Year end audit

Started by CharlesO • 7 replies • 2333 views

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CharlesO (Maryland)
Posts: 17

Posted:

During 2009 our developer handled all of the community money, (collected assessments, paid bills, etc.), and sent the elected Board monthly reports. In 2010, the BOD will take over the finances. The BOD has questioned some numbers on the monthly reports with no satisfaction from the developer, and realizing that an audit must be done, is demanding that the developer pay for it. Is this a reasonable demand? Thanks

MicheleD (Kentucky)
Posts: 4,491

Posted:

Was the development transitioned over to you or still within the control of the developer for this period in which he handled the finances?

RogerB (Colorado)
Posts: 5,067

Posted:

Charles, an audit should be done before turnover. The association's developer Board authorizes the audit and the association pays for the audit just like it pays for all other association expenses.

CharlesO (Maryland)
Posts: 17

Posted:

The BOD has managed the community - developed the 2010 budget, managed contractors, handled resident issues, etc. The developer collected the assessements, paid the bills and reported the numbers monthly to the Board. From the Board's, since the developer has handled the money and the Board has problems with his numbers, he should pay for the audit so when the BOD takes over the finances in 2010, they will start the new year with valid books.

MicheleD (Kentucky)
Posts: 4,491

Posted:

That may be your perspective, but it is still an association cost. The association should pay for it.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Charles,

When the developer was in control weren't the members paying assessments? Those assessments were used to pay the bills of the assn. The developer may have had to add to the assessment income; however, generally speaking he was not running the assn. with his own money. If an audit is to be performed the cost should be borne by the assn, not the developer. Look at it this way. Once the assn is turned over to the members, would you require the BOD to pay for the next audit -- even if you don't like the numbers on their financial statements? I think not! And, another thing to think about is the fact that just because you don't like the numbers on his financial reports doesn't mean he's done anything wrong. Do you have access to all the financial documents to intelligently question the financial statements? I may be wrong, but I would think not!!

SusanW1 (Michigan)
Posts: 5,202

Posted:

What do you mean the board is not "happy" with some of the developer's figures?
What can you do about it now?
His books are his books and I am sure he has all receipts, etc. to answer all your questions. It could cost you a mint to audit his books - only to get one figure brought over to your books.

Concentrate on getting your own books/accounts in order so when you get set up, you accounts are in order. And make sure everything has been done that he promised and/or said he paid to do for the HOA's benefit.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Susan,

Perhaps things are done differently in MI and even maybe MD, but here in AZ the developer's books would really be the assn's books and all financial accounting would be in the name of the HOA. So, it's really the assn's books that should be audited and, IMO, the assn should pay for it.

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