Belvue Apartments Crosslease 93132

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AGM 2016 Update

This time, the draft financial statements were released with the AGM 2016 invitation 3 weeks before the meeting. There was time to review the numbers and --- as expected --- there are plenty of problems with these statements that neither BCA, the Owners Committee or the Auditor recognised. This letter, addressed to the Owners Committee, explains the issues and was distributed at the 2016 AGM.

It is important to note that most of the raised issues are no trivialities. They include:

basic accounting incompetence and the lack of a proper accounting system and automated procedures, where simple "typing errors" would be eliminated or at least identified,
expenses charged by BCA against us without legal justification,
at least $771.80 (but probably even more) cash missing due to improperly granted "discounts",
charging PAYE to the wrong account and
Obtaining budget approval by deception.

Of the 7 points I've raised, only the first 2 minor issues have been replied to so far. Both of them confirmed, our financial statements were wrong and need correcting. The more substancial points have not been addressed as yet. Until all underlying issues have been adequately addressed, the financial statements cannot be considered as accepted. Please delay the payment of your levy until this matter has been resolved. You have the right to refuse paying until our financial accounts are in order. There is no risk to you to miss out on an early payment discount, because no early payment discounts will be granted this year at all. There is also no risk to the finances of our crosslease for such important payments as building insurance or similar, because the crosslease has generally enough money in the bank to last for at least a full year. I promise to keep everybody informed by updating this web site within 2 weeks of any new developments of this matter.

For a historical perspective: we are not alone in receiving accounting services of questionable standard. The High Court case Paula Beaton led against the Institute of Chartered Accountants in 2005, when she was still Director of Body Corporate Administration Ltd, makes some interesting reading, see the original High Court decision at the Justice department web site here.
It started out with complaints from the public to the Institute of Chartered Accountants (of which Paula Beaton was a member) about charging already paid levies again and about using an old audit report in support of new accounts. (section [85] of the court decision).
The Institute of Chartered Accountants then led an investigation against Paula Beaton for offering accountancy services to the public through her company BCA without the proper Certificate of Public Practice required. During that investigation, "there appeared to be instances of breaches by [Paula Beaton] of certain of the Institute's professional standards. [...] there are differences of opinion between [Paula Beaton] and the Institute as to the way in which interest has been accounted for, as to the operation of certain client trust accounts and in respect of the manner in which accounting for professional fees was undertaken" (section [74]).
Just a short time before the conclusion of the High Court case, Paula Beaton resigned as director of BCA and sold off her shares in the company, with Glenn Kwok taking over as the new director and owner. Paula and Glenn swapped roles between "director" and "general manager". But because Glenn was not a member of the Institute of Chartered Accountants, "the change in shareholding deprived the Institute of any further jurisdiction in the matter" (sections [79] and [184]). "Correspondence during May 2005 between [Paula Beaton], BCA's new solicitors and the Institute firmly established BCA's future position: it was not prepared to cooperate in any way with the Institute's investigation and would not supply any further information or documents to that body" (section [80]).
The High Court case itself deals mainly with very procedural matters and in the end comes to the conclusion that the Institute of Chartered Accountants may investigate Paula's dealings further, but the company BCA is out of reach. Further details on the case were suppressed by the judge, because they related [at that time in 2005] "with matters currently before the Professional Conduct Committee of the Institute" (section [205]).

AGM 2015 Update

The financial statements for 1.4.14-30.9.15 were not released prior to the 2015 AGM. This made it impossible to have any meaningful discussion about them during the meeting. To perform any at least rudimentary checks on the accounts requires several calculations and comparisons. This is the reason, financial statements under Body Corporate legislation are required to be made available at least 2 weeks prior to an AGM. BCA and the Owners Committee were well aware of this, since the same issue was raised 2 years earlier and almost led to the re-scheduling of the 2013 AGM.
I e-mailed my protest against the lack of care by the AGM organisers in this matter ahead of the AGM. During the AGM, the relevant resolution, as formulated by the meeting chair, Paula Beaton, was to include my e-mail as part of the meeting minutes of the 2015 AGM.
Contrary to normal practice, no AGM meeting minutes were sent at all when the next levy was invoiced in February 2016. When the AGM 2015 meeting minutes were finally distributed with the AGM 2016 invitation in November 2016, my e-mail, which was supposedly part of it, had been removed.

AGM 2013 Update

If you have received our financial statements for 2013 and compare them with our financial statements received the year before, both sets of statements should normally match up correctly in their 2012 numbers.

Please look at the "Statement of Financial Position" under the column heading "30.9.12". The columns distributed at the 2012 AGM and 2013 AGM should be the same, but they are not! What this means is: what BCA Ltd tried to convince you that our financial position was on that day 30.9.12 has indeed changed at a later time, with no explanation given to you by BCA. You were not given the full Auditor's report, either (only 2 pages of it, without any numbers). The only place you find the true explanation is on this web page and the accompanying background material.

Similarly, if you look at the "Statement of Financial Performance" under the column heading "2011/2012", both the 2012 AGM and 2013 AGM versions of this column should match, but again they don't! Again, BCA hopes you don't look at the details and you don't ask critical questions, because you would uncover some dirty little secrets. Well, the dirty little secrets are exposed on this web page and the accompanying background file "cleanup2011.pdf".

I had to shut down this web site for a few days directly after the AGM, because during our 12.11.13 AGM, Glenn Kwok (BCA Ltd) threatened to sue me (the web site maintainer) for defamation and I no longer enjoy the legal protection of the office bearer liability insurance, which comes with membership of the Owners Committee. But now that I've checked the Defamation Act 1992, it's clear that speaking the truth cannot be constructed as defamation in any way. Good Luck, Glenn! You won't shut me up from speaking the truth!

Initial Posting of October 2013

When our financial statements for the period 1.10.10 - 31.01.11 were prepared by Body Corporate Administration Ltd., there were 3 (innocent) accounting errors. As a result of these errors, the numbers in our bank accounts and the numbers in our financial statements did not match. This mismatch is normally a signal to the accountant that there's something wrong and he needs to re-check the numbers. However, the BCA accountant chose not to bother with the additional work, but decided instead to invent a fantasy transaction that accounted for the discrepancy and added the fantasy transaction to "bank fees". With this cover-up, our financial statements looked plausible.

A few months later, when our financial statements for the period 1.10.10 - 30.06.11 were prepared, another 8 accounting errors were made. Again, not willing to make the necessary investigations and corrections, another fantasy transaction was created. Again, this was hidden under "bank fees".

At the end of the budget year, when the financial statements for the period 1.10.10 - 30.09.11 were prepared for our last Owners Committee meeting before the AGM, one more error was added. By this time, the accumulated errors were big enough that they could not plausibly be hidden under "bank fees" any more. Instead, the discrepancies were explained as 4 cheque payments that were supposedly sent out, but not yet cashed in (so-called "unpresented cheques"). Again, due to the deliberate nature of the manipulations, the numbers appeared to "add up" correctly.

Finally, during the last 2 weeks before the 2011 AGM, our financial statements for the same period 1.10.10 - 30.09.11 were changed once more and went through the audit process without the auditor noticing anything wrong.

In these last-minute changes, our total bank balance stayed the same and the sum of all changed incomes matched exactly up to the cent the sum of all changed expenses. It is highly unusual that the sum of two owner levies totaling $2,533.32 should exactly match the unrelated sum of a $2,238.23 water bill, a $200.00 cleaning products bill, a $78.30 phone bill and $16.79 in bank fees. Something looked very fishy here.

This is when I started asking for explanations and BCA did not reply. There were a few angry e-mail exchanges here and the affair dragged out to the end of the following budget year 2012. The key point to understand here is that it's not about small insignificant amounts. The $16.79 "bank fees" were a pure fabrication, as it turned out later (hint: all our bank fees are multiples of $0.10 or $0.25, so they could never add up to that number of cents). The systematic appearance of small "bank fees", which always matched the exact cent amount required to "balance our accounts", is indeed the proof that there was an organised attempt going on to hide other mistakes made. It turned out, the total amount of wrong transactions still covered up at the time our 2011 financial statements passed the audit was over $2,700.00.

To this day, Glenn Kwok (Director of BCA) has not acknowledged that what happened was "manipulation", but tried to downplay it as "only innocent mistakes". He also repeatedly said "no money had been lost" as a result of this, since BCA does not control our bank accounts and only records transactions as they happen. But the truth is, these mistakes do have financial consequences: some owners have been overcharged levies in 2011, while others have been undercharged.

Incorrectly accounted owner's levies were only gradually corrected during the 2012 budget year, but other spillovers of the past, like the aforementioned "unpresented cheques" persisted until the 2012 AGM. File "cleanup2011.pdf" (contained in archive "protected.zip" on the Privacy page) documents my lead role in pushing for this cleanup. I have always contributed constructively towards financial accountability, even if my comments were pointed and confronting at times. By 23.10.12 (a full week before the AGM), BCA had complete knowledge of the 2011 issues to finalise our accounts.

But they still chose to present you the accounts they knew to be wrong at the 1.11.12 AGM: BCA had not yet come to grips with correcting the 2011 issues. I maintain that BCA's last century manual processes are completely inadequate, because they lack a system to check basic accounting constraints. It took BCA a further 3 months to get everything corrected and audited. In February 2013, BCA mailed the 2 pages of the auditor's report to apartment owners, which say that the auditor found nothing wrong. But they conveniently left out the pages containing the numbers, to avoid having to admit that the version of accounts submitted for audit was quite different from the version of accounts presented to you at the AGM. It is exactly this kind of deception I find unacceptable and am determined to expose into clear daylight, as done through this web site.