Who watches the money?

Financial instability rarely happens overnight. It develops gradually when oversight weakens and risks go unnoticed. 

We often see community schemes in financial distress. In most cases, the issue is not a lack of levy income but insufficient financial oversight at trustee or director level. Many schemes do not have a trustee who is financially trained, experienced or consistently engaged with the scheme’s financial affairs. 

In the corporate environment, boards designate a person responsible for financial oversight, typically a Financial Director or similar role. Community schemes may not view themselves as companies, yet the underlying principle is identical: where money is involved, someone must be accountable for understanding it, questioning it and supervising it. 

Without clearly assigned financial oversight: 

• Controls weaken 
• Risks go unidentified 
• Reporting becomes a formality rather than a management tool 
• Decisions become reactive instead of planned 

Proper oversight does not require every trustee to be a financial expert. It does, however, require at least one engaged executive who takes responsibility for understanding budgets, monitoring cash flow, reviewing arrears and interrogating financial reports. That oversight is what protects a scheme from avoidable financial strain and supports long-term sustainability. 

Every community scheme should designate at least one trustee or executive with primary responsibility for financial oversight. 

This does not diminish the role of the managing agent. Managing agents are appointed to administer the finances in accordance with approved mandates and resolutions. Trustees and directors, however, remain legally responsible for oversight and control. The duty of care rests with them. 

Effective governance requires an informed and engaged counterparty on the part of the scheme. Trustees must be able to ask the right questions, review reports critically and ensure that financial decisions align with the long-term interests of owners. 

The financial management of sectional title schemes is governed primarily by Prescribed Management Rules (PMR) 21 to 28, contained in Annexure 1 to the Sectional Titles Schemes Management Act (STSMA) Regulations. 

These rules establish a comprehensive statutory framework for how scheme finances must be planned, safeguarded and reported. 

In practical terms, trustees are required to oversee core financial functions including: 

• Preparing and approving a fair and reasonable annual budget based on realistic expenditure forecasts 
• Calculating each owner’s participation quota (PQ) levy contribution 
• Charging interest on arrear levies and enforcing an approved credit control policy 
• Managing administrative and reserve funds, including compliance with reserve fund adequacy requirements 
• Ensuring that scheme funds are properly separated, safeguarded and used only for lawful scheme purposes 
• Ensuring adequate insurance cover is in place and regularly reviewed 
• Exercising control over disbursements and maintenance expenditure 
• Preparing, auditing where required and presenting annual financial statements 
• Maintaining proper accounting records and audit trails 

These obligations are not discretionary. They form part of the statutory governance framework that trustees are required to uphold. 

When trustees exercise informed and active financial oversight, it builds confidence among owners, managing agents and service providers. Financial risks are monitored rather than ignored, and corrective action can be taken early. 

Strong oversight materially reduces the likelihood of: 

• Unexpected cash shortfalls 
• Emergency funding requirements 
• Governance disputes 
• Unnecessary special levies 

Importantly, consistent enforcement of an approved credit control policy ensures that compliant owners are not subsidising delinquent owners. This promotes fairness, predictability and financial stability within the scheme.

Trustees already operate under significant pressure and often serve voluntarily. The objective is not to increase that burden, but to ensure that financial accountability is clearly assigned and properly supported. 

At least one trustee or executive should take clear responsibility for financial oversight. This is not merely best practice. It is central to good governance under the STSMA framework. 

A scheme that prioritises financial oversight builds resilience and protects property values.
A scheme that treats oversight as optional will eventually face preventable crises.