Should a vote be put to association owners to waive yearly financial auditing requirement
Pursuant to Florida Statutes, Condominium and Homeowners’ Associations have to each year report the financial health of the Associations to their members. Such requirements are contained in Section 718.111(13), Florida Statutes for Condominium Associations and Section 720.303(7), Florida Statutes for Homeowners’ Associations.
For Condominiums with less than 50 units, or for Neighborhoods with less than 50 parcels, all that is required to be provided to the members is a ‘report of cash receipts and expenditures’. If communities have 50 or more units or parcels but the Associations total annual revenues are less than $150,000, they also only need to provide their members with a report of cash receipts and expenditures. Reports of cash receipts and expenditures can be prepared by an Association’s bookkeeper.
However, for Associations with annual revenues of $150,000 to $299,999, they must annually prepare ‘compiled’ financial statements. For Associations with annual revenues of $300,000 to $499,999, they must annually prepare ‘reviewed’ financial statements and for Associations with annual revenues of $500,000 or more, they must annually prepare ‘audited’ financial statements. Compiled, reviewed and audited financial statements are prepared by Certified Public Accountants (CPAs).
As it costs extra money for an Association to pay a CPA every year to prepare the required higher level of reporting financial statements, the statutes allow the members to vote to ‘waive’ the compilation, review or audit and instead just have prepared a report of cash receipts and expenditures. Such a vote to waive must be approved by a majority of the voting interests at a properly called meeting.
In Homeowners’ Associations there is not limit as to how many years a vote to waive the complication, review or audit can be taken or any limit on when the vote can be taken. However, in Condominium Associations, the vote must be taken before the end of the fiscal year and is effective only for that fiscal year or for that year and for the next fiscal year. Also, in a Condominium Association the members cannot vote to waive for more than three consecutive years. So, if a Condominium Association waives for three years, it must every fourth year engage a CPA for a compilation, review or audit.
A board of directors can always decide not to put to the members a vote to waive if the Directors believe waiver is not in the Association’s best interest. In addition, a Board can always decide to perform a greater level of auditing than is minimally required in the statutes. A greater level may be decided if the Directors want assurance that the Association’s books and finances are property being administered or have believe that maybe they are not being administered correctly.
As you can see there are some protections to Association members per Florida Statutes to either prevent, or quickly catch, any foul play with Association funds. However, there is also the ability for an Association to realize cost savings by only periodically paying for more costly financial reporting when there is no evidence of, or hint of, any monkey business going on with the member’s monies. Therefore, a board of directors, with the Association’s Treasurer’s input, should then each year make a knowledgeable decision as to whether to put the wavier question to a vote of its members or not.
