The one-minute guide
What it is: A periodic report your strata managing agent is required to produce under Section 55 of the Strata Schemes Management Act 2015 (NSW), summarising the functions they have exercised on the OC's behalf, together with the scheme's financial statements.
What it covers: Income and expenditure for each fund, fund balances, outstanding levies, upcoming budgeted items, and the agent's activity record.
When you get it: At minimum before every AGM. Some schemes receive it more frequently.
Why it matters: It is the primary financial accountability document between your strata manager and the Owners Corporation. Reading it helps you check your money is being managed as expected.
Key tip: The fund balance and the budget variance columns are the most important numbers on the page. Start there.
The Section 55 report lands in owners' inboxes before every AGM, and it is often one of the thickest documents in the meeting pack. Most owners flick past it. That is a mistake. This report is the closest thing strata has to a company's annual accounts: it shows where the money came from, where it went, and whether your scheme is in good financial health. This guide explains what the report contains, what each section means, and what warning signs to look for.
What is Section 55 and why does it exist?
Section 55 of the Strata Schemes Management Act 2015 (NSW) requires a strata managing agent who has been delegated functions of the Owners Corporation to keep records of how they have exercised those functions and to provide those records to the OC. In practice, this obligation has evolved to encompass a broader periodic report that includes the scheme's financial statements.
The purpose is straightforward: accountability. The OC delegates significant authority to its strata manager, including the power to pay invoices, collect levies, maintain accounts, and instruct contractors. Section 55 ensures the manager must account for everything they have done with that authority, and that the OC can review and scrutinise it.
A note on terminology
The term 'Section 55 report' is widely used in the strata industry to refer to the periodic financial report package that accompanies AGM papers. Strictly speaking, Section 55 of the Act requires the agent to record the exercise of their functions. The financial statements themselves are governed by Sections 92 to 95 of the Act. In practice, the two are bundled together into what everyone calls the 'Section 55 report' or 'strata manager's report'. This article uses that common usage throughout.
| Audience |
Relevance |
Why it matters |
| Lot owners |
Essential |
This report is your primary window into how scheme funds are being managed. Reading it before every AGM is strongly recommended. |
| Committee members |
Critical |
You are responsible for reviewing and approving financial management on behalf of all owners. You should review this report in detail before each meeting. |
| Strata managers |
Essential |
You prepare and present this report. Its accuracy and clarity reflect directly on your service quality. |
| Prospective buyers |
Very useful |
Reviewing recent Section 55 reports as part of a strata inspection gives you the clearest picture of a scheme's true financial health. |
| Tenants |
For information |
The report does not directly affect tenants but reflects whether the building is being maintained and funded adequately. |
TL;DR: The Section 55 report is the periodic financial accountability document your strata manager is required to produce. It shows how scheme funds are being managed and gives the OC the information it needs to govern effectively.
What the report contains
Section 55 report packages vary slightly between strata management software systems, but they consistently include the same core components. Here is what to expect and where to find each one.
1. Income and expenditure statement
This is the profit and loss statement of the strata scheme. It is usually produced separately for each fund: the administrative fund and the capital works fund. It shows all income received during the reporting period (primarily levy income, but also interest, insurance recoveries, and other receipts), all expenditure paid during the period itemised by category (insurance, cleaning, management fees, maintenance, legal, utilities, and so on), and the net surplus or deficit for the period. Most reports show two columns side by side: actual figures for the period, and budgeted figures. The gap between them is the budget variance — one of the most important things to check.
2. Balance sheet
The balance sheet shows the financial position of the scheme at a point in time: typically the last day of the reporting period. It shows assets (cash at bank, accounts receivable, prepaid expenses), liabilities (accounts payable, accrued expenses, GST payable), and net assets — the difference between assets and liabilities, which should broadly equal the fund balances.
3. Fund balance summary
This is often presented separately and shows the current balance of the administrative fund and the capital works fund. It is one of the simplest and most important numbers in the entire report. A positive and growing capital works fund balance indicates the scheme is building adequate reserves. A low or declining balance is a warning sign.
4. Levy arrears schedule
This lists all outstanding levy amounts owed by lot owners, usually broken down by lot number and showing the age of the debt. It will show you which lots are in arrears and by how much, how long debts have been outstanding, and whether recovery action has been initiated. A small number of lots in arrears is normal. A large number, or debts outstanding for many months without recovery action, warrants a question at the AGM.
5. Budget comparison
This compares actual income and expenditure for the year against the budget approved at the previous AGM. It answers the question: did we spend what we said we would? Significant variances in either direction deserve explanation, either in the report itself or from the strata manager at the meeting.
6. Strata manager's activity record
This is the Section 55 component in its strictest sense: a record of the functions the strata manager has exercised on behalf of the OC during the reporting period. It typically summarises correspondence, maintenance orders, insurance transactions, legal matters, compliance tasks, and committee resolutions actioned. It is less scrutinised than the financial sections, but it provides a useful record of what the manager has actually done.
7. Bank statements and supporting records
The report is usually accompanied by, or links to, bank statements for the scheme's accounts. These confirm that the fund balances shown in the financial statements match the actual cash held in the bank. Any unexplained discrepancy between the reported fund balance and the bank statement balance is a serious red flag.
TL;DR: The Section 55 report contains the income and expenditure statement, balance sheet, fund balances, levy arrears schedule, budget comparison, the manager's activity record, and supporting bank statements.
How to read the report: a section-by-section guide
Here is a field-by-field guide to the most important items in the report and what to check in each one.
| Line item / section |
What it means and what to look for |
| Opening fund balance |
The cash balance of each fund at the start of the reporting period. This should match the closing balance from the previous period's report. If it does not, ask why. |
| Levy income (actual vs budget) |
The total levies collected during the period. Compare to the budget. A shortfall usually means levy arrears are higher than expected. A surplus may mean a special levy was collected. |
| Interest income |
Interest earned on fund balances held in savings or term deposit accounts. If the scheme has substantial cash balances but earns no interest, ask whether the funds are placed optimally. |
| Insurance (actual vs budget) |
One of the largest single expenses for most schemes. A variance above budget usually means the renewal premium increased. Check the insurance renewal paperwork if the jump is significant. |
| Management fees (actual vs budget) |
Your strata manager's fees. These should match the contracted amount. An unexpected variance should be queried. |
| Maintenance and repairs |
Expenditure on common property maintenance. Large items should be cross-referenced with committee minutes or work orders to confirm they were properly authorised. |
| Legal and compliance costs |
Includes NCAT applications, debt recovery, by-law enforcement, and professional advice. Consistent or growing legal costs may indicate an underlying dispute or governance problem worth investigating. |
| Closing fund balance |
The cash balance at the end of the period. For the administrative fund, this should be a modest positive amount. For the capital works fund, it should be building over time in line with the 10-year plan. |
| Capital works fund balance |
The most critical number for long-term scheme health. Compare it to the capital works fund plan projections. If it is significantly below plan, a special levy or levy increase may be coming. |
| Accounts receivable (levy arrears) |
Money owed to the scheme by owners who have not paid their levies. A high figure relative to total levy income means a meaningful proportion of owners are in arrears. Check the arrears schedule for detail. |
| Accounts payable |
Money the scheme owes to suppliers for work completed but not yet paid. A large figure may indicate cash flow pressure or slow payment. |
| Budget variance |
The difference between actual and budgeted figures. Variances of more than 10–15% in any major category deserve an explanation. Ask the strata manager at the AGM. |
| GST position |
Most strata schemes are registered for GST. The report should show GST collected and paid. The net GST position should be reconciled with the BAS lodged with the ATO. |
TL;DR: The most important numbers to check are the capital works fund balance (vs the plan), the levy arrears figure, the administrative fund closing balance, and any budget variances above 15% in major categories.
Red flags to watch for
Most Section 55 reports are straightforward and require no alarm. But certain patterns, when they appear, deserve immediate attention. Here are the most important warning signs.
Capital works fund significantly below plan
Compare the closing capital works fund balance to the 10-year capital works fund plan. If the fund is materially below where it should be at this point in the plan, the scheme is underprovisioned for future works. This typically results in either a levy increase or a special levy down the track. A deficit of more than 20% below plan is worth raising at the AGM.
Large or growing levy arrears
A high level of unpaid levies has two consequences: it reduces the scheme's available cash, and it means compliant owners are effectively subsidising those who are not paying. If the arrears schedule shows multiple lots in arrears for more than 90 days without evidence of recovery action, ask the strata manager what steps are being taken.
Unbudgeted major expenditure without explanation
Large maintenance or legal costs that were not in the budget, and are not explained in the report or the meeting agenda, should prompt a question. Was the work authorised by the committee? Were quotes obtained? Was the expenditure within the committee's delegated authority limit, or did it require a general meeting resolution?
Fund balance not matching bank statement
The closing balance on the income and expenditure statement should reconcile with the bank statement for the same date. If the numbers do not match and no explanation is provided, this is a serious issue requiring immediate clarification.
Consistently low administrative fund closing balance
The administrative fund should maintain a modest positive balance throughout the year, not go close to zero or into deficit. A scheme that regularly runs the administrative fund very low is living hand-to-mouth and is vulnerable to any unexpected expense triggering a cash shortfall.
Significant year-on-year insurance increase without explanation
Insurance premiums have risen sharply across the strata sector in recent years, so some increase is expected. However, a jump of more than 15–20% year on year deserves scrutiny. Check that the building has been revalued recently, that claims history is not driving the increase, and that the broker sought competitive quotes.
If you find something that concerns you
Do not wait until the AGM to raise a concern that appears serious, such as a fund balance that does not reconcile with the bank statement, or evidence of unauthorised expenditure. Contact your strata manager in writing before the meeting to ask for an explanation. If the response is unsatisfactory, you can raise it formally as a matter of business at the AGM, request that it be recorded in the minutes, or seek advice from NSW Fair Trading.
TL;DR: The five most important red flags are: a capital works fund below plan, large or growing arrears, unexplained major expenditure, a fund balance that does not match the bank statement, and a chronically low administrative fund balance.
Questions to ask at the AGM
The AGM is your formal opportunity to ask the strata manager to explain the financial statements. Here are practical questions that draw on specific parts of the report.
About the capital works fund
- How does our current capital works fund balance compare to the 10-year plan projection for this year?
- Are there any major works anticipated in the next two to three years that the fund may not be sufficient to cover?
- When was the capital works fund plan last reviewed, and does it account for current construction cost levels?
About levy arrears
- Which lots are in arrears? What recovery action has been taken, and what is the expected timeline for resolution?
- Are any arrears being disputed, and has legal advice been sought?
About budget variances
- The maintenance expenditure was [X]% over budget. Can you explain what drove this and whether it was properly authorised?
- Insurance came in above budget. Were competitive quotes obtained at renewal, and has the building been revalued?
About the administrative fund balance
- The administrative fund closed the year with [amount] in the account. Is this considered adequate, and what is the expected position after the next major invoice cycle?
About the agent's activity record
- I noticed [specific item] in the activity record. Can you provide more detail on how that was handled and what the outcome was?
Prepare your questions before the meeting
Read the Section 55 report before the AGM, not during it. The meeting is not the right time to read the document for the first time. Review it in advance, note your questions, and if anything appears materially concerning, email your strata manager a few days before the AGM to ask for a written explanation. This gives them time to prepare a proper response and ensures a more productive meeting.
TL;DR: Come to the AGM with specific, number-based questions drawn from the report. The most valuable questions relate to the capital works fund position, levy arrears recovery, and any budget variances above 15%.
Accessing your financial reports through the Netstrata portal
Netstrata clients do not have to wait for an AGM to see their scheme's financial position. Netstrata has made significant investments in its Owners Portal to give owners direct, real-time access to their scheme's financial records.
Netstrata Owners Portal
The Netstrata Owners Portal provides owners with drill-down access to every invoice associated with their scheme. This means you can view the actual invoices behind any line item in the income and expenditure statement, not just the total figure. This level of transparency is an industry first in Australian strata management.
Through the portal and the Netstrata Space app you can access current and historical Section 55 reports and financial statements, individual invoices for every expense item, your levy account balance and payment history, AGM papers including budgets and capital works fund plans, and bank reconciliation records. This means you can review your scheme's finances at any time during the year, not just when the AGM package arrives.
TL;DR: Netstrata owners can access their scheme's full financial records, including individual invoices, through the Owners Portal at any time. You do not need to wait for the AGM to review the financial position of your scheme.
Frequently asked questions
How often must the Section 55 report be provided?
Under Section 55 of the Act, the report must be provided to the OC at the times specified in the management agency agreement. In practice, it is produced at minimum before each AGM. Many strata managers provide it quarterly or half-yearly, particularly for larger schemes. Your management agreement should specify the frequency. If it does not, or if you are not receiving it at the contracted frequency, raise this with your strata manager.
Can I request the report at any time, or only at the AGM?
Yes. Under Section 182 of the Act, any owner is entitled to inspect the financial records of the scheme. You can request access to the books and records from your strata manager at any time. There may be a fee for producing copies of some documents, as set out in the management agency agreement. Netstrata clients can access financial records directly through the Owners Portal without needing to make a formal request.
The report shows a large amount spent on maintenance. How do I know it was all legitimate?
Cross-reference large maintenance items with the committee meeting minutes, which should record when works were authorised and by whom. Under the management agency agreement, the committee has a delegated spending limit, beyond which a general meeting resolution is required. If a large expenditure does not appear in the minutes, ask the strata manager to produce the work order, quotes, and the authorisation. Netstrata owners can view individual invoices directly through the Owners Portal.
Our scheme's auditor signed off on the accounts. Does that mean everything is fine?
An audit provides reasonable assurance that the financial statements are free from material misstatement and comply with the relevant accounting standards. For large schemes or those with annual budgets above $250,000, an audit is mandatory under Section 95 of the Act. However, an audit is not a guarantee against all problems: it looks at whether the numbers are correctly presented, not necessarily whether every spending decision was wise or well-governed. Reading the report yourself remains important.
What is the difference between the administrative fund surplus and the capital works fund balance?
The administrative fund surplus is the amount remaining in the day-to-day operating fund after all annual income and expenditure are accounted for. It should be a modest positive amount that carries forward to the next year. The capital works fund balance is the accumulated savings specifically set aside for major future works. It is built up over many years and is expected to be much larger. The two serve entirely different purposes and should be read separately.
I found an invoice I do not recognise. What should I do?
Make a note of the invoice number, date, supplier, and amount, and ask your strata manager to explain what it was for and who authorised it. If the explanation is satisfactory, the matter is resolved. If it is not, or if the invoice cannot be traced to an authorisation, escalate to the committee and, if necessary, to NSW Fair Trading. Netstrata clients can view the underlying invoice directly through the Owners Portal.
TL;DR: You have a right to access your scheme's financial records at any time. If something in the report does not make sense, ask for the underlying documentation. An audit is useful assurance but does not replace your own scrutiny of the report.
Important
This article provides a general overview of the Section 55 report and how to read it, based on NSW strata legislation and common strata management practice as at the date of publication. The specific format and content of your scheme's reports may vary depending on your strata management software and the terms of your management agency agreement. For advice specific to your scheme's financial position, consult your strata manager or a licensed strata professional. Relevant legislation: Strata Schemes Management Act 2015 (NSW), Section 55 (strata managing agent to record exercise of functions), Sections 92–95 (financial statements and auditing), Section 182 (inspection of records).
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