Pecanwood HOA Financial Policy

Transcription

1 Pecanwood HOA Financial Policy The purpose of this financial policy is to ensure that the Estate remains financially sustainable through the enforcement of strict financial control and management of risks. The Financial Authority Protocol forms part of the financial policy and should be read as such. 1. DEFINITIONS Home Owners Association (HOA) The Pecanwood Home Owners Association NPC, a Non-Profit Company according to the Companies Act, Act 71 of 2008, 2. PRINCIPLES 2.1 Strict financial control and sustainability. 2.2 Levy income is to be allocated to capital and maintenance reserve funds. 2.3 Capital gains will not be utilized for operating expenses. 3. GOVERNANCE 3.1 All authority levels for any kind of expenditure will be guided by the Financial Authority Protocol. 4. ACCOUNTING POLICIES 4.1 The Estate s principal accounting policies are set out in the Audited Annual Financial Statements are in accordance with SARS, GAAP, IFRS,and the new Companies Act of South Africa. 5. BUDGETS/FINANCIAL PLANNING 5.1 Annual Operating and Capex budgets are to be aligned with the Estate s financial year-end (End of February). 5.2 Three (3) year Capex budgets are to be prepared, reflecting the key strategic priorities. 5.3 Budgets will be approved at a Meeting before financial year-end. 5.4 A Zero-based budgeting approach must be followed. 5.5 An annual operating surplus of at least 5% of the annual levy income is budgeted for to cover unexpected operating expenses. 6. AUDITED FINANCIAL STATEMENTS 6.1 Audited Annual Financial Statements will be approved by the members at an Annual General Meeting not later than six (6) months after financial year-end. 6.2 The appointment of External Auditors will be approved by the members at the same Annual General Meeting. 6.3 External Auditors to rotate on a 5 year basis according to good corporate governance. 7. CAPITAL AND MAINTENANCE RESERVE 7.1 A cash reserve fund of at least two (3) month s levy income as managed by the service level of the HOA current financial years Operational Budget. Current expenditure trends must be evaluated. 8. INVESTMENT (Liquidity) 9.1 Available cash are to be placed into short term financial instruments that are risk free, tax beneficial and accessible at short notice. 9.2 NO engagement in any form of speculative trading will be allowed

2 9.3 Petty cash is controlled and reconciled by both the Estate Administrator and the Accountants on a monthly basis. 10. BORROWING 10.1 Subject to any restriction imposed or direction given at a general meeting of the company, the directors may borrow from the members or other persons or entities any sums of money for the purpose of meeting the objectives and business of the company not included in the company s financial policy and as set out in the Memorandum of Incorporation of the Company The directors may secure the payment or repayment of any sums of money borrowed in terms or the payment of any debt, liabilities or obligation whatsoever of the company in such manner and upon such terms and conditions as they resolve upon in their discretion Prior to engaging in any form of borrowing, the Directors must: Identify the Estate s debt capacity Verify debt affordability and the Estate s ability to service debt Review and report on all potential funding sources Obtain and Members approval as applicable in the Financial Authority Protocol 11. DEBT COLLECTION 11.1 Debtor s accounts are processed on the 20 th of each month. If the 20 th falls over a weekend, the accounts will be processed the following Monday Accounts are due on the first day of the following month Payments that are made by debtors up until the 19 th of each month will reflect on member s statements Interest get charged at prime + 2% on debtor s accounts that are in arrears 30 days + and prime + 10% on debtor s accounts that are in arrears 60 days + compounded Notice will be given to delinquent payers under 30 days. Notices are issued via to debtors who are more than 60 days in arrears, and the total outstanding amount is payable by the 15th of the following month. The final notice is followed up by sms Final notices are issued to debtors that are in 60 days + arrears, which is payable by the 8th of the following month Debtors that do not respond to the notice by mail and via sms are followed up with a courtesy call /SMS / . If no response on the above procedures, then it is to the discretion of the finance committee If no response to the above procedures it is at the discretion of the to initiate any of the following steps: Allow debtor for deferred arrangement. Take legal action by deferring to the Legal Portfolio 11.9 Interest will be raised against debtor accounts while legal action is in process All legal costs incurred will be for the Member s account Any request for deferment/restructuring is to be in writing and must be approved by the of Directors. 12. BAD DEBT WRITE-OFF 12.1 In keeping with the accounting policies of GAAP adopts the allowance method as opposed to the direct write-off method in terms of bad debt Bad debts expense is recognized early because bad debts are probable and they can be estimated to a fairly accurate extent therefore they fulfil the criteria required for recognition of contingent losses and it is necessary to recognize bad debt expenses Doubtful debts must be identified and estimated at an early stage during the debt collection process. In accordance of the Debtors policy bad debts must be identified Bad debt expense must be recognized before the debts actually become uncollectible. Bad debt baskets must be allocated Bad debt will only be written off if there are no other options to collect the debt Writing off of bad debts requires approval in line with the Financial Authority Policy. 13. INCOME OTHER THAN LEVY INCOME 13.1 The estate receives additional income from the following sources: Interest on Investments

3 Late building penalties Fines Policy 13.2 Any income other than levy income is taxable under South African law 13.3 Additional income is not repayable to members. 14. BUILDING DEPOSITS 14.1 All building deposits are paid into an investment account Interest received on the account is for the benefit of the HOA except in cases where otherwise requested by the owner or builder Building deposits will only be refunded after the following process has been completed: An inspection is completed The inspection report is filed with the estate office The FD & Management of the Pecanwood Home Owners Association authorises the refund, save for save for non-refundable inspection charges and any penalties Building inspection costs, maintenance levy cost and any other penalties will be deducted from the building deposit prior to refund. 15. CREDIT & CREDITOR PAYMENTS 15.1 Authority to approve payment to any creditor is guided by the Financial Authority Protocol Payment must be made according to creditor s terms and conditions Only electronic banking methods are used to pay creditors Payments are authorised by the Estate Manager or directors as per the Financial Authorisation Protocol and then processed by the Accountants The Estate credit card is issued to the Estate Manager, who has signing powers for purchases. This card is only to be used for Estate-related purchases and purchases must be in line with the Financial Authorisation Protocol Application for credit facilities and credit purchases (accounts) requires the signatures of two directors. Purchases on account will be governed by the Financial Authorisation Protocol and must be accompanied by an official purchase order. 16. SALARIES/WAGES 16.1 Salaries are payable on the 25th of each month if the 25th falls over a weekend, the salaries will be paid on the foregoing Friday Salaries are paid via electronic banking (same procedure as with creditors) Short-term casual wages may be paid from Petty Cash Salary increases are calculated annually on the 1 st March Discretionary performance bonuses are payable annually at the end of September Any increase, bonus or salary adjustment is entirely at the discretion of management and the directors. 17. ASSETS 17.1 The writing off and disposal of assets should follow the Financial Authorisation Protocol An asset register must be kept (and updated every 12 months) for all immovable and movable assets with an initial contract value of Two Thousand Rand (R2 000.) 17.3 Insurance schedules should be updated every 12 months when the Estate s asset register is updated. 18. PROCUREMENT OF GOODS & SERVICES 18.1 General The procurement of goods and services of both operational and capital nature will be governed by the Financial Authorisation Protocol Three (3) written quotes/tenders must be obtained for all goods and/or services procured with a contract value greater than R to ensure competitive prices and value for money The following additional criteria must also be considered when goods or services are procured on behalf of the Estate: quality, any conflict of interest, after sales maintenance/support, preference for local suppliers and BEE compliance.

4 18.2 CAPEX Procurement Capital procurement is governed by the Financial Authorisation Protocol 18.3 Entering into/renewal of contracts with service providers Contracts are to be entered into with regular service providers for essential services, such as sewerage maintenance, water testing, security services and the like Contracts must be reviewed and changed as required by the directors at financial year end Any increase in contract fees require a board resolution before any contract is renewed Conflict of Interest/Related parties No goods and/or services may be procured from any member, staff member or their direct family without written approval by the of Directors and clear declaration of interest as a related party in the Audited Annual Financial Statements. If not material, interest must still be declared at level and recorded as such. 19. CLEARANCE 19.1 The Accountants are mandated to issue clearance certificates on behalf of any of the Home Owners Associations only when all levy and special levy payments for the stand in question are up to date. 20. GENERAL 20.1 Expenditure which requires approval can be approved via round robin and ratified at the next meeting The Estate Manager is authorized to incur emergency expenditure exceeding limits as set out in the Financial Authority protocol subject to such expenditure being communicated to and approved by at least four directors of which one must be the Financial Director. AUTHORITY WHO 1 Appointment of External Auditors Audit Committee proposal, voted by Members 2 Approval of Auditors Fees Audit Committee proposal, voted by Members 3 Amendments to Financial Authorisation Protocol 4 Approval of Annual Financial Statements & Members 5 Approval of Annual CAPEX budgets & Members ratification (AGM) 6 Approval of Annual Operating budgets & Members ratification (AGM) 7 Approval of Policies (Procurement / Finance / Investments / Accounting / Penalties

5 AUTHORITY WHO 8 Institution of Legal action/proceedings by or against Pecanwood (other than debtors) 9 Institution of Legal action against Debtors FD & Management to then be handed to Legal & Management 10 Legal costs (a) Incurring legal costs (not budgeted) (b) Write off of legal costs: Debtors (c) Write off of legal costs: All other 11 Operating expenses (budgeted) Management 12 Operating expenses (not budgeted for and/or exceeding budget) (a) R per expense / budget item (b) >R per expense/budget item 13 CAPEX (budgeted) (a) R per budget item (b)>r per budget item 14 CAPEX (budgeted for but exceeding CAPEX budget) ) (c) R per expense / budget item (d) >R per expense/ budget item 15 CAPEX (not budgeted for) (f) R per expense / budget item (g) >R per expense/ budget item 19 Re-prioritization of Capex priorities as recommended by reserve plan 21 Appointment of Accountants 22 Opening/Closing of Bank accounts FD, Manager & Accountants

6 AUTHORITY WHO 23 Issuing of Guarantees FD & 24 Bad debt write offs (debtors) (a) R (b) > R Estate Manager & FD FD & 25 Sale of immovable assets Immovable assets and common property may not be sold 28 Sale of movable assets (a) Value R (b) Value > R (c) Value > R Estate Manager and Accountants FD & Manager 29 Write off of assets Management, Auditors and Accountants 30 Approval of Insurance policies Estate Manager & Risk & Audit Portfolio 31 Vendor selection for SLA agreements: Procurement (3 written quotes) Estate Manager and Portfolio 32 Engaging in any form of borrowing subject to restrictions as per MOI 33 Salary increases/bonuses/change in headcount numbers Remuneration Committee 34 Any claims for out of pocket expenses by staff, within the petty cash allowance of R Budgeted for, management presents scale & final figures, Remuneration Committee to approve Petty cash Estate manager to approve any such expense, accountants to check