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What is the true cost of CAM, and can we price it correctly?


What is the true cost of CAM, and can we price it correctly?

THE INTRODUCTION:

The company in question has a significant presence in the leasing/ rental business in India. It has a prominent space spread across 1 million square feet and has more than 0.45 million square feet of prime retail space.



THE PROBLEM:

The company seeks detailed computation of its common area facility and related costs and assurance that its common area maintenance (CAM) charges [1] are reasonable and in accordance with the company's CAM policy and the agreements with its space buyers/ retailers. This, in common parlance, is referred to as the CAM Audit.



THE SOLUTION:

An elaborate audit of CAM and related costs was conducted to ensure that pricing is reasonable and in line with the company's concerned policies and relevant buyers/ retailers' agreements. The information was also used for billing tenants/buyers/retail space owners covering elements of resource deployment, upkeep, consumables, utility (air, water, and electricity), etc.

Each cost element of common area maintenance was thoroughly diagnosed as follows:

Cost Element

​Explanation

Audit Approach (Check-Points) Deployment Cost

Deployment Cost

Maintenance agency and outsourced employee costs are directly identified to the common area and segregated based on nature and work area.

Deployment cost is mainly segregated into the following areas:

  • Common Area

  • Utility - Electricity

  • Utility - Centralised air-conditioning

  • Deployment for non-common areas (Costs which are not considered as common and are indirect in nature like commercial, operations, legal, CSR, office, etc.)

  • Check department-wise employees deployment

  • Check identification and allocation of deployment costs into cost centres according to the nature of the job

  • Analyse all possible scenarios/ departments for considering them as CAM/ non-CAM charges

  • Ensure completeness assertion by considering all GL accounts booked as employee costs in audited financial statements

  • Study deployment daily shift chart.

  • Study human resources cost not forming part of CAM charges

​Upkeep Cost