Incorrect Financial Statements - Someone talk me down from my ledge

I realize I am going to sound like a rouge board member here and that really isn't my intention. I am the treasurer of our BOD and our MC creates the financials. For several months I have been working to get an error corrected that our MC hasn't been able to identify other than acknowledging the error exists and has been growing the past few months.

I received this months financial statements which make absolutely no sense to me and as best I can tell are thousands of dollars out of balance but our MC worked with another board member to "fix the problem". Our MC won't meet with me to discuss the fix which annoys me. I have since met with that board member and while they have a very sound understanding of accounting (better than mine) several things the MC told them about or financial operations/statements aren't correct. Part of their fix was to change our accounting system (cash to accrual) mid year.

Of course the financials are on our next agenda but what are my options now??? I won't vote to accept them knowing there are significant issues but I suspect the rest of the board may not care. I don't want to go to war against my own board because I finally feel we are heading in the right direction (long term planning, etc) but I am concerned about this issue. I will certainly make sure my objections end up in the minutes but what other recourse do I have should no one else care? Termininating our MC contract isn't an option for a number of reasons.

I would suggest you go to your bylaws and/or declaration and show the other board members that they are ultimately responsible fot the financial statememt to be correct not the MC. If anyone is raising a question concerning their accuracy, and if anything legal becomes of it, the other board members cannot say they didn't know, they are responsible. I would vote not to except them, so it is recorded, to protect myself.

Chris,

I would suggest you formulate a brief statement for the Board. Ir might be something like this.

I am very concerned about the accuracy of the current financial statement. While the MC has made a number of changes, I still don't believe that the statements accurately reflect our true financial condition. We all have a fiduciary responsibility to the HOA. I would like some time and assistance to try to get our finances clarified before the Board votes on the financial report. I propose... (a CPA review, a meeting with the MC, or whatever).

peter

Chris,

What exactly do you mean by saying they are "out of balance"? What is the "error" you have been trying to have corrected? How was the "problem" fixed by changing the accounting method?

Changing from cash basis to accrual is not something the assn can do willy-nilly. IRS Form 3115 (Application for Change in Accounting Method) must be filed and the IRS must give their approval.

It's not your job as Treasurer to accept the financial statements. The BOD should vote to accept the financial statements at any board meeting where they are presented.

Since you may not have a good working knowledge of accounting, it may be a good idea to have the mgmt co accountant who handles your account meet with you to explain the financial statements. The fact that you do not understand the financial statements doesn't mean there is something wrong with them. Perhaps this other board member who has a better understanding of accounting should be the Treasurer.

Don,

I don't see where the link you provided gives access to the AICPA Audit & Accounting Guide; however you can access it at the AICPA website:

www.aicpa.org/InterestAreas/AccountingAndAuditing/Resources/AudAttest/AudAttestGuidance/Pages/AAG_CIRA.aspx

This is a .pdf document

P.S. to my previous post.

The PDF file available from AICPA is computer searchable which should help locate information of interest.