FL: audit and attorneys

Hi,

Is it customary for an audit firm in Florida to get the HOA attorney opinion without asking for a permission or even notifying the board ?

It happened to our HOA, the attorney billed the HOA for the opinion they provided to the auditors (nothing extraordinary, just a bunch of generic disclaimers), naturally, and we had no prior notification or even mention in the engagement letter.

Our property manager claims that it's "customary".

I find it hard to believe having participated in a commercial company's audits where never ever auditors requested access to the company counsel, much less doing it without any notification.

Thanks !

Dean:

No, it's not reciprocal

I talked to the property manager, and he said that he knew nothing about the auditors contacting the HOA attorney without authorization. The whole thing is rather bizarre.

Yes.

Part of an audit is to verify expenses which requires contacting contractors. This includes your association attorney.
When we have our audits in my last association, we specified to the CPA that contact with the attorney was only to be done through the board in order to minimize costs.

I did not understand this until I looked up "material loss contingency." From Google AI:

A material loss contingency is a situation involving uncertainty about a potential loss that could significantly impact a company's financial statements, requiring accrual and disclosure if certain conditions are met

On the one hand, I can see why the auditor would want the HOA attorney to respond. On the other hand, this should have gone through the board, with the auditor asking the board to ask the HOA attorney to respond.

The board can then investigate further. For example, the board could query:
How much would the HOA attorney charge? Can the Board respond themselves, especially when they are not aware of any likely impending lawsuits or major infrastructure/amenity repairs? Can the HOA attorney give it a minute's though and respond either "Yes" or "There is this one problem that I need to review, and you all know about it. It is ___. Can I get back to you?"

Without more information, I cannot judge whether billing $750 for the evaluation the attorney did to arrive at this response is appropriate.

The attorney is putting his reputation on the line when he responded thusly, after all. "Substantive attention" is a judgement call. The attorney may very well have had to go through a few years of records.

If the board feels strongly about this billing, then consult the new attorney and ask if it is worth filing a complaint with your state's disciplinary board. When it comes to disciplining Attorneys', attorneys' disciplinary boards tend to listen only to an attorney's former clients (like your HOA) and not anyone else.

Contacting a contractor to confirm an invoice and/ or a payment is quite different than obtaining a legal advice/opinion and having the HOA billed.

Googling the phrase "we have not been engaged to give substantive attention to or represent the Client in connection with material loss contingencies" indicates it is boilerplate that is now customarily used by auditors and a client's attorney. In other words and as TimB4 indicated, auditors routinely check with a client's attorney to receive a disclosure of potential material losses (as known by the HOA' attorney, anyway).

To me the only issue is how much the attorney billed.

The key word is "contingency."

I expect whether a CPA requires the HOA's attorney to make a declaration about contingent material losses depends on the level of audit.

How does a CPA require an HOA attorney to do anything?

Absent a written waiver by the HOA, the information voluntarily provided by an attorney may violate client attorney privilege.

Our new CPA firm, which works on mostly HOA and COA audits in Florida and New York, did not contact our attorney for this opinion. However, I have it from a VERY reliable source, who was the General Counsel and the CEO of a publicly traded company in Florida, that contacting the company attorney for the material loss opinion is routine practice in the corporate world. So it could be that your CPA is more used to doing corporate work and not HOAs and that your attorney is used to providing that opinion and didn't see any reason not too.

I'm not quite sure why you are so upset over this. It's not like the attorney did anything wrong, and in fact they did what they needed to do, which was certify that you don't have any litigation hanging out there that might materially effect the finances of the HOA down the line.

The amount that they charged is about two hours of what our attorney charges for her time. They had to do research in order to make sure they were giving the correct information to the auditor. If your association can't handle a legal bill for two hours time, how do you handle legal matters that come up in your association?

I don't like to have our association taken advantage of in any way. But I also don't believe in micro-managing professionals I hire to do work for the association.

Your world, but I would not pay the attorney for work the board did not authorize.