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Typical Issues Arising from Rent Audits
By
Kastuv Ray
Introduction
Internal Audit departments within Local Government examine the controls in place for the rent debit system every year as this system is integral to the functioning of the organisation.
Risks
Risks identified during the audit planning stage may be the following: -
· Inequitable methods of calculating rent may lead to failure to comply with legislation
· Poor collection procedures may lead to loss of income
· Poor management information may lead to incorrect decisions being made
Issues
The issues that arise are sometimes totally different to the risks identified. Listed below are some issues that may be identified during these types of audits: -
· No formal policies for rent calculation and collection
· Holding of unallocated in suspense accounts for indefinite lengths of time
· A failure to authorise control accounts reconciliations by senior officers
· Identification of persistently late payers
· Failure to set up proper performance indicators
· A reluctance to write off former tenant arrears
· No reconciliation of properties between the different databases
Action to Be Taken
Management need to take the following corrective action to deal with issues identified above: -
· Create a policy for setting up of rents (which includes a view on rent arrears, i.e. to keep them low) and to dictate a method for dealing with late payers.
· Produce a policy detailing the time limit for holding unallocated/misposted income on the suspense account.
· Ensure that there is evidenced authorisation of control account reconciliations by a senior officer within the function.
· Maintain a list of persistently late payers. Management could also consider installing software, which could identify when tenants defaulted on payments.
· Performance indicators should be created such as the current level of tenant arrears compared with the previous 2 years (across all the offices covering rent) and a comparison made to the whole authority. This should then be benchmarked to other local authorities.
· Former tenant arrears should be written off say, after 7 years (after failure to find the individual and secure the payment). Management should make use of tracing agencies wherever possible.
· An annual reconciliation should be undertaken between properties on the accounting and housing database.
Conclusion
Listed above are only some examples of issues that occur and the list is by no means exhaustive. The issues that arise depend on the robustness of the system and this article is only meant to provide some examples of issues.
