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Started by MissyS • 8 replies • 1491 views

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MissyS (Florida)
Posts: 73

Posted:

With our tight budget we want to lower the level of financial reporting from a review to a compilation. I always get confused when it comes to how many votes are required to pass. Can someone explain this Florida Statute “If approved by a majority of the voting interests present at a properly called meeting of the association, an association may prepare or cause to be prepared:” Are plans are to send a notice to all members within 14 days along with proxies. Once the meeting is held; from my understanding, we count the number of members present plus proxies for the majority and not the total number of 120 members. I’m embarrassed asking, but since this is regarding our HOA’s finances I want confirmation that we are doing everything properly.

DonnaS (Tennessee)
Posts: 5,671

Posted:

Missy,

How much is your annual budget? The Statutes state that if the annual operating budget is $100,000 but less than $200,000, you are required to do a compilation. You (the membership) do not have to vote on this item as it is a Board action to vote on.

The next question is what does your ByLaw state for voting percentages? Does it say "majority of the membership OR majority of votes cast at a meeting including proxies? That will be what you have to follow.

Both your quote from the Statute and the below quote, require a majority of the total voting interest. That would be the majority of your 120 members.

c) If 20 percent of the parcel owners petition the board for a level of financial reporting higher than that required by this section, the association shall duly notice and hold a meeting of members within 30 days of receipt of the petition for the purpose of voting on raising the level of reporting for that fiscal year. Upon approval of a majority of the total voting interests of the parcel owners, the association shall prepare or cause to be prepared, shall amend the budget or adopt a special assessment to pay for the financial report regardless of any provision to the contrary in the governing documents, and shall provide within 90 days of the meeting or the end of the fiscal year, whichever occurs later:

MissyS (Florida)
Posts: 73

Posted:

Donna, our annual revenue is $300,000, and we are required to perform a review. We want to have a compiled financial statement, a lower report. I thought the Florida Statutes trump our documents. Here is the statute I’m referring to:

720.303 Association powers and duties; meetings of board; official records; budgets; financial reporting; association funds; recalls.--

3. Audited financial statements if the association is otherwise required to prepare reviewed financial statements.

(d) If approved by a majority of the voting interests present at a properly called meeting of the association, an association may prepare or cause to be prepared:
1. A report of cash receipts and expenditures in lieu of a compiled, reviewed, or audited financial statement;
2. A report of cash receipts and expenditures or a compiled financial statement in lieu of a reviewed or audited financial statement; or
3. A report of cash receipts and expenditures, a compiled financial statement, or a reviewed financial statement in lieu of an audited financial statement.

Thanks for your input.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

MissyS,
That is no small amount 300K. May I suggest that you at least have an audit every few years. A compilation is (IMHO) something no association should use. A review at least for 300k and an audit every five years or so. Why a board would want to take the responsibility that would go with voting for a lesser scrutiny of their books is beyond me. A review can't be that expensive. As far as who trumps who in this case if the Boards wants an audit every year, they should get it, after all, their butt is the one hanging out. So I suggest you let the board decide, either go with what is required or go more complete but don't shoot yourselve in the foor to save a few bucks.

SusanW1 (Michigan)
Posts: 5,202

Posted:

What do your bylaws say in regards to audit or review?

I have never heard of "dumbing down" a standard like this, especially considering your annual budget.

What's wrong with an audit review? Why do you want to just do a compilation?

MissyS (Florida)
Posts: 73

Posted:

Susan, last year’s treasurer was so meticulous almost to the point of obsessive. When paying bills not only did she notate the check #, date, account #, but also stapled a copy of the check to the invoice. Check copies were attached to all copies of deposit slips. Because petty cash had been abused in the past, she was determined to never let that happen again. Petty cash expenditures for 2007 were $100. We’ve had several large unexpected roof repairs, and any Florida HOA understands the hardship the 2004 hurricanes have had on HOAs causing insurance rates to triple. Our insurance cost went from $25,000 to over $65,000.

Believe it or not the old board did not adequately budget for an audit. We had a CPA come in to take a quick peek at our records to give us an idea on the cost of a review. If he found no problems he estimated the cost at $5,000. He is actually the one who recommended the compilation, which would be approx. $1,500. Now if he does find problems then we will proceed with a reviewed financial statement. According to Florida Statutes, remember the membership will be the ones deciding to accept the lesser financial report not the board. I can assure you this board won’t make the same mistake as the previous board and all future budgets will include the cost of a review.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

If you have a compilation by a CPA and he certifies it, I agree it makes sense to do that. This to me is as good as a review by some neighbor down the street, or really much better. Your board seems to have made a correct decision based on their situation but keep in mind to budget for an audit every few year and require full publication of all expenses and income every six months. I imagine you have all this stuff on a spread sheet of some kind.

You want to move to the Beach to a condo and take over trying to get this place right, let me know, I like your activism.

SusanW1 (Michigan)
Posts: 5,202

Posted:

CPA is not going to "certify" anything except a full audit.

You don't have to have a CPA do a compilation, much less pay $1,500!! A three-member group can do that (does not include the treasurer)

Do a search on this site; we just discussed audit, audit review and compilation m about a month ago.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Susan,
I expect you are right, from where you sit. But if a CPA does a compilation if is far better than having the fox do it. And I would imagine he will submit a bill with a disclaimer on it but he will also sign his name and attest some restrictive conclusion.

Don't send me the differences between the three type, I know about them and if all was equal I would take your advice over a compilation, if I had to make the decision, it is more right. But their board feels this is the best they can do, is willing to stand behind their decision and justify it, so I support them.

I do not support my boards decision to not do any audits, reviews or compilations and have no records that the books have benn reviewed in any fashion.

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