Property Mangement Companiy - Audits??

I've not posted in over a year on this site but a recent comment from our HOA President last week intrigued me. I have been pushing for our Board/Officers to conduct a financial review of our books for a couple of years. I do not think that things are out of whack but in the 15 years we have been an HOA the books have NEVER been reviewed or checked. Anyway, my last attempt to get the Treasurer to consider this caused lots of grief. My questions about a few multi thousand dollar expenses had me concerned after I did some digging and found the payments appeared to be made a year after the work was done. The long and short of it is the Board thinks I'm trying to bully the HOA Officers to look at the books when there is no reason too. Recently the HOA President stopped by my house last week and told me the property management company is audited every year and there is no problem. He provided no other details.

My initial calls to the good folks in the Cobb County and Georgia State offices reveals no information on our management company getting a yearly audit. The company manages about 80 HOA's/POA's and I can't conceive that the state would check all of our "books". Has anyone ever heard of a management company being "audited" as I was told? If you know who I should check with in GA I'd appreciate some feedback.

Thanks
Dennis Gray

Do some research on types of audits. A basic audit will only look at methods they establish that if in the norm pass. It will not delve into proper motions, comparing contracts, determining any business judgement rule.

There may not be any audit that digs deep enough to uncover issues unless you have a forensic audit conducted.

You might need to see what the process is to determine any wrong doing. Call all parties in for questioning etc. Your documents may be silent and I do not know if there is any real process out there.

Unfortunately, the Board is given a great deal of leverage and forgiveness unless you can prove it to specific individuals. The Management company should produce records you can review. It falls to "business judgement".

Could be a simple reason for paying a contractor long after the fact. Failure to perform, payment without and then proceedings were in favor of the contractor.

Would be good if someone honest would start an independent advocacy group to assist in and guide members on questionable issues such as you describe.

My mistake but I read this:

I've not posted in over a year on this site but a recent comment from our HOA President last week intrigued me. I have been pushing for our Board/Officers to conduct a financial review of our books for a couple of years. I do not think that things are out of whack but in the 15 years we have been an HOA the books have NEVER been reviewed or checked. Anyway, my last attempt to get the Treasurer to consider this caused lots of grief.

Dennis,

Your President has misplaced trust. Who cares if the MC is audited or not (other then the MC and their investors).

The Association should, in my opinion, have (as a minimum) a financial review done every couple of years. If it's a large HOA, then yearly would be prudent. If the financial review turns up anything odd, then a full audit should be done.

My guess neither the OP nor the President has any understanding of the purpose, procedures, or purpose of any audit.

Auditing the MC would more than likely review their finances. It would do nothing as far as the properties they manage.
An audit is not some magical examination that uncovers financial misdeeds.

And if the OP's property has not been audited for some time doing a one year review would offer little in the way of checking past years financials.

We are required to perform an annual audit. In my view that is sound business practice. For the cost of the audit worth the money.

I have served on a couple of HOA Boards as well as a few other Non profit boards and think I've got an idea of how or why audits might be useful. I have never alleged any appropriate actions that suggest an audit of the HOA is needed. My point has been that in all the years the HOA has been around, 16 years, we have never even had a review of out financial records. A number of things being posted in our financials seem to suggest that as a minimum we have some very sloppy book keeping. A prime example is a $6000+ billing for a new HVAC unit installed in June of 2015 and not paid until May 2016, according to out records.

There was no issue with the installation, the billing or anything else from what I've learned. So why does it take nearly a year to pay a bill? We have plenty of money in the accounts. From what I have gathered it appeared that the Mgmt. Company sat on it! I directed my concerns to our treasurer and suggested that this seemed to be a case of poor or sloppy book keeping and financial management. There were other issues in the budget and expenses that also did not make sense. So I asked the HOA Board/Officers to consider a financial review of the records for the past year.

The response I got from the HOA President was that the Management Company had just completed an audit (of their records not ours) and all was well and no review was warranted. Obviously I'm not really concerned about the Management Companies "audit" and I don't think they would release such information to begin with. It has no real relevance to our HOA.

Since my original posting it appears the HOA had spent over $15K on a pavilion next to the Tennis Courts that was never permitted. The county has now posted a "Demolish Structure" order on it. This is another example of really poor financial management IMO. Perhaps we should be asking for an audit at this point?

BTW. Our CCR's and By Laws DO NOT require any financial review or audit ever. My attempts to get the HOA Board to review and revise the documents for the past 2-3 years have been fruitless.

There are a lot of terms being thrown around (from the OP.)

An "audit" of the HOA is not needed. But what might be needed is a review of the financial report. The board should instruct the mgt. company on what exactly it needs to know.

At the Board meetings, the financial report should have included "Accounts Receivable" and "Accounts Payable." That way, the board would have known about that huge outstanding bill, and that it had not been paid in due time.

What has the Treasurer been doing all this time? This is something that person ought to be on top of.

There is no good reason why your board should resist having the HOA's finances audited. They seem to take it as an unreasonable suggestion or an insult. I would suggest attending the meetings every month and working to get a competent board elected. The ability to examine and manage your HOA's finances starts there.

How board members can be assured that the finances are being handled well by the management company is a question that doesn't have a simple answer. But there are some policies a board can institute. The HOA's operating funds and reserves in separate bank accounts, a different staff person handles expenditures and receipts, dues payments go to a lockbox. Etc. If these and other policies are not in place, again, a new board is needed.

I would ask for an explanation as to why it took a year for the bill to be paid. It would make me worry that the management company was commingling its clients' funds if there was no good explanation.