How do we get an audit?
Our board president and her minions refuse to have our financial books audited. How do we go about getting this done? Thank you.
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Michele,
Arizona law requires that every association to have either an Audit, Review or Compilation completed on the association finances every year. Those accounting reviews are identified in decreasing rigor. The associations are allowed the choice if the declaration (CC&R’s) do not specify that an audit is required. Many older CC&R’s used the term “audit” generically but those association then lose the option and must do audits annually.
As homeowners you have absolutely no power to force the association to do an audit. If you have reason to question the finances, then you can ask for an audit to be done and provide the board the justification for your concerns. They do not have to comply with your request, but the board does have a fiduciary duty and if a legitimate concern does exist, they are obliged by their duty to the association to investigate the concern and if appropriate have the audit performed. Failure of the board to act reasonably with this issue could result in them being found in breach of duty to the association and its members and could personally be held liable for the consequences. Board liability indemnification and D&O insurance does not cover “breach of Duty” issues.
As for the community if you are not happy with the response of the board you can always circulate a petition for a special meeting of the members to recall the entire board and elect a new board that will start with an audit of all finances and clear the slate and move on.
I will note that even if your remove the board if a subsequent audit proves that the board failed to maintain its fiduciary responsibilities to the association the new board would be free to pursue litigation on the past board based on their actions when in office.
Dennis
Hello, we only have meetings when HOA has something to tell us. The last meeting we had was December 2023. We have no idea we’re the $202 monthly fees are going. I’ve live here for 6 years and we’ve had the same board members which are also Buck Reynolds. I would like to be able to have their books audited. Our HOA doesn’t operate like anyone else. We are told we are broke and that is why gates , roads other maintenance isn’t being done. We do have a man made lake, I do understand that cost. Their is more to much to type.
Thanks for any help you can give our community.
Connie,
I understand your concern, it is hard to give $202 a month when you cannot see where the money goes. That is why we have transparency laws in Arizona. You are entitled to see any and all financial and other records upon request. The association is required to have open board meetings to deal with all association business and board action and all homeowners are entitled to attend those meetings and ask questions on any issue being discussed. Finally the association is required by law to hold annual meetings of the members to inform the members of association business and to hold the board accountable for their actions. Compliance with the law is not optional as is ignorance of the law no excuse for board members to fail to comply. Your board need to read state statutes and get advice on how they should operate this community. While I’ll gladly help the board at no cost upon their request it is probably unlikely that that will occur.
You and the other members have no authority to demand and audit but the law also requires some type of outside financial review on an annual basis. The association is required to have that review completed and made available to any member upon request.
The law is there to protect all of your interest but if the board decides to ignore the law it provides little consequences to the board and the members have only litigation to force compliance which is very expensive.
Dennis
This HOA doesn’t go by the laws from what I gather. They have board members that are from Buck Reynolds. Now they have 2 of the board members are from land development. But the gentleman that is part time resident has been on the board for the last 15 years. We are paying for stuff that isn’t being used. The meets when we have one is on FaceTime. They don’t answer any questions,. The reply is I will look in to it and then that is the last you hear. We have 99 home owners here and there is more land to be developed. That land development only pays one $202 I hear for their part. Someone needs to be governing these HOA other wise their is no count ability if the home owners have no say.
Connie,
It sounds to me that you may still be under declarant control and the declarant chooses who will serve on the board, is that the case for your community? Please read your CC&R’s. The amount of control that developers give themselves in these documents is often quite extreme and often totally unfair and unreasonable. But the problem is they are part of a contract that all of you agreed to when you bought your home. Most people don’t bother to actually read these documents before they buy and then find themselves in a situation like yours. The declarant can only apply the special rights that were written into the original CC&R’s and can not change those rights without the unanimous consent of all homeowners. This is case law for Arizona that most developers ignore.
We have no state based oversight agency in Arizona and even if we did they would be absolutely useless because they would be staffed by the same people that cause all the problems in these communities. Many people have asked me to advocate for such an agency and I’ve absolutely refused to waste my time doing so. There are 11 states in this country that have a government division overseeing these communities in their states and the homeowners re no better off in those states then in states without government oversight. The government has never fixed anything what I advocate for are laws that empower the homeowners to balance the power in these communities and regulate themselves. Clarity in the law is vital to that balance of power not over regulation.
Dennis
Dennis.
Yes, that is the case from what I understand. From my understanding we were suppose to be able to take over our own community and pick a different board. I guess that there was a statement in the cc&r’s, but the Buck Reynolds changed it without any votes and extended it. My neighbor was telling me about it I’m not sure where she got her information. None of us were notified of this or got a vote. When I bought my house I was told it had HOA, but I had no idea that the property had gone into bankruptcy and how it worked. In Minnesota our HOA doesn’t work at all like this. I guess we are lucky that the state does thing’s differently. I’m still trying to learn how it works here and how they get by with no transparency. How they averages a meeting once a year.
I do appreciate everything you are trying to do for us home owners in these HOA’S. I sure hope homeowners can get more balance in the power of their communities.
Connie
Connie,
What you are referring to is what is known as the period of declarant control. What your declarant did in extending the period of declarant control without any approval of the owners is illegal under contract law. We tried to address this transition in legislation last year but failed, we will try again this year. We will also work on improving the existing transparency and ensure that they are also applied to declarant controlled boards. While I can do a lot I still need the help of as many homeowners as possible to get this legislation passed. This is what my coalition is about working together to get better laws to improve these communities and protect homeowners from abuses of power.
Dennis
So can we fire them? Is there anything we can do? So what help do you need from homeowners?
Have a great evening!
Connie,
While the members of the community have the power to recall any elected board member that power does not extend to board members appointed by the declarant, during the period of declarant control. The declarant has total control over the community and is established as a total dictator over the affairs of the association and community. This is why we have tried for two years to get legislation in place to limit the time of this period of declarant control. We will try again next session with a new bill that I’ve already drafted.
What I need from homeowner is to let as many of your friends and neighbors know about our coalition and to ask them to join. There are no fees involved and I provide my support free of any charges. I need homeowners to contact their legislations and to ask them to sponsor legislation that I’ve drafted to protect homeowners and establish public policy over the governance of these communities that is fair and balanced for both boards and residents. During the legislative session I’ll inform everyone when a specific bill needs action from the coalition and I ask that you all provide that direct support to help get that legislation thru.
Dennis
Thank you for your help. I will see what I can do. Is their any contact web or numbers we need?
Just direct them to this web site and ask them to join as you have.
Dennis
What about this:
Arizona Revised Statutes Title 33. Property § 33-1243. Board of directors and officers; conflict; powers; limitations; removal; annual audit; applicability
file:///var/mobile/Library/SMS/Attachments/97/07/DD7F6E8B-0F43-4174-944F-ADAE70549E53/IMG_2591.jpeg
Connie,
I’m not sure exactly what your question is here, but what you referred to is a condominium statute, not a planned community statute. There are corresponding sections for planned communities in ARS 33- chapter 16.
Dennis