Under the Building Maintenance and Strata Management Act 2004, a management corporation must have its accounts audited annually by a public accountant and present them to subsidiary proprietors at the AGM. Strata title plans with 4 or fewer lots are exempt, and plans with 5 to 10 lots may resolve by consensus to have a subsidiary proprietor audit the accounts instead of a public accountant. The auditor must be independent of both the council and the managing agent.
An MCST audit is not a company audit with a different label. The governing law is different, the accounts are structured differently, and the people relying on the report are subsidiary proprietors rather than shareholders. Councils that treat it as a formality tend to discover the difference at the AGM, when someone asks why the sinking fund balance moved. This article sets out what the BMSMA actually requires and what the auditor will test.
What is an MCST audit?
An MCST, or Management Corporation Strata Title, is the body corporate created when a strata development is completed. It collects contributions from subsidiary proprietors, maintains common property, and holds funds on their behalf. An MCST audit is the annual independent examination of those accounts, culminating in an auditor’s report presented to subsidiary proprietors at the annual general meeting.
The purpose is straightforward. Money collected from owners is being spent by a council of volunteers, often with a managing agent handling the day-to-day administration. The audit is the mechanism by which owners get independent confirmation that the money is accounted for.
The legal basis: what the BMSMA requires
The requirement sits in the Building Maintenance and Strata Management Act 2004 and the subsidiary legislation made under it, including the Building Maintenance and Strata Management (Strata Management Accounts Exemption) Order 2005. In practical terms the Act requires a management corporation to keep proper books and accounts, to have those accounts audited, and to present the audited accounts to subsidiary proprietors.
Two features distinguish this from a Companies Act audit. The Commissioner of Buildings, not ACRA, is the regulator with oversight of compliance. And the audit obligation attaches to the management corporation itself, regardless of the size of the development’s budget, subject only to the lot-count exemptions below.
Which MCSTs are exempt from audit
The Strata Management Accounts Exemption Order 2005 creates relief for very small developments:
| Number of lots in the strata title plan | Audit position |
| 4 or fewer lots | Exempt from the audit requirement |
| 4 or fewer subsidiary proprietors for the whole financial year | Exempt from the audit requirement, though other accounting obligations remain |
| At least 5 but not more than 10 lots | May resolve by consensus that the books and accounts for that financial year be audited by one of its subsidiary proprietors instead of a public accountant |
| More than 10 lots | Audit by a public accountant required |
Note the shape of the middle tier. It is not an exemption from audit; it is permission to use a different auditor. The consensus must be reached for that financial year, so it is not a standing decision, and a single objection puts the MCST back to requiring a public accountant. Councils of small developments should record the resolution properly in the minutes, because the absence of a recorded consensus is what the Commissioner would look for.
Every other management corporation, which in practice means almost every condominium, mixed-use development and strata-titled industrial estate in Singapore, requires an audit by a public accountant every financial year.
Who can audit an MCST
The auditor must be a public accountant registered with ACRA, and must be independent of the parties whose stewardship is being examined. That rules out:
- Any employee or partner of the managing agent
- A member of the council of the management corporation
- Anyone preparing the MCST’s books and accounts during the year
- A person with a financial interest in a major contractor to the development
The independence point is the one that causes real trouble. Where a managing agent proposes the auditor as part of a bundled service, the council should confirm the auditor has no relationship with the agent.
The audit is, among other things, a check on the agent’s handling of owners’ money, and an auditor supplied by the agent is not in a position to perform it. Councils replacing a bundled arrangement should appoint a firm offering audit services independent of the managing agent.
The two funds: what the auditor is actually testing
An MCST’s accounts are not a single pot. The BMSMA requires the management corporation to maintain a management fund and a sinking fund, and the auditor tests both, including whether money has moved appropriately between them.
| Fund | What it pays for | What the auditor focuses on |
| Management fund | Recurrent operating costs: cleaning, security, utilities, minor repairs, insurance, managing agent fees | Whether contributions billed agree to the approved budget and share values, and whether expenditure is properly supported |
| Sinking fund | Capital and cyclical works: repainting, lift replacement, waterproofing, major plant renewal | Whether transfers in and out are authorised, and whether spending from the fund is genuinely capital in nature |
Beyond fund separation, the recurring areas of audit attention are contributions receivable and arrears, because these are the largest asset and the most disputed figure at any AGM; the completeness of interest charged on late contributions; the authorisation of expenditure against the limits in the by-laws and the Act; insurance coverage for the common property; and GST, where the MCST is registered.
The AGM timetable, and the 14-day rule
The audit is not an end in itself. It exists to give subsidiary proprietors something to read before they vote. The audited accounts must be prepared and circulated to subsidiary proprietors ahead of the AGM, and the practical rule councils work to is at least 14 days before the meeting.
Working backwards from that produces the timetable that actually governs an MCST audit:
- Financial year end: managing agent closes the books and reconciles contributions receivable
- Weeks 1 to 3 after year end: records handed to the auditor, fieldwork begins
- Weeks 4 to 6: audit queries resolved, draft accounts reviewed by the council
- At least 14 days before the AGM: audited accounts circulated with the notice of meeting
- AGM: accounts presented, auditor appointed for the following financial year
The AGM is also where the auditor for the next financial year is appointed. Councils that leave the appointment to the AGM and then start the audit months later are the ones that end up circulating accounts late.
What councils and managing agents should have ready
- Trial balance and general ledger for both the management fund and the sinking fund
- Bank statements and reconciliations for all MCST accounts, including fixed deposits
- Contributions register showing amounts billed, collected and outstanding by lot
- The approved budget for the year and the AGM minutes approving it
- Council and general meeting minutes for the full financial year
- Contracts with the managing agent and major service providers
- Insurance policies covering the common property
- Supporting invoices for sinking fund expenditure, with evidence of the approval obtained
- GST returns, if the management corporation is GST registered
The item that most often delays an MCST audit is the contributions register. If arrears by lot cannot be reconciled to the ledger, the audit stops until it can, and no council wants that conversation appearing in the AGM papers.
How the MCST audit differs from a company audit
If your council members also run businesses, they will bring company audit expectations to this engagement, and several of them do not transfer.
| Company statutory audit | MCST audit | |
| Governing law | Companies Act 1967 | Building Maintenance and Strata Management Act 2004 |
| Regulator | ACRA | Commissioner of Buildings |
| Who receives the report | Shareholders | Subsidiary proprietors |
| Size exemption | Small company criteria under the Companies Act | Lot-count exemptions under the 2005 Order |
| Accounts structure | One set of financial statements | Separate management fund and sinking fund |
In particular, the small company audit exemption that removes the statutory audit obligation for many private companies has no application to an MCST. The thresholds and the exemptions are entirely different regimes. For the company-side rules, see /blog/when-is-audit-required-singapore/.
Frequently asked questions
Is an MCST audit compulsory in Singapore?
Yes, in almost all cases. Under the BMSMA a management corporation must have its accounts audited annually by a public accountant, unless the strata title plan has 4 or fewer lots, or has 4 or fewer subsidiary proprietors for the whole financial year, or has 5 to 10 lots and resolves by consensus to have a subsidiary proprietor audit the accounts instead.
Who can audit an MCST?
A public accountant registered with ACRA who is independent of the council and of the managing agent. An employee or partner of the managing agent cannot audit the MCST, because the audit is partly a check on the agent’s handling of owners’ money.
Can a subsidiary proprietor audit the accounts?
Only where the strata title plan has at least 5 but not more than 10 lots, and only if the management corporation approves it by consensus for that financial year. The resolution should be recorded in the minutes.
What is the difference between the management fund and the sinking fund?
The management fund covers recurrent operating costs such as cleaning, security, utilities and insurance. The sinking fund covers capital and cyclical works such as repainting, lift replacement and waterproofing. The auditor tests both, including whether transfers between them were authorised.
When must audited MCST accounts be circulated?
Before the annual general meeting, with councils generally working to at least 14 days ahead of the meeting so that subsidiary proprietors can read them with the notice of meeting.
Does small company audit exemption apply to an MCST?
No. That exemption sits in the Companies Act and applies to companies. An MCST’s audit obligation comes from the BMSMA, and the only relief is the lot-count exemption in the 2005 Order.
What does the MCST auditor look at most closely?
Contributions receivable and arrears by lot, the separation of the management and sinking funds, authorisation of expenditure against the approved budget and the by-laws, insurance of the common property, and GST where the MCST is registered.
Who appoints the MCST auditor?
The management corporation appoints the auditor at its annual general meeting for the following financial year.
Need an independent auditor for your management corporation?
AG is independent of managing agents. See AG’s audit services in Singapore to discuss your development’s timetable.
