“Does a Condominium Audit Require Owner Approval” – News-Press

Q: My condominium association has a budget of less than $300,000.00 per year. At a recent board meeting it was stated that the association plans to have an audit of the association’s finances. I understand that the Florida Statute would not require our association to have audit and there was no owner vote taken authorizing such expenditure. Is this appropriate? (G.R., via e-mail)

A: Yes, the Florida Condominium Act (“Act”), Chapter 718, Florida Statutes, allows the board of directors, without a vote of the owners, to approve a greater than otherwise required level of financial reporting.

You stated that your association has an annual budget of less than $300,000.00. Typically, pursuant to Section 718.111(13)(a) of the Act, your association would be required to have compiled financial statements prepared. An association with greater than $300,000.00 but less than $500,000.00 in annual revenues, is required to prepare reviewed financial statements. Associations with revenues in excess of $500,000.00 are required to have an audit prepared. For associations with less than $150,000.00 in annual revenues, they are required to prepare a cash receipts and expenditures report.

If the association wants to have a lower standard of financial statements prepared, it may only do so following approval by a majority vote of all voting interests in the association. Such vote must occur before the end of the fiscal year in question and is effective only for the fiscal year that the vote is taken. Additionally, the association may not waive its required financial reporting requirements in consecutive years.

Here, however, your question involves not the preparation of a lower standard of financial statements, but a higher standard. The Act specifically provides that, without a meeting of or approval by the unit owners, the association may have a higher level of financial reporting prepared. As such, the board, by board action alone, has the authority to approve audited financial statements where compiled financial statements are only required by statute.

In addition to the requirements in the Act, the association should also review its bylaws to confirm that a greater level of financial reporting is not required by the condominium documents.

Chapter 720, Florida Statues, the Florida Homeowners’ Association Act, contains similar financial reporting requirements for homeowners’ associations. Section 720.303(7) of the Homeowners’ Association Act contains the same financial reporting thresholds as the Condominium Act and also allows for the waiver of the statutory required level of financial reporting upon approval of a majority of the voting interests present at a properly called membership meeting.

While the Homeowners’ Association Act does not contain express authority for the board to authorize an increased level of financial reporting, rather, it provides that upon petition of 20% of the voting interests in the association, the association shall call a membership meeting for the purpose of raising the level of financial reporting for the subject fiscal year and upon approval of a majority of the voting interests in the association shall prepare the approved increased level of financial reporting and may amend the budget or levy a special assessment to pay for same.

Again, any homeowners’ association reviewing what level of financial report is required should also review its governing documents to confirm that the documents do not impose a higher level of reporting than is required by the Homeowners’ Association Act.

Joe Adams is an attorney with Becker & Poliakoff, P.A., Fort Myers. Send questions to Joe Adams by e-mail to jadams@beckerlawyers.com. Past editions may be viewed at floridacondohoalawblog.com.