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Q&A: Audit Audacity

Q I own 2 units in a Florida co-op that has 250 units. The resort has rental sales in excess of $500,000 annually. Our last audit was done over ten years ago and with the new law regarding audits I understand that there MUST be an audit at least every three years, which means the mandatory audit will be done in 2017. In 2015, at the annual meeting, we did not have a quorum (we rarely do) and therefore we did not have a meeting. A paper ballot was sent out to the membership with the recommendation of the board to "waive" an audit again for this year. Eighty-two votes came back to waive and 47 votes came in to have the audit. In reading the law, I believe that in order to waive the audit there must be a quorum, it must be done at an annual meeting and it requires 126 votes (in our case) to waive the audit since resort sales are over $500,000. The current board is leaving in 2017, which means that for the entire 12 years they will have sat as board members they have NEVER had an audit. In the last two years many "discrepancies" have come out with regard to our balance sheet, laundry income and rental discrepancies. The president is a real "bully" and uses the co-op attorney to intimidate anyone who challenges his authority. He owns seven units and I'm worried we are in for a big surprise once he leaves the board in 2017. Can you help us?

—Worried in West Palm

A According to Eric M. Glazer, founding partner at the law firm of Glazer & Associates, P.A. in Fort Lauderdale, “Florida Statute 719.104(4)(b) states: “Except as provided in paragraph (c), an association whose total annual revenues meet the criteria of this paragraph shall prepare or cause to be prepared a complete set of financial statements according to the generally accepted accounting principles adopted by the Board of Accountancy. The financial statements shall be as follows: 3. An association with total annual revenues of $500,000 or more shall prepare an audited financial statement.

“So without question, the co-op must prepare an audited financial statement and had to do so each previous year. There is one way to waive the audit. The statute says: 4. The requirement to have the financial statement compiled, reviewed, or audited does not apply to an association if a majority of the voting interests of the association present at a duly called meeting of the association have voted to waive this requirement for the fiscal year.

“So, in order to waive the requirement for the audit, a meeting must be called. A quorum of unit owners must appear at the meeting either in person or by proxy. If a quorum is attained, a majority of them would need to vote in favor of waiving the audit. If a quorum is not attained or a majority of the votes cast are not in favor of waiving the audit, the audit must take place. The number of owners needed for a quorum is typically found in the association’s governing documents.

“The statute requires that the meeting to vote on waiving the audit must be held prior to the end of the fiscal year. This means that if the association’s fiscal year runs from January 1 to December 31, it may be too late to waive the audit requirement. Furthermore, even if the co-op is successful in obtaining the vote, the vote is only effective for one fiscal year. Finally, it is certainly troubling that this cooperative never had an audit, because the statute is clear in that an association may not waive the financial reporting requirements of this section (the audit) for more than three (3) consecutive years.”

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