Preparing Your Annual Financial Statements for the AGM

Once a year the treasurer has to stand up and show the owners where the money went. For most self-managed schemes that's the single most scrutinised thing you produce all year — more than the budget, more than the minutes — because it's the one document that answers the question every owner quietly asks: am I getting value for my levies, and is anyone watching the money? The good news is that annual financial statements aren't an accounting exam. They're a plain summary of what came in, what went out, and what's left in each fund. This guide covers what the statements have to show, how to build them from the records you already keep, and the format that gets approved on the first vote instead of sparking an hour of questions from the floor.

What "annual financial statements" actually means

For a small strata scheme, the annual statements are usually a short set of documents, not a corporate annual report:

1. A statement of income and expenditure — what money came into each fund over the year (levies, interest, any other income) and what was spent, broken down into sensible categories.
2. A statement of the fund balances — the opening balance of each fund at the start of the year, the movements, and the closing balance at year end.
3. A reconciliation to the bank — proof that the closing balances in your ledger match what the bank actually holds.

Some schemes add a short balance sheet (assets and liabilities), a list of outstanding levies (arrears), and notes on any major or unusual items. But the core is always the same: income and expenditure, and closing balances, per fund.

Why it matters

• It's the year's accountability moment. Owners approve the statements at the AGM. A clean, readable set builds trust; a confusing one invites suspicion even when nothing is wrong.
• It's a legal obligation in every state. The scheme is required to keep proper accounts and present them to owners annually — the format and audit rules differ, but the duty doesn't.
• It sets up next year's levies. You can't set a defensible budget without knowing what this year actually cost against what you forecast.
• It's what a buyer's conveyancer reads. The statements turn up in a strata search. Messy accounts drag on sale prices for every lot.

Before you start: what you need in front of you

You can't write the statements until the underlying records are complete and reconciled. Gather:

• Bank statements for every scheme account, covering the full financial year, plus the statement that shows the closing balance at year end.
• The levy register — what was raised against each lot, what's been paid, and what's still outstanding.
• Every expense for the year, with an invoice or receipt behind it, coded to the right fund (admin/day-to-day vs capital works/long-term — see the funds guide below).
• Interest earned on any account, and any other income (insurance rebates, recoveries, fees).
• Last year's closing balances, which become this year's opening balances. They must match.

If your records live in a spreadsheet or a shoebox, reconcile them to the bank before you start drafting. The statements are only as trustworthy as the ledger underneath them.

The two funds run right through the statements

Every figure has to be attributed to the correct fund. Owners — and any auditor — will expect to see the administrative (day-to-day) fund and the capital works (long-term) fund reported separately, each with its own income, expenditure and closing balance. Blending them is the fastest way to lose a vote, because it hides whether the long-term savings are actually being preserved.

If you're unsure which fund a given cost belongs to, resolve that before you report it — see the admin-fund-vs-capital-works guide linked below.

Step 1: Reconcile every account to the bank

Before anything else, prove your numbers are real:

1. Take the closing balance in your ledger for each fund.
2. Take the actual closing balance on the bank statement.
3. Explain any difference — usually timing items like a cheque not yet cleared or a levy paid but not yet banked.

If the two don't reconcile, stop and fix it now. A statement that doesn't tie to the bank is not finished, and it's exactly the kind of gap that turns an AGM into an interrogation.

Step 2: Build the income and expenditure statement

Summarise the year for each fund, in categories owners recognise. A workable administrative-fund layout:

Income

• Levies raised (administrative fund)
• Interest earned
• Other income (recoveries, rebates)

Expenditure

• Insurance
• Common-area utilities
• Cleaning and gardening
• Repairs and maintenance
• Statutory inspections (fire, lifts, pool)
• Administration (audit/accounting, bank fees, postage, software, meeting costs)

Then the same shape for the capital works fund — usually just levies and interest in, and any major works out. Show the budgeted figure alongside the actual where you can: owners want to see how the year landed against the budget they approved twelve months ago, and the variances are where the useful questions live.

Step 3: State the closing fund balances

For each fund, show:

• Opening balance (must equal last year's closing balance)
• Plus income for the year
• Less expenditure for the year
• Equals closing balance

The closing balances are the figures that carry into next year and feed the levy-setting. Get them right and reconciled, and the rest of the AGM finance discussion has solid ground to stand on.

Step 4: Add the supporting detail owners expect

Round out the pack with:

• Arrears list — lots with outstanding levies at year end, and the total owed. This is often the most-scrutinised single figure.
• Notes on unusual items — a special levy, a large one-off repair, an insurance claim. A one-line explanation heads off the question before it's asked.
• The auditor's report or review, if your scheme requires one (see the callouts below).

Do the statements have to be audited?

This is the question that changes most between states. As a rough national picture: larger schemes generally must have the accounts audited; smaller self-managed schemes usually don't have to, but can choose to, and owners can resolve to require one. The thresholds, and whether a full audit or a lighter review applies, are set by your state's legislation — check the callout for your jurisdiction before you assume you're exempt.

The other states follow the same shape. South Australia, Tasmania, the ACT and the Northern Territory all require the scheme to keep proper accounts and present them to owners annually, with audit obligations that scale with size or turn on an owners' resolution. Whatever yours is called, confirm the current threshold in your legislation — and if in doubt, a review costs little and settles the question.

Common mistakes

1. Presenting the statements before they reconcile to the bank

An unreconciled statement is a draft, not a result. If the closing balances don't match the bank, the numbers are wrong somewhere — find it before the AGM, not during it.

2. Blending the two funds

Reporting one combined balance hides whether the capital works fund is being preserved. Show each fund separately, top to bottom.

3. Opening balances that don't match last year's close

This year's opening balance for each fund must be identical to last year's closing balance. A mismatch means money appeared or vanished between reports — an immediate red flag to any owner who checks.

4. No budget-versus-actual

Actuals with no budget alongside tell owners what was spent but not whether it was in line with what they approved. Show both; the variances are the point.

5. Leaving arrears out

Outstanding levies are an asset of the scheme. Omitting them overstates how well the fund is doing and hides a recovery problem the committee should be acting on.

Frequently asked questions

How detailed do the statements need to be?

Detailed enough that an ordinary owner can see what came in, what went out by category, and what's left in each fund — and no more. For a small scheme that's usually a couple of pages, not a bound report.

Do owners have to formally approve the statements?

In most schemes the financial statements are put to the AGM and adopted by resolution. Check your state's requirements and your scheme's by-laws for the exact mechanism, and record the outcome in the minutes.

Can we prepare the statements ourselves, or do we need an accountant?

A small self-managed scheme can absolutely prepare its own statements if the records are clean. You may still need a qualified auditor or reviewer if your state or your scheme's size requires one — that's a separate role from preparing the accounts.

What financial year do we use?

Most schemes align to a financial year set in their records or by-laws (often the anniversary of registration, or the standard 1 July–30 June year). Use the same period every year so the statements stay comparable, and make sure the year you report matches the one your levies were budgeted against.

Quick checklist

• [ ] Every scheme account reconciled to the bank at year end
• [ ] Income and expenditure summarised per fund, in owner-friendly categories
• [ ] Budget shown alongside actual, with variances explained
• [ ] Opening balances match last year's closing balances
• [ ] Closing fund balances stated for each fund
• [ ] Arrears list and notes on unusual items included
• [ ] Audit or review obtained if your state or scheme requires one
• [ ] Statements circulated with the AGM notice so owners can read them beforehand

Related resources

• How to prepare for your first AGM as treasurer
• Admin fund vs capital works fund: what can you legally spend from each?
• How to set and raise strata levies without upsetting owners

This guide is general information for self-managed strata schemes in Australia. It is not legal advice. Accounting formats, audit thresholds and financial-year rules differ between states — always check the strata legislation that applies to your scheme, and seek professional advice for significant financial decisions.