Auditor provides no opinion after audit

Started by MayaS • 2 replies • 178 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

MayaS (Washington)
Posts: 3

Posted:

The previous management company refuses to respond to auditor’s questions for addl data/evidence to complete the audit.

So the auditor has sent a letter to the board saying they express no opinion.

The issues are with missing invoices for expenses, as well as about lack of evidence to validate operating and reserve balances.

The board believes the previous management company took about $3000 labeling them as expenses (but no invoice) but didn’t steal much more than that. Auditor recommends writing it off as bad debt and proceeding with what that company shared
as the operating and reserve balances.

We are a small hoa, with 65000 as annual dues.

Should we approve the audit and move forward? Or should we be doing more diligence? Please advise. The board is new, the previous company doesn’t seem to care at all.

The hoa will not want to spend more than 2k to get this resolved. Thanks.

SheliaH (Indiana)
Posts: 6,964

Posted:

Turn this over to your attorney. That will cost money, but if this s is what it takes to get all the information to your auditor so he/she can make a proper assessment of the association's finances, this is what you have to do.

The amount of money reflected in the missing invoices and reserves is also a factor - a big one. You appear to be a small HOA if the budget is $65k, so writing this off is a big deal. Think carefully about what this will do to the association's financial health, especially reserves. You may be looking at a special assessment down the road if you don't have the money you're supposed to have. This smells of embezzlement, so you might need to consider if you have enough to pursue criminal charges.

I know you don't want to spend a lot of money on this, so if you end up taking tbe auditor's advice, you'd better talk to him/her about inernal controls the association shoukd establish to prevent this from happening again. If you have a new property manager, review the contract to see what's already there and talk to your attorney to see what could be added. If not, you could check out the CAI website for educational materials on managing property managers and best practices in protecting the association's finances. The association bank may also be able to provide tips.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

CathyA3 (Ohio)
Posts: 6,299

Posted:

If I were on the board, I'd compare the amount to be written off with the cost of getting the lawyer involved, and go with the cheaper solution (which could easily be writing off the money).

It sounds like lessons were already learned and you've changed management companies, so that's good. I second Sheila's recommendations about improving internal controls to prevent this from happening again (eg. no expenditure is approved without documentation). An important part of the board's job is managing the manager: making sure that this person is following the terms of their contract and taking steps promptly when that isn't happening.

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here