Requesting financials & indépendant audits in AZ

I am the Treasurer on our HOA Board and have asked to see the previous 10 years of financial reports and independent audits. Both the PM and HOA President have declined my request and are now asking me to state why I should have them at our next meeting. I believe my PM has been foolishly spending and mismanaging our money and need to view the expenses to prove my point. I have quoted the AZ Statue that says they have 10 days but they still won't comply. Our PM and Board won't let any homeowners view financials as well. Any advise would be appreciated. Thank you.

Depending on where and how this stuff is stored, grabbing stuff over 5 years might also take time (more than 10 days) and money (you might have to pay for copies), so that could be why you're getting some interference.

You don't say how long you've been treasurer, but if you're new to the job, remember the BOARD is supposed to be overseeing spending - the property manager is hired to do the day to day operations and act at the board's direction, so if there is mismanagement, at least half of your beef is with them.

It's true some property managers have been funny with the money, but before you start accusing people, let's begin with SPECIFICS - "mismanaging money" is a very broad statement. What areas are you specifically concerned about - cost overruns of certain repair or replacement projects? Underfunded reserves? Increasing delinquencies? Start with the annual budgets for the last five years along with the income and expense reports and look for trends. You'll also need to review the board meeting minutes for this time - if you see discussion or decisions being made on certain expenditures, that should be reflected in the income/expense reports.

By the way, have you talked to the previous treasurer to get some backstory on the budget - if there are other treasurers who served during the last 10 years, you may want to talk to them also, if they're still available.

After reviewing all this stuff and talking to people, you should be able to come up with questions to ensure you understand the processes. There's nothing wrong with asking about audits, but you should also know about internal controls - whose names are on the checkbook? Are two signatures required if checks exceed a certain amount? Do you have WRITTEN contracts signed by the appropriate board officer?

As for the homeowners, you absolutely should ask your colleagues why financials haven't been made available to them upon request. Check your documents to see what it says about access to Association records - at the very least, homeowners should be getting copies of the annual budget every year. If you know of other homeowners with similar concerns, you might want to encourage them to attend the next board meeting and have them express their concerns - let's see if the president blows off an entire group of people who can just as easily vote him out or recall him, along with the rest of the board.

Your the Treasurer.

Your reason is simple, you are responsible and accountable for the financials of the Association.

Are you really saying that the PM approves bids? And not the board?? That's very suspicious.

You really do need to nag for the financials. Do it at meetings and demand that your request be in the minutes.

I don't know AZ statutes, but I imagine that an audit might be required to go to Owners. there are a could of knowledgeable AZ posters who might help.

I'm wondering, with respect, what is it that you do as Treasurer?

Michelle,

Typically, audit requirements would be within the governing documents.

That said, I did take a look at AZ statutes and per AZ 33-1810, an audit, financial review or compilation is required annually. However, a CPA is required only if the Associations governing documents require a CPA. If not, the Board can have anyone do this.

as an FYI, here is a thread about audits:

Subject: Financial Audits, Reviews or Compilation Which do you use?

I'd suggest that you solicit bids on your own (so you know the cost).
Then make the following motion:

In order to comply with State statutes, I propose we have an audit. The cost would be around $$$$$

An audit will actually verify that goods and services were purchased.
This will show if invoices are being faked.

An audit or review also provides peace of mind to others who are not involved with the process that a third party didn't see anything that raised a flag.

Audits or reviews will also identify procedural issues and (in our case) a list of recommendations will be presented to correct issues discovered.

Our first audit discovered issues with our record keeping. Based on recommendations from the CPA, we implemented better procedures that now catch mistakes earlier.

I personally, Michelle, would be worried about my responsibilities as a board member who MIGHT be permitting the PM to "foolishly" spend Onwrs' money. All members of the board are responsible and MIGHT be guilty of some kind of negligence if you all ignore your HOA's finances. (I'm not in the legal professions)

Read your CC&Rs, which will tell you the board's Obligations. Read your HOA's contract with the management co and you'll probably see that YOUR board is responsible.

Again, It seems like the board doesn't even vote on bids or contracts??? that's shocking and is, excuse me, sloppy board behavior.

It IS time to take the gloves off and get some answers. Make sure your requests for the financial are in the board meeting minutes in case the PM is a scammer and you all didn't properly direct her to take care of the best interests of your community. You personally might be off the hook.

If you're not willing to at least try to practice your fiduciary duty of care and your duty of loyalty to your HOA, you're best off resigning.

You can't change the past. The audit will mostly show you the past spending. Your in the "Now". So it's time to concentrate on it. Spending habits and the need for them change over time. Your HOA may have needed an aggressive reserve 10 years ago. Now the reserves are adequate. So then there may be a less concentration on reserves.

Start doing the audit process now under your reign if your so concerned. Plan on having one next year at the end of this one. There you will have your audit results and a change to start meeting that requirement.

I agree with Richard. But, according to the PO, they PM & board press will give her nothing.

I’m with Richard and would have been in court. Arizona law notes:

33-1805. Association financial and other records

A. Except as provided in subsection B of this section, all financial and other records of the association shall be made reasonably available for examination by any member or any person designated by the member in writing as the member's representative. The association shall not charge a member or any person designated by the member in writing for making material available for review. The association shall have ten business days to fulfill a request for examination. On request for purchase of copies of records by any member or any person designated by the member in writing as the member's representative, the association shall have ten business days to provide copies of the requested records. An association may charge a fee for making copies of not more than fifteen cents per page.

B. Books and records kept by or on behalf of the association and the board may be withheld from disclosure to the extent that the portion withheld relates to any of the following:

1. Privileged communication between an attorney for the association and the association.

2. Pending litigation.

3. Meeting minutes or other records of a session of a board meeting that is not required to be open to all members pursuant to section 33-1804.

4. Personal, health or financial records of an individual member of the association, an individual employee of the association or an individual employee of a contractor for the association, including records of the association directly related to the personal, health or financial information about an individual member of the association, an individual employee of the association or an individual employee of a contractor for the association.

5. Records relating to the job performance of, compensation of, health records of or specific complaints against an individual employee of the association or an individual employee of a contractor of the association who works under the direction of the association.

C. The association shall not be required to disclose financial and other records of the association if disclosure would violate any state or federal law.

After sending my request via “Certified Return Receipt” to prove when requested with the sections of my governing documents and State Statutes as backup ... then maybe a short follow up chance to follow the laws. Then I would nail them to the wall.

And now we know why some States via their Laws are starting to charge the HOA’s “penalties” for not providing certain documents within required time frames. Potentially Arizona will find this happening in the future if this is how HOA’s are treating their homeowners. When HOA’s moan and groan about more laws being implemented against them ... they potentially have done it to themselves.

Sorry ... I have an issue with secrecy. An HOA is supposed to be open honest relationship between owners. Potentially this is why my HOA can get 100% of owners to agree to amend our CCR’s this last year. Our BOD had many discussions with various owners (including myself) to answer all their questions prior to our HOA meeting.