The Cost of Weak Controls: Why Strata Accounting Discipline Matters 

Recent reporting on a major governance failure at a Coquitlam strata — including allegations of a “rigged election,” inappropriate reimbursements, chronically underfunded repairs, deficits, and drained accounts — highlights a very real risk that most strata corporations never confront, yet one that underlies the entire financial framework of British Columbia’s strata system. Those risks are not hypothetical; they are real, they are costly, and they are preventable.

In British Columbia, more than 26,000 strata corporations collectively hold billions of dollars in operating funds, contingency reserves, and special levies in trust accounts — assets entrusted to volunteer councils and licensed managers and representing one of the largest pools of privately governed funds in the province. These sums and numbers dwarf even the largest of municipalities, with their vast bureaucracies and career politician electees. 

This vast pool of funds represents not owner discretion but owner trust — and when systems of oversight break down, the opportunity for financial loss grows in exactly the ways we are now seeing in the media. 

Why Accounting Controls Exist: To Prevent Misuse, Mismanagement, and Fraud 

At its core, the licensing regime for strata property managers in BC — including trust accounting requirements and annual audits — exists because of precisely the type of risk illustrated by these stories.  The pre-licensing period was rife with reports of financial mismanagement – fortunately, licensing has vastly improved the situation. 

Strong controls are designed to defend against: 

• Unauthorized reimbursements, particularly when the approver is also the payee. 

• Uncontrolled access to restricted funds, such as contingency reserve or special levy funds. 

• Insufficient documentation or approvals for major expenditures. 

• Poor segregation of responsibilities where one individual holds too much authority in isolation (for example, a Council member who does not include others in direction to management). 

These are not just theoretical risks. Weaknesses here enable real losses because they remove objective checks on human judgment — whether from ignorance, oversight, or, in rare cases, intentional misconduct. Fortunately, the latter is exceedingly rare. 

The Stakes Are High: Billions in Strata Funds At Risk 

Contingency reserve funds, operating accounts, and special levies are not chump change. Every strata corporation is required to collect and hold funds for ongoing operating costs and future repairs. Many strata now hold significant reserve funds informed by depreciation reports and major remediation work schedules — sometimes representing hundreds of thousands, or even millions, of dollars per corporation.  These funds have skyrocketed in recent years, as buildings have become more complex and the long-term capital funding needs have become more clear to owners.

Multiply that by the thousands of strata corporations across BC and you’re looking at a financial ecosystem measured in the billions of dollars. These funds are not sitting in a ledger; they are physically held in trust accounts, invested under provincial guidelines, and earmarked for critical building repairs, insurance deductibles, emergency work, and long-term capital plans.  

Because the Real Estate Services Regulation’s trust protection (through the Special Compensation Fund) only covers up to $100,000 per strata corporation claim, the exposure between actual funds in trust and insurance coverage is enormous.  

 What Strong Accounting Controls Look Like 

Strong accounting control systems are designed to minimize the risk of loss or error, not just comply with minimum requirements: 

• Clear written authorizations for any expenditure from restricted funds, with documented council approval. 

• Segregation of duties — particularly for reimbursements — so that the approver is not also the recipient of funds. 

• Double-signatures from management, dual-approval workflows, and documented audit trails for all releases from trust accounts. 

• Routine audit-ready and timely financials, prepared consistently and transparently, so that irregularities cannot hide in the noise. We’re especially proud of this point at our firm, where financial statements are almost always completed within a month of the reporting period.  We know this to be increasingly rare in our industry.

• Comprehensive documentation retention, ensuring that every transaction has an observable “paper trail.” 

When these controls are consistently applied, they don’t just reduce risk — they materially deter attempts at misuse because the barriers to unauthorized access are high and well-defined. 

The Extra Work Is Real — and Worth It 

Implementing and maintaining strong internal controls is not free — it requires diligence, time, training, and operational discipline. It means: 

• Turning down incomplete or verbal authorizations. 

• Delaying reimbursements until paperwork is in order. 

• Requiring council resolutions in writing or minutes for project disbursements. 

• Training volunteers and staff on best practices and compliance standards. 

• Preparing for external audits that verify not just numbers, but compliance with processes. 

This additional work is real — it costs money and sometimes causes friction. Council members may chafe at documentation requirements. Vendors may want faster payments. But this friction is not a flaw — it is a feature of a system designed to protect owners’ money, not accelerate convenience. In other words, this is a feature and not a bug- we are proud to have such strong internal controls even though they can sometimes create additional work for us, vendors and our clients.  This ensures your funds are safe-guarded to an exceedingly high degree.

 Safeguards Are Protection — Not Red Tape 

The policies that require documented approval, dual signatures, and structured release of funds exist for a reason. They are not bureaucracy for its own sake; they are defenses against loss, whether by accident or deliberate misuse. 

When accounting controls are weak or absent: 

• Funds can be moved without proper oversight. 

• Reimbursements can be authorized by the same person receiving payment. 

• Special levy or reserve funds meant for long-term repairs can be spent without adequate council authorization. 

• Errors and irregularities may go undetected until it’s too late. 

Conversely, when robust controls are in place, strata corporations are protected — and that protection delivers peace of mind to owners and councils alike. 

Strong Controls Protect Owners, Not Just Numbers 

The recent headlines from Coquitlam serve as a stark reminder that financial mismanagement is not an abstract concern but a governance failure with real consequences. The broader strata community — councils, managers, and owners — should take these stories not as anomalies, but as warnings of how much is at stake when controls falter. 

In British Columbia, the volume of funds entrusted to strata corporations is massive — and without robust accounting discipline, there is a vast opportunity for losses that could be devastating for owners. 

At Stratawest, we are sometimes told by vendors and strata council members coming from other firms that our level of control over your money is too great – usually because they are looking for immediate payment, not because they are trying to sneak in an invalid expense.  We view this as one of our core strengths, as evidenced by our absolutely stellar track record with the annual trust account audits we’re required to conduct by our regulators.  Indeed, we’ll happily stack our track record in that regard up against any of our competitors.  We view it as a core part of our success that our financial statements are timely, accurate, error free and disclose all material information to our clients and ensure that our controls reflect those goals. 

We are happy to work individually with any client who wishes to relax those controls – we’ll explain why they are in place in the first place, and the risks associated in reducing them.  What we will not do is accept instruction from a single council member, as highlighted in the current media cases, as instruction on behalf of an entire group of homeowners who have placed their trust in their elected council and us. 

Strong controls, diligent oversight, and consistent documentation are not optional. They are the bulwark that preserves owner trust, prevents fraud, and ensures that strata corporations remain financially healthy and transparent.