In the last year, the team at SAAS Audit have noted an increase in cases where the Queensland Building and Construction Commission have notified licensed contractors that they will be subject to a compliance audit. Failure to respond to a QBCC audit request can result in cancellation of a contractor’s licence.
If a licence is suspended or cancelled, a contractor must cease any building work and can’t provide quotes or tenders for building work or sign a building contract.
If a licence is suspended or cancelled, a contractor must cease any building work and can’t provide quotes or tenders for building work or sign a building contract.
New Regulatory Regime Encourages Complacency
The current Minimum Financial Requirements (MFR) Policy commenced in 2014. A key change from the old MFR was that licensed contractors were no longer required to provide financial information on a yearly basis as part of the renewal of their licence.
There is no doubt that the QBCC’s objective of reducing the cost of maintaining a licence would have been achieved in most cases. There is, however, a significant risk that contractors will see the annual renewal as a box-ticking exercise and focus on compliance with the MFR will be lost.
QBCC Compliance Audits – What to Expect
QBCC Audit notices we have seen are in writing and advise the licenced contractor that the QBCC has reasonable grounds for concern that the contractor does not satisfy the MFR. Contractors have only 21 days to provide all relevant information which includes the following:
- MFR report & financial statements
- A copy of the QBCC review control sheet prepared by the independent accountant conducting the review together with all other documentation prepared when conducting the review
- Specific supporting documentation such as aged debtors, creditors, bank statements, work in progress workings, ATO portal statements, credit facilities, loan agreements & information on legal claims
When information lodged has been assessed by the QBCC they will contact the party who lodged the information and the licensee with either an outcome or a request for further information. At SAAS Audit we have had a good recent track record with the QBCC, even in cases where it was evident that contractors may not have historically complied with the MFR.
Risks for Independent Reviewers
QBCC Audit notices also include a warning for accountants signing the MFR reports. We are reminded that “it is an offence for an accountant or any other person to provide QBCC with information that is false or misleading in circumstances where the person providing the financial information has not taken reasonable steps to ensure the information was not false and misleading”. The maximum penalty for getting this wrong is $11,385 or two years imprisonment.Given that QBCC will essentially be provided with the reviewer’s work papers during an audit it is therefore essential that adequate procedures are undertaken and documented. Accountants should ensure that the relevant standards on such engagements, being ASRE 2400 Review of a Financial Report Performed by an Assurance Practitioner Who is Not the Auditor of the Entity and ASAE 3100 Compliance Engagements, are complied with.
Advice to QBCC Licensed Contractors & Accountants
There are some simple steps that contractors and their accountants can take to minimise the risks associated with a QBCC audit:
- Accountants with QBCC licensed clients should read and understand the MFR and ensure their client is also aware of the regulations and the consequences of non-compliance.
- Clients should ensure that quality internal management accounts are prepared at quarterly intervals as a minimum.
- The client's Net Tangible Assets (NTA) position and current asset ratio should be documented and considered each quarter with reference to revenue requirements and the existing NTA declaration provided to QBCC.
- QBCC Licensed Contractors should ensure that an independent examiner submitting a review report to QBCC has adequate experience of conducting such reviews. Accountants conducting reviews need to follow the relevant standards on review engagements.
- Start the review process quickly if contacted by the QBCC. This will allow adequate time for a review to be undertaken and the collection of information to submit to QBCC.
Please note - the above article is general in nature, it was written without taking into account any individual contractor’s situation or needs, and is not intended as professional advice.
