How do I go about haivng the HOA recoreds audited?

Started by KimD9 • 20 replies • 3367 views

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KimD9 (Michigan)
Posts: 109

Posted:

Many of the homeowners want to have the records and expenses audited. As I have said in many posts
several of us have gone and viewed receipts/records and there are thousands of dollars that were reimibursed
to our President with no receipts.

How do we go about this officially? Who do we call?

Thank you

KerryL1 (California)
Posts: 14,550

Posted:

First, do your own governing documents require an annual audit?? Or does your state require that HOAs pay for an annual audit? And that the audit be sent to H/Os? Or, at a lower level, an annual review? In either case, the person would be a CPA.

Second, it sounds, based on what I remember about your previous posts, that you want someone to audit your records over several years. Others here will know better, but I think that could be very expensive.

I suppose you could all chip in and hire a forensic accountant. I believe they charge $250-$300 an hour.

I also think there might be some statutes of limitation issues where you may not go back further than xx # of years. I believe I mentioned previously that in CA, we, as H/Os cannot review/copy records that are beyond the current year plus the two previous ones (minutes must be kept forever). What is the law in your state, Kim?

Finally, I think we all know how badly you & a certain % of other H/Os in your Association want to get rid of this president. I still say your best bet is to gather support and throw him out via a recall, or at the next election. You're really stretching to try to make a criminal case out of this, IMO.

JerryD5 (Colorado)
Posts: 218

Posted:

It is in our bylaws that require us to have a yearly audit. We pay our firm $1500 or so (plus do our taxes). They rely on all the required files to accomplish this (from our PM). That might be the sticking point in your case. Would your PM or the board be willing to turn over any of the required documents? If you get stonewalled there, I don't see the point of proceeding with an audit.

I am with the others that consistently have offered advice for you to get rid of the bad board (or person) first and once that is done, get an independent audit. To do so in your present situation would be an exercise in futility in my opinion.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Kim,

First and foremost, you will need absolute access to the records in order to provide that same access to the CPA.

You also need to be aware that there are several levels of service a CPA can provide. This was discussed in an earlier thread. See: Subject: Financial Audits, Reviews or Compilation Which do you use?

If you are trying to prove embezzlement, then you would need to have a Forensic Audit. A forensic auditor is it's own specialty, with it's own certification requirements.

To determine when a forensic audit vs. a financial audit is needed see this article from the Huston Cronicle: Forensic Audit vs. Financial Audit

The cost of these services vary greatly.

Our last financial review (done last year) cost $1,800.

A financial audit can cost around $10,000 with a forensic audit costing much more.

NpS (Pennsylvania)
Posts: 4,216

Posted:

GREAT Idea : Call a Special Meeting : Demand the resignation of any board member who doesn't pay old annual dues : If they don't pay up, remove them from office under your CC&Rs : Board members who do pay up get to choose the replacements for those who don't pay up : AFFORDABLE : BRINGS IN SOME MONEY : HOA MOVES FORWARD WITH NEW BOARD : NO MORE FREE MEMBERSHIPS

LOUSY Idea : Explore using HOA money to prove that Prez was lining his own pockets : You don't need any more proof than the fact that less than $75 out of every $150 paid in was going toward HOA expenses - and the rest was going to Prez and MC : You only need to show that the other money wasn't going into the community, and that should be easy for you to demonstrate with what you already have : Your entire HOA only brings in a little over $13k per year : You don't have the kind of money it takes for the kind of investigation you seem to want to pursue : CHANCE OF RECOVERING MONEY FROM PREZ = VERY LOW : CHANCE OF ANTAGONIZING HOMEOWNERS BY WANTING TO SPEND MONEY YOUR HOA DOESN'T HAVE AND CAN'T AFFORD = VERY HIGH : CHANCE OF LOSING THE BATTLE TO CHANGE THE BOARD = HIGH.

Kim
You have a big issue (free memberships that violate your CC&Rs) and a small issue (In your opinion, Prez is taking money that he shouldn't). IMO, you have a shot at recovering some unpaid membership dues and no chance of getting Prez to reimburse HOA for money he took. You also have a shot at getting the people you want in office so that they can decide how to run the HOA (including any decisions about hiring a CPA). First goal should be to change the composition of the Board - Go for the Great idea instead of the Lousy idea.

How has your group been doing on preparing a Special Meeting?

Sikubali jukumu. Read all posts at your own risk.

KerryL1 (California)
Posts: 14,550

Posted:

I entirely agree with your "Lousy Idea," NpS, but Kim seems determined to follow some sort of criminal justice path though she's been told repeatedly that it's a bad idea.

But your GREAT IDEA cannot work in my HOA because we have no document that states that directors who are xx days delinquent may no longer serve on the Board. Some HOAs have such a clause in their docs, usually bylaws, but we don't and I don't think Kim's do either. I think some of us have mentioned that to her. Maybe she mentioned it's in her docs, but I', not going to look back at all that verbiage.

Still, no reason why a whole bunch of you cannot attend a board meeting and demand he pay his dues, right, Kim?? Or even have a whole bunch of owners sign a petition demanding same? Or are board meetings closed in your HOA, Kim?

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By KerryL1 on 12/29/2014 3:51 PM
I entirely agree with your "Lousy Idea," NpS, but Kim seems determined to follow some sort of criminal justice path though she's been told repeatedly that it's a bad idea.

But your GREAT IDEA cannot work in my HOA because we have no document that states that directors who are xx days delinquent may no longer serve on the Board. Some HOAs have such a clause in their docs, usually bylaws, but we don't and I don't think Kim's do either. I think some of us have mentioned that to her. Maybe she mentioned it's in her docs, but I', not going to look back at all that verbiage.

Like you Kerry, not going to dig through old posts. But I seem to recall something about officer and director positions being non-compensated under Kim's CC&Rs or state statute. IMO, that's enough on its own to vote someone off the board via Special Meeting.

Quote:

Posted By KerryL1 on 12/29/2014 3:51 PM
Still, no reason why a whole bunch of you cannot attend a board meeting and demand he pay his dues, right, Kim?? Or even have a whole bunch of owners sign a petition demanding same? Or are board meetings closed in your HOA, Kim?

I don't believe that Kim has the discipline to stay with the NO FREE MEMBERSHIP message. That's why putting her energy into preparing a Special Meeting could be very helpful in keeping her focused.

Sikubali jukumu. Read all posts at your own risk.

MarkM31 (Washington)
Posts: 556

Posted:

Quote:

Just purge and replace the BOD thru a special election, and lean anyone in arrears

CyrstalB (Maryland)
Posts: 457

Posted:

Quote:

Posted By NpS on 12/29/2014 2:29 PM
GREAT Idea : Call a Special Meeting : Demand the resignation of any board member who doesn't pay old annual dues : If they don't pay up, remove them from office under your CC&Rs : Board members who do pay up get to choose the replacements for those who don't pay up : AFFORDABLE : BRINGS IN SOME MONEY : HOA MOVES FORWARD WITH NEW BOARD : NO MORE FREE MEMBERSHIPS

LOUSY Idea : Explore using HOA money to prove that Prez was lining his own pockets : You don't need any more proof than the fact that less than $75 out of every $150 paid in was going toward HOA expenses - and the rest was going to Prez and MC : You only need to show that the other money wasn't going into the community, and that should be easy for you to demonstrate with what you already have : Your entire HOA only brings in a little over $13k per year : You don't have the kind of money it takes for the kind of investigation you seem to want to pursue : CHANCE OF RECOVERING MONEY FROM PREZ = VERY LOW : CHANCE OF ANTAGONIZING HOMEOWNERS BY WANTING TO SPEND MONEY YOUR HOA DOESN'T HAVE AND CAN'T AFFORD = VERY HIGH : CHANCE OF LOSING THE BATTLE TO CHANGE THE BOARD = HIGH.

Kim
You have a big issue (free memberships that violate your CC&Rs) and a small issue (In your opinion, Prez is taking money that he shouldn't). IMO, you have a shot at recovering some unpaid membership dues and no chance of getting Prez to reimburse HOA for money he took. You also have a shot at getting the people you want in office so that they can decide how to run the HOA (including any decisions about hiring a CPA). First goal should be to change the composition of the Board - Go for the Great idea instead of the Lousy idea.

How has your group been doing on preparing a Special Meeting?

seriously good reply NPS!

JonD1
Posts: 2,350

Posted:

Seems Kim has her own plan to address the claimed misbehavior.

IMO she is taking the long way but that's her choice.

Other than finding more evidence just what would be the purpose of having audits performed? In my view a waste of time requiring the cooperation of thecPresident and MC which I doubt Kim would have.

When your house is on fire you don't then work on finding the cause. Step one put the fire out.

Kim's question about who she should call suggests the belief or hope there is someone else waiting to handle this for her. Not so.

And as suggested to waste money on audits accomplishes little if anything.

Put the fire out first THEN work on repairs and finding answers not the other way around.

BonnieG1 (Nebraska)
Posts: 1,186

Posted:

We have an annual budget of over $100,000. The Board checked on the possibility of having our finances audited. (In NE an annual audit is not required). The cost of an audit was $7,000.00. Since this would have been an audit just for peace of mind we decided that there was no way an audit could recoup $7,000.00 for us and decided it wasn't worth the expense.

We do have checks and balances in place to help prevent anyone from "profiting" form their position.

I agree with the advise others have given you regarding removing a problem Board member.

KimD9 (Michigan)
Posts: 109

Posted:

We put everything on hold so that everyone could enjoy their holiday season. Now it is back to business.
We are still gathering more information at this time. Our next step is going to be reading all the meeting minutes.

In the meantime, I found this very interesting....

We are a Non-Profit organization, which runs on volunteers, our association pays mileage at the rate of .55 a mile, BUT the following statement holds true

“Volunteers who drive their vehicles when they perform work on behalf of a nonprofit are restricted in tax law to deducting only 14 cents per mile, a rate that is set in statute and has not been changed in years. Volunteers who are reimbursed by the charity for the miles they drive must pay income taxes on any amount in excess of 14 cents per mile http://www.councilofnonprofits.org/public-policy/federal-policy-issues/federal-issues-listing/volunteer-mileage

“A charity may have a policy of reimbursing volunteers at a rate higher than the IRS rate. For example, a charity may reimburse volunteers at $0.25 per mile. However, when a charity does this, volunteers must report the difference between the rates as income on their personal tax returns.” http://smallbusiness.chron.com/mileage-reimbursement-policy-nonprofit-volunteers-69921.html

http://www.irs.gov/Tax-Professionals/Standard-Mileage-Rates

According to this our Association has overpaid reimbursement to the amount of 4x the IRS rate which is calculated to be
over $7000 in the past 14 years in OVERPAYING him.... This was to be claimed on his taxes as income. He cannot get compensation
for his position. We are requesting a refund from him at this time and working towards a special meeting.

JonD1
Posts: 2,350

Posted:

Kim

You seem to have a flawed understanding of HOA laws versus IRS codes. How the Board President prepares their tax returns and what might be included is NOT in your wheelhouse.
That's between the President and the IRS. Have you seen the President's tax returns?

And reimbursement for expenses is quite different from compensation. So the .55 per mile which was permitted by the Board, including your relative, does not now get reduced due to IRS code.

And in my view your demand to be refunded is a waste of time.

It appears your witch hunt continues. And all of this running around in circles takes away from the effrot to remove this person if in fact it is warranted.

Just what positive is accomplished by all of this?

KerryL1 (California)
Posts: 14,550

Posted:

Kim, I must agree with all of Jon's points.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Damn the torpedoes. Full speed ahead. There are pennies to be recovered.

Sikubali jukumu. Read all posts at your own risk.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By KerryL1 on 01/10/2015 4:39 PM
Kim, I must agree with all of Jon's points.

As do I.

Kim cannot see the forest through the trees.

NigelB (Texas)
Posts: 254

Posted:

Quote:

Posted By KimD9 on 01/10/2015 11:07 AM
We put everything on hold so that everyone could enjoy their holiday season. Now it is back to business.
We are still gathering more information at this time. Our next step is going to be reading all the meeting minutes.

In the meantime, I found this very interesting....

We are a Non-Profit organization, which runs on volunteers, our association pays mileage at the rate of .55 a mile, BUT the following statement holds true

“Volunteers who drive their vehicles when they perform work on behalf of a nonprofit are restricted in tax law to deducting only 14 cents per mile, a rate that is set in statute and has not been changed in years. Volunteers who are reimbursed by the charity for the miles they drive must pay income taxes on any amount in excess of 14 cents per mile http://www.councilofnonprofits.org/public-policy/federal-policy-issues/federal-issues-listing/volunteer-mileage

“A charity may have a policy of reimbursing volunteers at a rate higher than the IRS rate. For example, a charity may reimburse volunteers at $0.25 per mile. However, when a charity does this, volunteers must report the difference between the rates as income on their personal tax returns.” http://smallbusiness.chron.com/mileage-reimbursement-policy-nonprofit-volunteers-69921.html

http://www.irs.gov/Tax-Professionals/Standard-Mileage-Rates

According to this our Association has overpaid reimbursement to the amount of 4x the IRS rate which is calculated to be
over $7000 in the past 14 years in OVERPAYING him.... This was to be claimed on his taxes as income. He cannot get compensation
for his position. We are requesting a refund from him at this time and working towards a special meeting.

If your HOA provides for a mileage reimbursement of .55 per mile - while IRS only allows .14 per mile to be deducted with the excess being taxed, how do you conclude that the association has overpaid and that the recipient should reimburse the HOA?

1. The HOA sets a reimbursement of .55 per mile - an overpayment would be an amount in excess of the HOA allowance.
2. The .14 IRS limitation and any excess reimbursement is between the taxpayer and the IRS - not the HOA and IRS - you have no right to access the individual income tax return of the recipient.

Conceivably - the HOA could reimburse at whatever amount they wish from 0.0 to $100 per mile if they were so inclined - if you don't like it then change the HOA reimbursement rules. The only thing the IRS code does is to limit the mileage deduction to .14 to the individual performs the volunteer work.

Any variance is between the IRS and the taxpayer not the HOA and the recipient as the HOA approved the mileage reimbursement

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Nigel

The issue is not the 0.14 versus 0.56. The issue is according to Kim the guy drives around racking up unnecessary mileage and Kim wants to hang him on this.

Again, she cannot see the forest through the trees.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By JohnC46 on 01/12/2015 10:37 AM
Nigel

The issue is not the 0.14 versus 0.56. The issue is according to Kim the guy drives around racking up unnecessary mileage and Kim wants to hang him on this.

Again, she cannot see the forest through the trees.

... and miles to go before I sleep. ... and miles to go before I sleep. Keep on truckin Kim. Sooner or later, you'll find your way out of the woods and onto common ground.

Sikubali jukumu. Read all posts at your own risk.

JohnB26 (South Carolina)
Posts: 1,001

Posted:

How far can a dog run into the woods?
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1/2 way, then he's running OUT.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By JohnB26 on 01/15/2015 3:16 PM
How far can a dog run into the woods?
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1/2 way, then he's running OUT.

She will not get it.

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