Service Charge Audits

During a service charge audit, the audit will review the service charge budget, invoices, receipts, balances stating an income and expenditure statement and in some cases even explanatory notes as to why expenditures were incurred. The report will include comparative statements from the previous year's audit to provide more clarity and give a good idea as to what has happened since the previous audit. 

An audit can help identify any errors or discrepancies in the charges imposed by the service provider, but is often requested by the payers of service charge to ensure funds are being property accounted for and spent. Thus could identify overcharging, undercharging or incorrectly calculating charges given to the occupier of the property. The aim of a service charge audit is therefore to give comfort to the payers of the service charge that the charge levied and expenditures incurred are right and correct.

Some of the common areas that are reviewed during a service charge audit include: 

• Maintenance and repair costs

• Insurance costs

• Utilities costs

• Cleaning and landscaping services

• Administrative costs

Property managers will usually oversee the management of many properties. Funds for each property must be separately identified as it would be a breach of trust for one property to bear the cost of another. If there is no mention of a service charge in the lease agreement it is still good practice for the landlord or property manager to prepare a service charge statement in cases where a significant service charge is collected. This ensures transparency with the tenant and gives them a much needed peace of mind.

After completing the audit, the auditor will provide you with a report that details their findings and will offer recommendations as to what can be improved or what they think may help the landlord or property manager provide better service or cut any unnecessary costs. The report may also include suggestive ways on how to improve the property manager or landlords service charge procedures and processes. Service charge audits must be verified by an independent accountant before being issued to the tenant.