Condominium board To Audit or Not to Audit ?
 

I am a member of a new condominium board that was elected back in May
05, the board consists of 5 members, there are no surviving members
from the last board. We have our property managed by a management
company since 1997, there are 107 units with a yearly budget of
approximately $375,000.00. To the best of my knowledge we have never
had a audit of the management company, they do hire an accountant for
an end of year record of the last years finances. to me this is not a
true audit as in my eyes all they are doing is checking the management
companies arithmetic, and they were not hired or report to the board.
I guess my question is should we be auditing the management company ?
How often ? and under what parameters ? Thanks allot for any
assistance.

Condominium board To Audit or Not to Audit ?
 

"Tony Tedesco" wrote in message
...
I am a member of a new condominium board that was elected back in May
05, the board consists of 5 members, there are no surviving members
from the last board. We have our property managed by a management
company since 1997, there are 107 units with a yearly budget of
approximately $375,000.00. To the best of my knowledge we have never
had a audit of the management company, they do hire an accountant for
an end of year record of the last years finances. to me this is not a
true audit as in my eyes all they are doing is checking the management
companies arithmetic, and they were not hired or report to the board.
I guess my question is should we be auditing the management company ?
How often ? and under what parameters ? Thanks allot for any
assistance.

How are you set up and what do your condominium association bylaws say?

Ours say that an audit must be done once a year by an independent company
and reported at the annual owners meeting.
We are set up as a non-profit association and the management company is
employed by us to do just what it says -- manage the property. Our condo
board renews the management company contract each year. At some point they
may decide to employ another company. So, we don't audit the management
company's books; but we do audit our books since that's our money.

TKM

Condominium board To Audit or Not to Audit ?
 

On Fri, 21 Oct 2005 21:51:48 GMT, "TKM" wrote:


"Tony Tedesco" wrote in message
.. .
I am a member of a new condominium board that was elected back in May
05, the board consists of 5 members, there are no surviving members
from the last board. We have our property managed by a management
company since 1997, there are 107 units with a yearly budget of
approximately $375,000.00. To the best of my knowledge we have never
had a audit of the management company, they do hire an accountant for
an end of year record of the last years finances. to me this is not a
true audit as in my eyes all they are doing is checking the management
companies arithmetic, and they were not hired or report to the board.
I guess my question is should we be auditing the management company ?
How often ? and under what parameters ? Thanks allot for any
assistance.

How are you set up and what do your condominium association bylaws say?

Ours say that an audit must be done once a year by an independent company
and reported at the annual owners meeting.
We are set up as a non-profit association and the management company is
employed by us to do just what it says -- manage the property. Our condo
board renews the management company contract each year. At some point they
may decide to employ another company. So, we don't audit the management
company's books; but we do audit our books since that's our money.

TKM


What I was saying is that our management company keeps our books, so
if we don't audit them how do we know they are doing it correctly,
with supporting documentation of expenses, and proper accounting
practices. We are a not for profit and the management company was
hired by the last board they have been our management company for 7 -8
years, and no audit in that time to the best of my knowledge.

Condominium board To Audit or Not to Audit ?
 

"Tony Tedesco" wrote in message
...
On Fri, 21 Oct 2005 21:51:48 GMT, "TKM" wrote:


"Tony Tedesco" wrote in message
.. .
I am a member of a new condominium board that was elected back in
May
05, the board consists of 5 members, there are no surviving
members
from the last board. We have our property managed by a management
company since 1997, there are 107 units with a yearly budget of
approximately $375,000.00. To the best of my knowledge we have
never
had a audit of the management company, they do hire an accountant
for
an end of year record of the last years finances. to me this is
not a
true audit as in my eyes all they are doing is checking the
management
companies arithmetic, and they were not hired or report to the
board.
I guess my question is should we be auditing the management
company ?
How often ? and under what parameters ? Thanks allot for any
assistance.

How are you set up and what do your condominium association bylaws
say?

Ours say that an audit must be done once a year by an independent
company
and reported at the annual owners meeting.
We are set up as a non-profit association and the management
company is
employed by us to do just what it says -- manage the property. Our
condo
board renews the management company contract each year. At some
point they
may decide to employ another company. So, we don't audit the
management
company's books; but we do audit our books since that's our money.

TKM


What I was saying is that our management company keeps our books, so
if we don't audit them how do we know they are doing it correctly,
with supporting documentation of expenses, and proper accounting
practices. We are a not for profit and the management company was
hired by the last board they have been our management company for
7 -8
years, and no audit in that time to the best of my knowledge.

your kidding, right? get an audit immediately and yearly from now on.
and use an acct of the board's choosing, not the one used by the mgmt
company.

where would the funds to pay the acct come from?

Condominium board To Audit or Not to Audit ?
 

Even if the bylaws and/or state law don't require it, you absolutely
should have an audit done by an outside accountant once a year. As
board members, you have a fiduciary responsibility to the members of
the association to make sure all the financial transactions are above
board. An audit doesn't cost much and is well worth it for peace of
mind. I'd also make damn sure the association has D&O insurance to
cover liability of the board members. This is usually offered as part
of total insurance packages for condo associations.

I personally had experience with a management company that turned out
to be crooks. They came highly recommended by other associations that
they managed. I caught them before they had a chance to fleece us and
they were only on the job for about a year. They had tried to rig
bids for a $100K project, inflating the cost by 2-3X, including
submitting a phoney bid from a contractor who, when we contacted him,
said he had never even heard about the job!

After I fired them, we were updating signature cards for our checking
account at the local bank. The management company was never authorized
to have signature authority on checks. Yet, when I looked at the cards
on record at the bank, the scoundrel had his signature on there. What
he had obviously done was to add his own signature after the President
and Treasurer had signed them and before he returned them for us to the
bank. He apparently never did anything with them, but it was clear he
could have and was up to no good.

Now an audit won't prevent any of this, but it is one important step in
establishing your fiduciary responsiblity.

Condominium board To Audit or Not to Audit ?
 

"Tony Tedesco" wrote in message
...
On Fri, 21 Oct 2005 21:51:48 GMT, "TKM" wrote:


"Tony Tedesco" wrote in message
. ..
I am a member of a new condominium board that was elected back in May
05, the board consists of 5 members, there are no surviving members
from the last board. We have our property managed by a management
company since 1997, there are 107 units with a yearly budget of
approximately $375,000.00. To the best of my knowledge we have never
had a audit of the management company, they do hire an accountant for
an end of year record of the last years finances. to me this is not a
true audit as in my eyes all they are doing is checking the management
companies arithmetic, and they were not hired or report to the board.
I guess my question is should we be auditing the management company ?
How often ? and under what parameters ? Thanks allot for any
assistance.

How are you set up and what do your condominium association bylaws say?

Ours say that an audit must be done once a year by an independent company
and reported at the annual owners meeting.
We are set up as a non-profit association and the management company is
employed by us to do just what it says -- manage the property. Our condo
board renews the management company contract each year. At some point
they
may decide to employ another company. So, we don't audit the management
company's books; but we do audit our books since that's our money.

TKM


What I was saying is that our management company keeps our books, so
if we don't audit them how do we know they are doing it correctly,
with supporting documentation of expenses, and proper accounting
practices. We are a not for profit and the management company was
hired by the last board they have been our management company for 7 -8
years, and no audit in that time to the best of my knowledge.

Way past time to get an audit. In the meantime, ask the management company
to give your board the monthly bank statements of your condo association
account and question items that you don't understand.

Consider pulling the financial operations from the tasks that the management
companly does and have another company do that. Your board should have a
financial person on it who looks at the accounts regularly. Pay that person
something if the work is extensive.

You have a significant amount of money to manage. Chances are that the
management company is O.K.; but it's good to be suspicious - it's your duty
as a board.

As the treasurer of a local non-profit charity once, I trusted the
"dedicated" office staff and didn't question some cancelled checks for
"postage and supplies" that had ink spilled on them so the amounts couldn't
be read. Turned out that one of the staff had a drug habit and $20,000
later, we found out.

TKM

Condominium board To Audit or Not to Audit ?
 

On Fri, 21 Oct 2005 18:42:55 -0400, Tony Tedesco
wrote:

On Fri, 21 Oct 2005 21:51:48 GMT, "TKM" wrote:


"Tony Tedesco" wrote in message
. ..
I am a member of a new condominium board that was elected back in May
05, the board consists of 5 members, there are no surviving members
from the last board. We have our property managed by a management
company since 1997, there are 107 units with a yearly budget of
approximately $375,000.00. To the best of my knowledge we have never
had a audit of the management company, they do hire an accountant for
an end of year record of the last years finances. to me this is not a
true audit as in my eyes all they are doing is checking the management
companies arithmetic, and they were not hired or report to the board.
I guess my question is should we be auditing the management company ?
How often ? and under what parameters ? Thanks allot for any
assistance.

How are you set up and what do your condominium association bylaws say?

Ours say that an audit must be done once a year by an independent company
and reported at the annual owners meeting.
We are set up as a non-profit association and the management company is
employed by us to do just what it says -- manage the property. Our condo
board renews the management company contract each year. At some point they
may decide to employ another company. So, we don't audit the management
company's books; but we do audit our books since that's our money.

TKM


What I was saying is that our management company keeps our books, so
if we don't audit them how do we know they are doing it correctly,
with supporting documentation of expenses, and proper accounting
practices. We are a not for profit and the management company was
hired by the last board they have been our management company for 7 -8
years, and no audit in that time to the best of my knowledge.


My own thoughts on the matter are that if you are this concernesd,
that it may be worth the peace of mind to have an outside auditor go
over things to be safe.

I havbe no idea of the cost but with that kind of money, i think it
would definitely not be out of line to do one especially if there is
no prior record of one having beend one.

I am president of a 22 unit condo with a budget a hell of a lot less
than yours..grin..and if I had to handle that sort of cash flow, I
think I'd want an occasional outside audit just to cover my own rump
if there were ever questions.

Especialy if say, several years from now, someone else did one and
found shortages, you might be the one left holding the hot potato.

It's a largely thankless job and those who voted for you could wel
lturn and rend you if something goes wrong, so I'd give some serious
thought to getting it done..that's a lot of money and people do get
tempted to skim and sometimes decimals simply leap about the page.

Jim P.

Condominium board To Audit or Not to Audit ?
 

On Sat, 22 Oct 2005 14:22:29 GMT, "TKM" wrote:


"Tony Tedesco" wrote in message
.. .
On Fri, 21 Oct 2005 21:51:48 GMT, "TKM" wrote:


"Tony Tedesco" wrote in message
...
I am a member of a new condominium board that was elected back in May
05, the board consists of 5 members, there are no surviving members
from the last board. We have our property managed by a management
company since 1997, there are 107 units with a yearly budget of
approximately $375,000.00. To the best of my knowledge we have never
had a audit of the management company, they do hire an accountant for
an end of year record of the last years finances. to me this is not a
true audit as in my eyes all they are doing is checking the management
companies arithmetic, and they were not hired or report to the board.
I guess my question is should we be auditing the management company ?
How often ? and under what parameters ? Thanks allot for any
assistance.

How are you set up and what do your condominium association bylaws say?

Ours say that an audit must be done once a year by an independent company
and reported at the annual owners meeting.
We are set up as a non-profit association and the management company is
employed by us to do just what it says -- manage the property. Our condo
board renews the management company contract each year. At some point
they
may decide to employ another company. So, we don't audit the management
company's books; but we do audit our books since that's our money.

TKM


What I was saying is that our management company keeps our books, so
if we don't audit them how do we know they are doing it correctly,
with supporting documentation of expenses, and proper accounting
practices. We are a not for profit and the management company was
hired by the last board they have been our management company for 7 -8
years, and no audit in that time to the best of my knowledge.

Way past time to get an audit. In the meantime, ask the management company
to give your board the monthly bank statements of your condo association
account and question items that you don't understand.

Consider pulling the financial operations from the tasks that the management
companly does and have another company do that. Your board should have a
financial person on it who looks at the accounts regularly. Pay that person
something if the work is extensive.


I'd be real careful about paying a Board member...at least in the
states I am familiar with, being a volunteer Board member offers major
liability protection. If you get paid over and above direct
reimbursement for expenses, you are doing it profesionally and the
standards for liability get *much* tougher.

I would suggest hiring a CPA or other suitable auditor as an
independant consultant, someone who would have a fiduciary
responsibility to the Board but who would not compromise anyone's
volunteerr status.

Your legal advisor probably could reccomend someone with the right
qualifications if you want to vbypass the management company
completely.

Having a certifed pro outside of Board membership will also cut down
on any posible squabbles over the Board "cooking the books" if
something is indeed amiss.

Jim P.