5 hidden items that every trustee should read

Let’s be honest, most trustees skip the Notes to the Financial Statements. They’re long, technical, and usually tucked away at the back after all the important numbers. But the reality is this: the notes are where the real story lives. They explain how the numbers came to be, what risks sit quietly in the background, and what could still go wrong.

Ignoring the notes is a bit like buying a property without reading the title deed. Everything might look fine, until it isn’t. Here are five things the notes reveal that every trustee should read, every single year.

Think of accounting policies as the recipe behind the cake. Two schemes may both present “financial statements,” but the ingredients and methods can differ, which matters. The notes explain how levies are recognised, how reserve funds are treated, and whether income is recorded on a cash or accrual basis. These policies affect everything from whether levy arrears are reflected properly, to how healthy your surplus really is.

Red flag: Sudden changes in accounting policies without proper disclosure or trustee approval can distort year-on-year comparisons and create a false sense of improvement.

Action: Read policy changes line by line. If something changed, ask why and make sure it was approved and recorded in trustee minutes.

Buried deep in the notes, you’ll often find references to disputes, legal matters, or potential claims. They don’t appear on the balance sheet yet because they’re not certain, but if they materialise, the impact can be severe. Common examples include:

• Contractor disputes over unpaid invoices
• Owner disputes or legal action against the scheme
• Insurance claims still under review

Why it matters: These issues can swing your financial position overnight. For example, a scheme with a R200 000 potential claim pending should think twice before approving non-essential spending.

Action: Track contingent liabilities from meeting to meeting until they’re resolved, and don’t let them disappear into audit language.

You may think your financial year ends on 28 February or 30 June, but the notes tell the rest of the story. “Events after the reporting date” disclose what happened between year-end and the date the financials were approved. This can include:

• Special levies approved after year-end
• Major maintenance projects signed off
• New defaults by large owners
• Fire, flood, or other damage requiring funding

Why it matters: A scheme can look cash-positive at year-end, but be facing serious financial pressure by the time the audit is finalised.

Action: Make it standard practice to ask your managing agent: “Are there any post-year-end events that must be disclosed?”

Ever noticed a payment to a company linked to a trustee or a close relative? Related-party transactions must be disclosed in the notes because transparency protects trustees and the scheme. There’s nothing inherently unlawful about related parties providing services, but failing to disclose them properly is a serious governance issue.

Action: Review related-party disclosures every year. If one appears, confirm that it was approved correctly and recorded in the minutes, because trust thrives on transparency.

This section explains how administrative and reserve fund balances are calculated, transferred, and used. Missing it can lead to a completely inaccurate view of your scheme’s financial health.

Watch closely for:

• Transfers from reserve to admin (a short-term fix and a long-term warning)
• Unspent special levies (often a sign of project delays)
• Quiet reserve drawdowns (this is a slow but serious financial erosion)

Action: Compare these disclosures to your maintenance plan. Reserve funds should support planned maintenance – not patch over cash-flow problems.

Next time you receive the financial statements, don’t start with the numbers. Start with the notes as they are full picture. And if you’re still not convinced, remember this: most qualified audit opinions don’t start with the numbers. They start in the notes. Smart trustees know that the truth of the financials is always written in the footnotes.