Texas HOA Audit Question

I am reviewing our By-Laws and it states the following:

Article 4 Board of directors

...

* To keep and maintain full and accurate books showing all of the receipts and expenses or disbursements and to permit examination there of at any reasonable time by each of the owners, and to cause to be prepared by a competent CPA an annual financial statement of the Association.

* To prepare and deliver annually to each owner a statement showing all receipts, expenses or disbursements since last statement.

Question: I know they replaced a entire entrance gate at a HOA.

On annual report listed as: Fence/Wall Rep and Maint: $3540.

There is no way that giant gate got replaced for $3500 bucks. In addition there at 10 gated communities. There is much more gate repair going on than $3500.

It all goes back to..my HOA is generating and feeding their data to me. Annual projected income this year $1,821,299.00 for the HOA according to their report.

I think your seeing the forrest for the trees or just looking for something. If you are ALL part of the SAME HOA then you are going to be charged the SAME amount unless there are written such conditions based on square footage, type, or other physical definition. Amenities such as pool, tennis courts, or gates don't usually change the amount of dues you pay based on the HOA owning them. The HOA is ONLY fundedy by it's members for it's members. So all costs the HOA incur would need to funded by all it's members equally.

As for not seeing the street sweeper contract and referencing the "Executive meeting" indicates to me your HOA doesn't have a street sweeping contract. They are considering hiring a street sweeping contractor maybe in the future. The meeting is probably amongst the board members so they can decide on bids or other options before presenting it to the whole in the open meeting. I wouldn't say that is unusual activity as I find that it's good to have your board members working together before presenting things to the whole membership. The whole membership is going to have a million questions and I find that a prepared board who have taken the time to answer the questions themselves makes a better situation. It's frustrating to hear "I don't know" "We are still discussing it" instead of "Yes we have discussed this matter and here are the options we would like to discuss with you..."

The many posters on here are "experts" in their own HOA's for various states and regions. Each state is different but the advice given can still give you the direction your looking for. Review some older posts that may address some of your questions. We have many older posts that can help. Welcome and feel free to ask questions and we will discuss the heck out of them eventually...LOL!

John,

Let me see if I can offer some assistance.


Do you have one Association for all 12 communities or does each community have their own Association and there is a parent/master Association over all of the others?

Also, is the Association under declarant (builder) control or has it been transferred to the membership?


This is typical. An Association's Board of Directors (BOD) will hire a Management Company (MC) or a Community Manager (CM) to assist them with the day to day tasks of running the Association. Depending on the contract, the services provided would include accounting services. If it does, part of the accounting services could include a status report to the BOD and/or the membership.


My Association has done both. Prior to me serving on the Board, the report to the membership included our bookkeeper contract as part of the Administrative Expense line item. When I started serving, we separated the two because I believed it should be done that way.

Bottom line, it can be done either way. The choice is the Boards and/or the membership (by pressuring the board).


This would depend on your governing documents and TX law.
The code you cited in a later post, TX § 82.114 applies to condominiums and, per your posting, your Association doesn't contain condominiums. Therefore, that statute would not apply unless your governing documents said it did.

If your Association is incorporated within the State of TX, then TX corporate code would apply. BUSINESS ORGANIZATIONS CODE (Title 2). Chapter 20 for all corporations. Chapter 21 if they are for profit. Chapter 22 if they are a nonprofit. Most Associations are incorporated as nonprofits. However, check your governing documents to be sure (typically the Certificate of Formation or the Articles of Incorporation).

Here is a link to TX State Statutes


Based on the wording you posted about Amendment 6, Possibly. However, you would need to consult a local attorney versed on contract and corporate law. Depending on the amount you are talking about, it may be more cost effective to become elected to the Board and make changes to correct the discrepancy you see.


In the President's defense, he has been on the Board since before the amendment. Therefore he most likely forgot about it. This shows why it's important for Directors to keep reviewing the documents and (in my opinion) why no single individual should serve more than 3 or 4 years before taking a break and then, if they desire, return to the Board.

This also shows how an educated member or educated membership can correct these oversights.


I wouldn't be too worried about that statement. It just gives the Board the authority to lower assessments if needed.

Assessments are typically determined in the following manner:

Sum together the following yearly expenses:
1) Operating Expenses - Contracts, administrative supplies, taxes, insurance, etc.
2) Reserve Amount - Based on a Reserve Study, this would be the amount required to be set aside every year to pay for future maintenance, expected repairs and replacement of capital components. Here is a link about Reserve Studies
3) Contingency Fund - an amount determined by circumstances to defray the difference between assessment payments and expenses, budget shortfalls, perhaps insurance deductibles, unexpected expenses, etc. (not all Associations have a contingency fund).

Then divide by the number of lots to establish the annual assessments.

Based on the language in the amendment you posted, if I was on your Board, I would perform a separate reserve study for each community that has private roads and set assessments accordingly.

Perhaps you could volunteer to head a committee to perform those studies.


As I posted, sounds like new reserve studies should be performed. Another option would be to separate the communities into their own Associations. Of course, you would need to consult an attorney on how to properly do this.


Hopefully they are. This way they would see the same advice by individuals not vested in the outcome which, if they were, could taint the advice given.


The Annual report is just a summary.

Per TX 22.351 "A member of a corporation, on written demand stating the purpose of the demand, is entitled to examine and copy at the member's expense, in person or by agent, accountant, or attorney, at any reasonable time and for a proper purpose, the books and records of the corporation relevant to that purpose."

Send a request asking to inspect all expenses relating to the replacement of the gate and cite this code as your right to inspect them.


As I posted earlier, the statute you used to ask this question doesn't apply to your Association unless your governing document says it does. You may want to review your documents and see if there is any requirement that a review or audit is performed.

Your question about what is an audit is similar to this thread in HOAtalk.

Here is another thread that also discusses it.

As your reading those threads, it is best that you don't post on them and reactivate an old thread. This is because statutes change and what was applicable then might not be applicable now. Therefore, if you have a question, about an old post (more than a few months) it's best to start a new discussion.

I hope this helps,

Tim

If the developer is still building, you are likely under Declarant control or in a partial transition (allowing some members to be on the Board but the Declarant still has the voting power to do what they want).

If the Declarant still has control, there are many things they can do without membership input or vote and you might need to wait until the Association has been turned over to the membership to address the issues you raise.

Others more versed in TX law might have better advice for you.

As a reminder, no-one on this site is offering legal advice. For that you will need to seek out a local attorney.

As for my first rodeo, I think it still is. I only really became involved in my Association about 5 years ago when I had an issue with my Association. This site helped me a lot in dealing with that issue. The easiest, and typically quickest, way to correct issues is by becoming involved with the workings of the Association.