An anonymised case study showing how poor documentation and weak reconciliation processes nearly led to the loss of a $100,000 term deposit, and how the issue was identified and resolved during on-boarding.
The hidden cost of poor records is not theoretical, it can have very real financial consequences. One of the most striking examples from my on-boarding work involved a Strata Company that almost lost a $100,000 term deposit, despite having annual audits completed every year by the off-boarding agency. The incident revealed how fragile compliance becomes when processes are unclear, documentation is disorganised, and knowledge is concentrated in one person.
During an on-boarding project several years ago, I received financial records from an off-boarding agency. At first glance, everything appeared normal. However, as I began reconciling the financial statements to the cash at bank transferred, something did not add up. The balances were lower than expected, and the supporting documents were inconsistent.
Upon querying with the off-boarding agency, the strata manager who previously handled the scheme had left the agency, and the remaining staff had no knowledge of the Strata Company’s historical financial position, including what funds were held, where they were kept, or how they were recorded. There was no suggestion of intentional wrongdoing, the issue was simply that no one knew the process, and the documentation was a mess.
As I audited the records and worked through the scattered documents one by one, I uncovered a bank statement showing a term deposit worth over $100,000. Astonishingly, this amount did not appear anywhere on the Strata Company’s financial statements at handover. The treasurer later remarked that they had never realised the funds were missing, as the term deposit had not appeared in the financial statements for many years.
What made the situation even more alarming was this:
If the on-boarding process had been rushed or taken at face value, this significant asset could have been permanently lost without anyone noticing.
This incident highlighted several systemic failures, all tied to poor documentation and weak processes.
The off-boarding agent used a property management system rather than strata-specific software. The system was not designed to handle strata trust accounting, levy management, or multi-fund structures required in strata. As a result, key financial information was either misclassified or not captured at all.
The off-boarding documents were dumped into a single folder with inconsistent naming conventions. There was no structure, no indexing, and no way to quickly identify what was missing. Critical records were buried among duplicates, outdated files, and irrelevant documents.
The only person who understood the processes had left the agency. No handover notes. No documented procedures. No continuity. The agency was effectively blind to its own obligations.
The financial statements did not reconcile to the bank accounts:
Without proper reconciliation, errors compound silently, and in this case, almost catastrophically. Individual lot positions can also be affected, leading to incorrect balances, misallocated funds, and disputes that could have been avoided with accurate, routine reconciliation.
Despite yearly audits, the missing term deposit went unnoticed.
This underscores a critical truth:
Audits can only verify what is presented. If documentation is incomplete or inaccurate, even an audit may not uncover the gaps.
Auditors rely on the records provided. If those records are flawed, the audit will reflect those flaws.
Through detailed investigation and a full reconciliation of the Strata Company’s financial position, I was able to identify the missing term deposit and ensure it was transferred correctly. The Strata Company recovered the full amount, but the incident could easily have gone the other way.
This case became a defining reminder of how fragile financial accuracy becomes when documentation is poor and processes are undocumented.
This example illustrates a broader theme, poor documentation is not just an administrative inconvenience, it is a financial and compliance risk.
When processes are unclear:
The $100,000 term deposit was not almost lost because someone acted maliciously. It was almost lost because the system relied on one person’s knowledge, unsupported software, and disorganised documentation.
This case reinforces several critical principles: