What is the difference between a financial Audit, Review, or Compilation and do I need one at transition?

During a Compilation a CPA simply prepares the financial statements of the Association from information provided by the association but offers no assurance as to whether material changes are necessary for the statements to be in conformity with generally accepted accounting principles.

A Review is an inquiry and analytical procedure applied to financial statements. The CPA does not confirm balances with banks and creditors or test-selected transitions by examine supporting documents.

An Audit is the most extensive service a CPA can provide to an Association. It provides the highest level of assurance that the financial statements are presented fairly in conformity with generally accepted accounting principles. An Audit may be required by the Associations legal documents. If not required by the legal documents the new Board must use its best business judgment in determining if an Audit is needed.

A common problem with many new associations is that the financial records are not sufficient enough to be auditable. This determination may be necessary before engaging a CPA to conduct an audit. It would be in no one’s best interest to spend several thousand dollars for an audit only for the CPA to determine that the association’s records are unauditable.

Is there a State or Federal Agency that oversees the Association when it is in developer control?

No. The court system would most likely be your recourse if you have a legal dispute between the developer and owners.

Why does the Association exist in the first place?

The Association exists primarily to share in the ownership and maintance of common areas, such as swimming pools, and for the enforcement of Restrictive Covenants.

Why do I have to pay dues?

The payment of dues or assessments is mandatory. You may not have been aware of it, but you agreed to pay these fees when you purchased your home. The association's legal documents tie the ownership of your property and the payment of dues to an association.

What are the Association’s legal documents and how do I get a copy?

Condominium Associations have a Declaration (sometimes called a Declaration of Covenants, Conditions, and Restrictions, or CC&R), Articles of Incorporation, By-laws, and a Public Offering Statement.

Homeowner Associations usually have Articles of Incorporation, Restrictive Covenants, and By-laws.

The Articles of Incorporation can be found online at the NC Sectary of State’s website www.secstate.state.nc.us.

The Declaration is recorded at the County Courthouse in the County where the Association exists.

The By-laws may or may not be recorded with the State or the County and are usually pasted on by the Developer.

The Developer provides the Public Offering Statement.

What is the Association’s Registered Agent and why is it important?

Every North Carolina corporation, including homeowner associations is required by law to have a registered agent. The registered agent’s name and address is filed with the North Carolina Secretary of State and, in the unfortunate event the association is sued, the Sheriff serves the registered agent with the lawsuit. The registered agent then notifies the Board of Directors. Many associations never change their registered agent, and the agent is a representative of the original developer, or a board member that moved long ago. If the registered agent cannot be found the association may never receive actual notice of the litigation. A board member may serve as Registered Agent, but most associations prefer to have the Management Company serve in this capacity.