Optional Annual Audit Lobbying

Our revised ByLaws provide:

>>>Bylaw 3.2(a) is amended to state, in part: All books and records shall be kept in accordance with good and accepted accounting practices, and the same may be reviewed at least once a year by an independent accountant retained by the Executive Board who shall not be a resident of the Community or a Unit Owner at the discretion of the Executive Board or at the direction of a majority of the Unit Owners who shall be polled each year for their vote. The cost of such review shall be a Common Expense. This Amendment shall apply to fiscal years 2007 and forward.<<<

Our total handle (Income + Expenses) for 2008 will be $48,945.56. We will show a variance of +$3.55 (Income minus Expenses minus Cash on Hand) or less than 0.01% of the handle. The BOD, in our financial summary, will state we will not commission an audit but will also forward a ballot to Membership with which they can override our decision, requiring Yes votes from 11 of the remaining 18 households. The cost of an audit would be about 5% of our expected 2009 Income if commissioned. We became self-managed earlier this year and one of the BOD's hallmarks has been the elimination of unnecessary expenses resulting in lower dues while increasing services.

Q: Would you, as a BOD, just let the numbers speak for themselves, or would you lobby for a No Vote and/or a Don’t Bother Voting Vote?

Susan,

"May" replaced "Shall" from the original wording, and the Membership vote wording was added. The Amended ByLaw is meant to make the audit optional rather than mandatory.

$1,000 to discover why there's a $3.55 variance in our numbers is not what we, the BOD, consider a wise use of our limited funds.

Perhaps I haven't been clear with my original Q, so let me try again.

1. The BOD does not want to spend $1K for an audit.
2. The BOD doesn't want Membership to override our decision to spend $1K for an audit.

So,

3. Should the BOD just let Membership figure out an audit is not worth the expense, or should the BOD lobby Membership to also reject an audit?

Peter,

We added the optional override for trasparency purposes. As you might be aware (if from no other source than HOATalk), many non-BOD Members (and for that matter, a number of BOD Members) often raise suspicions concerning BODs dealing with money.

Hmmm. Having said that, maybe I just answered my own question! Though our stated reason for no audit is that it'd be a waste of funds, and that we're only $3+change off in our accounting, prompting Membership to vote No might raise a red flag? Get them thinking: "What did those crooks do with that $3.55?"

Susan,

It took us (the BOD) MONTHS, finally having to go door-to-door, to get this ByLaw amended. Enough for us, thanks.

John,
Think about this.
At your annual meeting put "review of Audit requirements" on Agenda.
When subject comes up and assumuming your BOD, like most other Boards have enough proxies assigned to carry the vote, get a motion to have a Review instead of an audit. Explain what you just explained abour your finances. If you get any problem, out vote them.
Probably after a few years this will all be an automatic ritual you follow. However the Board should be very much aware if there is any question of what is going on and if there is then vote to have an audit.

I would believe a called vote of the membership at an Annual Meeting would meet the criteria in your documents.

But I think I just heard some tiny hoofs on my roof, time to jump in bed and cover up my head.

If they are still unsure, you could (carefully) point out that an audit does not show if the money has been spent in a manner in which the membership would approve. For instance, say the BOD decided that they would hold their meetings at a steak house each month. And further, that the HOA purchased an expensive dinner for each member of the BOD as said meeting. Would an audit say anything?

Not if the BOD passed a motion and put the expense down properly.

The biggest thing an audit will verify is that the numbers you give them are accurate numbers. But for that matter, it occurs to me that I have only seen one of the audits done in my association's history.