trend is moving towards paperless and transactions are more and more done electronically, we should take the challenge to do it now.

Accounting Services bureau -

Accounting firms can join hand to run an accounting service bureau to serve the MAs and MCs, competent CPAs to run the show would be a better choice and fair to SP. MAs are good in managing the estate, should spend more time in upgrading the value of the estate and serve the interest of the SP rather than accounting.

Plight of Auditor -

1. Fee too low to perform a good job.
2. MC should specific scope of audit in additional to the standards one
3. Lack of communication between the Management Council and auditors
4. MA given too short time to perform an audit
5. MA failed to provide enough schedules and information for the audit

Taxation -

Failure to make sufficient provision resulted MC does not have enough reserve to pay back log tax liability

MC fail to pay tax consultancy fee resulted tax planning is not done, excessive tax is paid

Auditional Audit Coverage-

Summary of a good control system-

1. An efficient internet-based software to maintain the accounts
2. Assign competent data entry staff to record the entry
3. Assign competent supervisor to perform QC check and co-ordinate with the operation staff for changes that affecting accounts
4. Engage competent external CPA who has the requisite skills to perform procedure and system audit and review tax issues
5. Send accounting staffs for course customised to suite their needs.

Updated January 2006