January 1, 2002

5 Min Read
Preparing for Audit or Inspection

It's the time of year when your owner or supervisor is expected to conduct his annual audit and inspection of your facility. Audits and inspections are a normal and necessary part of operating any business. Facility managers often are intimidated by these procedures; but they shouldn't be. They simply need to be well-organized and prepared.

How can you be prepared for a scheduled or unannounced audit and inspection at your facility? What is expected of you? What might these procedures entail?

There are several areas most audits will address. Your auditors will want to look at your daily-transaction logs, move-ins and move-outs, auction files and files for units currently in lien status. They will inspect the grounds of the facility, looking for security and maintenance issues, and examining vacant and overlocked units, as well as all interior hallways, stairwells, etc. After the inspection, auditors will compile their findings and compose a written report, which is usually given to the owner or supervisor. You may or may not receive a copy of this report; however, the findings of the audit are usually discussed with the manager so he can see what he is doing right and which areas might need improvement.

Daily Records

Assuming your office functions are automated, you should have all daily computer reports well-organized in binders or folders for each month. Have these readily available for your supervisor or owner to inspect. Be prepared to explain any credits of rents or late fees, transfers of rental monies or account alterations. You might want to highlight these entries so your supervisors can see them and make notations of why you choose the actions you did.

Most managers do a "close-out" at the end of the month where they print various reports from their software. I recommend using a cardboard file box for each month and placing in it all monthly reports, daily-transaction logs, copies of new leases, move-outs and any auction files for that month. Keeping records organized this way will make it easier to find certain files when you need them.

Store these boxes in your company storage unit. It is imperative you keep files neat and well-organized for inspections. You never know when your supervisor or owner will show up to conduct these procedures. If you still use a manual bookkeeping system, keep all ledger cards in order and use the same logic and organization you would if the system were automated.

New Move-Ins

I always recommend using three-part, carbonless leases that are sequentially numbered. When you rent a unit, the original copy of the lease should be placed in the tenant file. One copy is given to the tenant, and the third is set aside to send monthly to the facility owner or company headquarters. If you don't send these copies at the end of each month, set them aside for your supervisor to inspect when he does his site inspection.

If you processed a move-in and took no money at the time the lease was written, be prepared to explain your actions and when the tenant did pay the money. If you give away rent at any time, be prepared to explain why. You might want to attach the coupon, ad, etc., to the lease to explain your actions.


When a tenant moves out, you should process the move-out via your computer. Print the move-out information and staple it to all the records in that tenant's file. Set aside all this information for your supervisor to inspect. At the end of each month, collect all the move-outs and place them in the same file box as your daily and monthly reports for that month, along with copies of your leases, and file them away.

If you didn't collect money from any tenants who moved out but still owed rent, be prepared to explain why. If you had a tenant in lien and got approval to cut him a deal if he paid some money and moved out, attach a voucher or sheet to explain why you made the deal and who approved it. This will help when your audit is conducted--you might forget what happened months ago.

Grounds Inspection

Needless to say, your facility should be kept neat and clean at all times. This means sweeping and cleaning, and relocking vacant units when they become available. Don't lock a unit that has not been cleaned or is not otherwise ready to rent. The first time you do, you just might get a surprise inspection and, trust me, all auditors have heard the infamous "the tenant just moved out of this unit" excuse. If I see a dirty unit and hear those words, I always check the computer to see when the tenant actually moved out. If it was days--or weeks--ago, this raises a red flag. It makes me wonder if the manager is doing his daily job duties. Not only that, but if he can't be honest about something as simple and minor as a dusty unit, what else is he not being truthful about?

You should walk your hallways several times a day and look for things such as burnt-out lights. Make sure overlocks have been placed on past-due units and removed from those that have been paid. Take a broom and dust pan with you to spot-sweep hallways, stairwells and elevators. Don't forget to look up. A facility full of cobwebs will look like Dracula's den and is not very inviting to prospective tenants. An auditor will look at facility maintenance, so always keep your facility neat and clean. Be prepared for an audit at all times.

Remember, audits and inspections need not be a source of fear. They are a normal part of every business. If you are well-prepared and honest, and do the best job possible, you have nothing to worry about. Auditors are not just looking for theft, they are looking to see you are adhering to your state's lien laws and company policy. Audits will only help you do a better job. If you stay focused on the optimal operations of your facility, you and your supervisors will be in a win-win situation.

Pamela Alton is the owner of Mini-Management®, a nationwide manager-placement service. Mini-Management also offers full-service and "operations-only" facility management, training manuals, inspections and audits, feasibility studies, consulting and training seminars. For more information, call (800) 646-4648.

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