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MaryU (California)
Posts: 2
Posted:
Hi,
I need to get information about auditing the books for our HOA.
Our dues will be 400.00 starting in september and we have nothing to show for it. We think there has been a long history of the board members taking our money and we really need to get this fixed.
How do I go about getting the books audited with no charge to the community? I dont even know if thats possible but I thought I would ask.
Thanks,
MJ
JohnK3 (Pennsylvania)
Posts: 967
Posted:
Do you have a Member/Owner skilled at accounting who might volunteer their services for at least a cursory look at things to see if your suspicions have merit? Asking around couldn't hurt.
SteveM9 (Massachusetts)
Posts: 3,699
Posted:
At no charge? Sounds like Mary should volunteer to go over the books. (wink)
MaryU (California)
Posts: 2
Posted:
thats part of the problem is that they say we cant look at the books. They are for board members only.
MaryA1 (Arizona)
Posts: 7,043
Posted:
Mary,

What makes you think the board members have been embezzling funds? That's quite a strong accusation to make w/o any hard facts to justify it. However, it seems to be a standard claim by many HOA members especially when the dues rise and the BOD is noncommunicative. In all too many cases the members really don't have a clue about how much $$$ it takes to run an assn. Following is a listing of some of the costs involved:

1) Management Co fee (if you are not self-managed);
2) landscaping fee (fee for landscaper plus repairs/maint of irrigation system, tree maint, shrubs and flowers replacements, weed control,etc.);
3) utilities;
4) insurance;
5) attorney fees;
6) administrative fees (mgmt co fee, web hosting, bank charges, postage, office supplies, meeting room exp, storage fees, bad debt exp, social activities, etc;)
7) state & fed taxes;
8) maintenance fees (playground equip, exterminating exp, fence or wall repairs,etc).

If your assn has amenities (clubhouse, pool, etc) and/or lakes there will be alot of additional costs associated with maintaining them. My assn has 12 lakes to maintain which takes a big chunk out of our yearly budget. Last month the expense totaled $28,000, of which $8,000 was for elec. The month before there was a $25,000 emer. repair of a pump.

Have you checked your bylaws and state law to see if an annual audit is a requirement? Do you even know if the board has had an audit or a review performed recently? Have you taken a look at the financial statements?

SteveM9 (Massachusetts)
Posts: 3,699
Posted:
MaryU,
Start by asking the board for a simple breakdown of what is spent where. A simple on page will due.

Expenses
Landscaping - $25,000
Painting - $10,000
Insurance - $50,000

Income
Dues - $240,000

Then if you have more questions, ask for specifics on a certain item. Like, tell me more about the painting line item for $10,000 can you provide more specifics? You should at least be provided with this info annually.
SusanW1 (Michigan)
Posts: 5,202
Posted:
Mary - start by asking for copies of the latest approved budget, Year to date Revenue/Expenses and Balance Sheet. These things should be provided to you in a matter of minutes. (pay for the copies)

Actually, these things should be in the posession of any board member on a monthly basis, so you might ask a board member.

Has your group ever had an audit? A board member can motion to have the books audited. It is somewhat expenseive, so you may want an audit review.

What specifically are you looking for? You have made some serious accusations.
LarryK1 (Washington)
Posts: 32
Posted:
Mary,

Since you are in California, check out the Davis-Sterling Act. In particular, the following sections should be helpful to you:

Civil Code ยง1365.2. Inspection of Books and Records
http://www.davis-stirling.com/MainMenu/Statutes/CivilCode13652/tabid/894/Default.aspx

Civil Code ยง1365(c). Financial Records and Reporting
http://www.davis-stirling.com/MainIndex/Statutes/CivilCode1365/tabid/892/Default.aspx

It appears that California law does not require an audit -- but your governing documents may -- but a review if certain financial conditions are met. Unfortunately, even a review would likely be at the association's expense.

If you cite the relevant inspection section to your association, they should open the books up to you -- even if you may need to pay the reasonable costs of copying the records.

Good luck.
SteveB11 (Arizona)
Posts: 2
Posted:
Mary is right. In most cases a homeowner has no ideal what it takes to run an HOA. Your HOA is a business and a good Board will treat it as so. In Arizona we have it stated in the law that we have to have a review. And the HOAs I run all have this review every year. Check your laws and then go to the Board and management with your concerns as a homeowner. You can always bring suit to force the Board to follow the CC&Rs and laws of your state.
MaryA1 (Arizona)
Posts: 7,043
Posted:
Steve,

One slight correction to your message. AZ law states the BOD shall provide for ". . .an annual financial audit, review or complilation." The board can choose which one. Note that the law does not specify that it must be performed by a licensed CPA. The board could appoint a few members to coduct a "review" of the books -- or they could do it themselves. IMO, this is a meaningless law!!

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