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
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