FL HOA - Did our board, treasurer and accountant violate GAAP and evaded tax authorities

Our new accountant, a CPA and owner of a company was hired to perform our HOA's accounting, reconciliations and generate reports for the board for a monthly fee. They also compiled our annual financial reports and income tax return reports for a fee.

I am unaware of accounting rules that allows anyone to record rental income as a reduction of unrelated homeowner receivables or delinquencies!

Facts: I obtained a copy of our 2010 compilation during a board meeting and noticed income was missing. FYI, our HOA foreclosed, acquired title to a home and obtained a tenant who paid $2,000/month rent for 11 months of 2010. I know this is fact since I obtained this tenant, prepared lease and hand delivered multiple rental checks to our HOA. I expected to see $22K of rental income in addition to our $300K regular dues in compiled reports. But NO additional income was reported. Zero!

Our HOA also had delinquencies of $15K on 4 homes. I have details that prove prior years balances. One balance was several years old, two were partially satisfied during the year and the home we acquired wtih a tenant had the remaining baalnce of $8K. I expected our HOA to write-off these uncollectible balances as bad-debt but there were no write-offs reported in our compilation. Zero!

I informed the board in writing but they did not respond. So I phoned our accountant directly to seeking answers and the truth. I asked if she new about our rental activities. She denied knowing much and was informed that only one month of rental income was communicated by our Treasurer and Assistant Treasurer. Since only 1 month was reported even though we collected 11 months of income. Did our HOA also evade paying tax authorities when this informaton was used to compile our tax return?

When I asked about rental income presently received under her watch she deferred further comments and told me she needed to speak with the board. I have since made an certified request to gain access to official records which is pending.

I obtained a copy of our HOA's interim financial reports from a board member and noticed the old delinquency balances disappeared - not from former owners paying old balances. I also noticed journal entries moving rental income received against unrelated receivable balances. Yet are accountant stated she had no knowlege, contrary to the information she prepared. We also expended funds to ready this rental home for a tenant and no expenses appeared on our compilation.

Has GAAP been violated and by whom? Did our HOA also evade paying tax authorities? Is there any form of misconduct or negligence? Who is really at fault?

I think your assigning "Income" to things that aren't income. Plus as rental property, dues are tax deductible. Dues aren't tax deductible if it isn't used as rental but primary residence. So I would suspect that the dues paid the HOA by this tenant wouldn't show up as income. I don't know how much of that $2K is rent and how much is the dues payment. That is important to know as well.

Is your HOA For-profit or Non-Profit? Most are non-profit. However, now that the HOA is a homeowner to a property, this changes how some things would be filed/recorded. The rent is not really "income" as much as it is a mortgage payment. The dues should still be under "income". It may be that the $2K you see recorded is the total of the dues paid and not reflect total rent payments.

Why concern yourself soo much anyways? Seems you have more of a vested interest in this than the average bear... If the accountant is a hired contractor, then they should have an insurance policy for IF they screw up. Which means the HOA has limited liability if the accountant does do things wrong. It should be covered.

Yes, I agree you should look into it.

I highly doubt the HOA acquired the home for $100. I've done a HOA foreclosure. The $100 was probably the processing fee to get the title. There still the matter of the mortgage on the property. Whatever the owner owed on the property is still in existance. That would be why the tenant had to pay the rent. To pay off the mortgage/loan. Otherwise why would the HOA even charge rent to a property with no mortgage? This would be a profit situation for a non-profit HOA. That would be a big no-no.

What I am saying is that the HOA has to be considered a homeowner as a whole for this property. I would then see where utilities, maintenance, dues, or other issues with having rental property would apply. The HOA basically owns rental property and would do whatever any other own would do with rental property and it's deductibles.

The real income for a HOA is it's dues. It is NOT the rent. That is where your getting confused. It was a bad idea for the HOA to get this property and to use it as rental. However, since your HOA is stuck with it now. They have to treat it not as another property in the HOA but as HOA property.

Melissa - please check these two websites in order to understand the Florida foreclosure process.
It is not like Alabama, and if you are advising someone in Florida by using your experience in Alabama it is not helpful.

pdf file – explains Florida foreclosure process

http://olympiatitle.org/PDF/State%20of%20Florida%20Foreclosure%20Process.pdf

http://www.floridacommunitylaw.com/lawyer-attorney-1612986.html

In the menu across the top there is a section "Helpful Resources".
The article "Should my board foreclose on its lien during this foreclosure crisis?"