Unidentified Funds: An Issue Often Overlooked in Strata Trust Accounting

In strata management, every operational decision eventually becomes a financial transaction. Knowing exactly where money comes from and who it belongs to is fundamental to accurate allocation, regulatory compliance, and transparent, audit-ready trust accounting.

But what happens when money appears in the trust account with no clear owner, no usable reference, and no reliable way to trace it?

These are unidentified funds, and while they may appear minor at first glance, they can quickly create compliance, operational, and audit risks if not managed correctly.

Most Common Causes of Unidentified Funds

In practice, unidentified receipts typically arise from a small number of recurring issues:

• Incomplete or incorrect BPAY CRN references
• Third-party payments with no identifying lot or owner details
• Settlement agent receipts left as credits instead of being transferred to the correct lot
• Legacy data issues during system migrations or agency transitions

Left unresolved, these amounts accumulate and obscure the true financial position of the trust account.

How to Manage Unidentified Funds Effectively

At Veritas, we recommend a structured, methodical approach that prioritises accuracy and traceability:

1. Daily monitoring of trust account transactions
2. Clear internal workflows for investigation and follow-up
3. Consistent communication with owners, settlement agents, and stakeholders
4. Audit-ready documentation of all investigative steps

With the right systems and discipline in place, unidentified funds stop being a recurring frustration and instead become an opportunity to strengthen financial integrity and client confidence.

Owners genuinely notice this level of diligence.

What This Really Highlights

Handled correctly, unidentified funds are not just an administrative problem, they are a signal.

Each unidentified receipt highlights potential gaps in:

• Communication
• Payment instructions
• Billing templates
• Internal workflows
• System configuration

By resolving both the transaction and its root cause, strata managers improve the reliability of their financial processes and reduce future risk.

The outcome is clear:

• Correct balances
• Timely allocations
• Fewer errors
• Clear, confident communication

All of which builds trust.

What If the Funds Remain Unresolved?

A common question we encounter is what should happen when unidentified funds cannot be resolved within a reasonable timeframe.

Can They Be Treated as Miscellaneous Income?

No. Doing so is neither fair nor compliant.

Unidentified funds belong to someone. Until the rightful owner is confirmed, the money cannot ethically or legally be treated as income of the Strata Company.

Misallocating unidentified funds can:

1. Distort the Strata Company’s financial position
   Financial reports lose accuracy and reliability, creating risk for both managers and auditors.
2. Benefit the wrong party
   Incorrect allocation may unfairly advantage one owner over another.
3. Undermine transparency and owner confidence
   Trust accounting relies on clarity, openness, and precision.
4. Create audit and reconciliation issues
   Misclassification leads to avoidable audit queries and compliance findings.
5. Deprive an owner of their rightful credit
   Legitimate payments may never be recognised correctly.

Compliance Implications

Improper handling of unidentified funds can result in:

• Breach of the Strata Titles Act (WA) trust money obligations
• Breach of fundamental trust accounting principles
• Breach of audit and financial reporting standards
• Breach of fiduciary duty owed by the Strata Manager

For these reasons, unidentified funds should remain in a clearly designated suspense or holding account until ownership is confirmed and allocation can be completed accurately.

Additional Compliant Resolution Options

In some cases, returning the funds is the most appropriate outcome.

Based on practical experience, banks such as Macquarie may process a return of funds where sufficient supporting information is provided, including:

• Trust account name and number
• Transaction date
• Amount in question
• Supporting bank statements

Where the rightful owner still cannot be identified, a compliant and transparent alternative is to lodge the funds as unclaimed money with the Department of Treasury.