The lease states that a service charge certificate is required

What is the risk?

If an audit is carried out when not required by the lease, the extra cost (over that of an engagement to provide a report of factual findings) might not be recoverable through the service charge. If the form of examination or certification is not specified in the lease, therefore, the normal arrangement is to engage an accountant to make a report of factual findings.

Factual findings report

If the lease does not specify an audit is the be undertaken, but instead refers to something like a certification or examination, then an alternative form of engagement is an examination resulting in a report of factual findings on the service charge accounts performed by an independent accountant.

A report of factual findings will require the independent accountant to perform agreed procedures on the service charge accounts.

Procedures might include
– Obtaining a copy of the annual budget and performing analytical procedures;
– Checking amounts demanded are supported by appropriate documentation;
– Ensuring the amounts have been extracted correctly from the accounting records; and
– Analysing samples of supplier invoices.

These procedures can vary depending on the nature of the building or specific requirements from the landlord/ managing agent.

To discuss the above further, please contact

Sam Routledge
Manager – Property Management Accounting
01603 227608

Andrew Potts
Service Charge Consultant