Audit Specifics

I know this has been on the Board more than once, but I would like some specific opinions.

1. Our budget runs around $250.000.00/ year.

2. As far as I know we have never had an audit, although our documents specify one be done yearly.

3. The Boards have expressed at the annhual meetings that audits are too expensive.

4. The manager states that he has someone qualified look at books but does not give a written report.

5. I know this is just not proper for a bunch of reasons.

6. The boards, managers (new and old) do not want to address this suibject.

7. I feel the Board is jeprodizing the associations, themselves personally, and suspect they are listening to our lawyer.

8. I really don't suspect anyone of any illegal acts, other (in my opinion) than not having a audit done.

9. Any constructive contributations on this specific subject?

Robert,
I know the feeling. Our HOA also does not do an Audit but rather a review. We have money not accounted for but the board does not see this as a problem. Where to go next??

Robert,
They have chosen to just ignore the whole thing. "We just wrote it off",
was the response given to me. I don't see how we can ever have an accurate accounting of the funds.

RobertR1, check to determine if an audit is required by your state statues. I believe Colorado requires an audit every other year when over $250,000 income or expenses. A good reason for a financial review or an audit is to protect the Board members and the company maintaining your financial records.

We provide all Board members who have an email address copies of monthly financial reports. Plus we will provide copies of all bank statements quarterly and recommend they be compared with financial instiution statements. This provides an ongoing financial review by the Board. Furthermore, we recommend the HOA have a financial committee which helps develop the annual budget and does a yearly financial review.

Audits do not necessarily guarantee that the books are in good order. For example, we just started managing an HOA which had an audit for 2007. The audit found no problems. Furthermore, the books had been maintained by a management company which manages over 200 associations. So we felt the financial records would be in good order. WRONG !!!

The $1,500 audit raised a red flag to our highly experienced accountant. She felt this was rather inexpensive. Was she correct. It was only a financial review. Numerous errors were discovered in the financial records which ultimately required us to do an internal audit. Several corrections and adjustments were required. Examples are:
1) the funds in the reserve account did not agree with the end of year investment statement. In other words the account was not even reconciled!
2) the balance sheet showed assets of tens of thousands of dollars too much.

Bottom line - the HOA complied with state law; the Board was protected by the audit; the management company was protected by the audit; and the financials records were not good.

Robert

There are many good reasons to conduct an audit. Each board member has a fiduciary duty concerning property stewardship and management of association funds.

If your governing documents state that an annual audit is required, they mean just that. Failure to adhere to the governing documents is likely a breach of fiduciary duty. Board members could be personally liable.

Below is the Florida Statute paragraph relating to financial reporting for associations.

720;303, (7) Financial reports shall be prepared as follows:

(a) An association that meets the criteria of this paragraph shall prepare or cause to be prepared a complete set of financial statements in accordance with generally accepted accounting principles as adopted by the Board of Accountancy. The financial statements shall be based upon the association's total annual revenues, as follows:

1. An association with total annual revenues of $100,000 or more, but less than $200,000, shall prepare compiled financial statements.

2. An association with total annual revenues of at least $200,000, but less than $400,000, shall prepare reviewed financial statements.

3. An association with total annual revenues of $400,000 or more shall prepare audited financial statements.

(b)1. An association with total annual revenues of less than $100,000 shall prepare a report of cash receipts and expenditures.

2. An association in a community of fewer than 50 parcels, regardless of the association's annual revenues, may prepare a report of cash receipts and expenditures in lieu of financial statements required by paragraph (a) unless the governing documents provide otherwise.

para 1. the term "compiled" is used
para 2. the term "reviewed" is used
para 3. the term "audited" is used

"compiled" just means organized and printed out (using standard accounting principles)into a report for the members' approval at the annual meeting (or for whomever "approves" the annual financial report).

"reviewed" means the information has had an audit review and presented for approval.

"audited" means gone over by a CPA and approved at the annual meeting.

Susan,
I can't get this address on Google,
Any ideas, thanks

Thanks for the reference Susan. Some good comments except it is not necessary for a CPA to do a compilation or a financial review. Since this was written by a CPA so it is understandable they would state in this misleading manner.