S.O. from Franklin County, Ohio writes:
Dear Mister Condo,
A majority vote of 51% of the owners requested an independent audit. There has not been an audit in twelve years. The association has stated that we will be assessed to pay for the audit. The declaration does not state that the Board has to complete an audit. What is the best way to handle this matter? The property is deteriorating and needs many repairs.
Mister Condo replies:
S.O., let’s jump ahead to the end of your question: “The property is deteriorating and needs many repairs.” Audits are a great idea and some states require them but let’s face it, if the property is deteriorating and needs many repairs, an audit is the least of your worries. My guess is that what your HOA really needs is a financial wake-up call that the common fees have been too low for many years and that your Reserve Fund was not properly budgeted and that there is simply no money available to properly maintain the property. Your Board needs to conduct a Reserve Study and likely face the reality that a Special Assessment or HOA loan is going to be needed to make the necessary capital improvements and repairs and that the common fees will likely need to be adjusted significantly upward to avoid this same problem from occurring again in 10 or 15 years. If the owners suspect that money has gone missing or embezzled, an audit would help shed light on that matter but I am guessing all an audit will do is cost the association money that is desperately needed elsewhere right now. My advice is to handle the repairs immediately, have a Reserve Study prepared, and prepare the homeowners for a Special Assessment and increased common fees. This will be a bitter pill for association members but it is the right path for the association to get back on sound fiscal footing. Good luck!