Just got this records request from a homeowner. Seems kinda like a fishing expedition to me. Is this within her rights to ask for all this information at one time and include a CPA and other homeowners?
Following is the request:
I am requesting to see any/all of the financial records for Velda Rose Estates for the year 2022. This includes every invoice, charge account statements with receipts, checks register and checking account statements, savings account statements, etc. I do not want copies but would like to review them in person. This can be done with a board member present if you so choose. Place does not matter. Colby clubhouse would be my suggestion. Please let me know what day you can do this. I anticipate this taking more than one day. The dates must be scheduled within 10 days, actually occur before March 31st and must also be agreeable to me. I will be having another member accompany me as well as a CPA hired specifically for this purpose.
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The law specifies “reasonable” request to view records. I will tell you exactly what I would have told this individual if they had asked me beforehand. This request is totally unreasonable and overly burdensome. It is clearly a fishing expedition with no clear purpose and mission. I would state with certainty that any association faced with this same request would refuse to provide the request and if challenged in court would prevail in any court in Arizona.
If the individual has a specific concern, they can ask for focused request for record review. You are required to do either an audit, review or compilation of your finances on an annual basis. This is for a reason. The report of that review must be provided to any homeowner upon request. Even if the homeowner is on a fishing expedition, they can ask to see the monthly budget comparison reports for one year, or one years’ worth of bank statements, and that would be appropriate. But when you add the transaction ledger entries for one year or the checking account register for one year that throws it over the top. Even with a CPA present such a forensic review could take a weak or more. No association can be reasonably expected to babysit such a blatant fishing expedition. If the members starts with a high level review, and a specific concern arises, they can then focus down to transaction histories for a budget line item for one or two months. This systematic approach financial review starting with a high-level review then focusing down to individual transactions is both reasonable and of limited burden for the association. What I tell all homeowners if first to look for smoke at a very high level, then drill down to find the fire if any exist.
The homeowner has the right to designate a representative to view the records, you would be hard pressed to defend denying both the requestor and the CPA from reviewing the records. But the other homeowner would have to request to view the same records, and they can do that together. While her time is her time and what she pays for the CPA is up to her, what you believe the impact of your resources to satisfy such a broad based and open ended request.
You have every right to reject this request as both unreasonable and overly burdensome. I would take a clear and objective review of why any homeowners would make such a request, is it based on a true and real concern for mismanagement or misappropriations of funds. Is this request based on a legitimate concern or a clear vindictive attack by a member with an agenda. Have other homeowners expressed concerns over financial management? Has the board truly been objective and challenging on the financial statements from the community manager? if not why not? If in doubt you would be best served as would your community if you and the board ordered a forensic audit of your own financial records. and let everyone know of your actions. Embezzlement and misappropriation of association funds do happen, not often but they do happen and while criminal prosecution is possible restitution of lost money is seldom achieved and the homeowners are left to restore the embezzled funds.
Dennis, your reply in this matter is most helpful. Can you recommend a method of review – direct access, PDF scans, paper printouts-that is most likely to result in approval of the request to review specific transactions such as tax-exempt reimbursements to Board members for meals and entertainment? The management company here stated they only provide paper copies, and that the paper copies cannot be certified as true and complete duplicates of the original. They are requiring 30 cents per page of non-certified paper. I don’t like the idea of printed paper circulating and favor seeing files electronically through a secure portal. Would this method be reasonable to request?
You are entitled to view any reasonable requested record of the association. There is no distinction between certified or non-certified records a record is a record, and the association has absolutely no right to retain two different version of a record. The law requires that you be able to view any record free of charge. they are allowed to charge you no more than $0.15 per page for any copies that your request. If you do not request copies than you don’t have to pay for anything but what the association shows you must be the official record of the association. If the association want to print out a document to show you that is fine, but it must be the official record and they cannot charge you for that printing. The law does not address electronic access to records but since most are stored electronically that is totally reasonable, but the association is not required to do so. If the association wants to be stupid the law does not keep them from being so.
I would like to address the question above and your comment about requesting financial records for all of 2022.
First of all, it was not unreasonable in any way. The BOD is spending homeowner money and they have a right to know how much is being spent and for what. And second, as to it being burdensome, that was not the case at all. We are not a huge community. Each month was organized in a separate folder (as the treasurer always does) and easy to follow. The review only took about 3 hrs.
What I think you failed to realize was that this request was made because we have a board who spends money and never tells us what anything costs. They do not get 3 bids and recently upped the amount they can spend without asking. Requests have been made for several items that have never gotten a response. The monthly financials, published in the newsletter, do not identify what is spent on specific items. During the review, it was discovered that there was another page to the financials that has never been published and does show many of the specifics. It was also discovered that there is no posting as to what is in a deposit. Even when questioned directly, the treasurer could not identify what was included in a specific deposit,
We asked that those 2 things (publishing the 2nd page of the financials and listing what is included in a deposit) be addressed/resolved but again, nothing has happened.
While I complete understand your frustration with an association that is resistant to transparency. I just caution you that while you believe that your request for information is reasonable the specifics of the request are what will determine the outcome if you challenge the refusal in court. The association clearly has a duty to provide financial transparency relative to the business and expenses of the association, and the association has a fiduciary responsibility to act prudently in the management of the association funds. Not getting multiple bids for significant expenditures have been found by the courts to reflect a lack of prudency.
They clearly have a job to do, that your community put them in this position of responsibility to do. You need to allow them the opportunity to do the job that you want them to do without second guessing every move. If you have concerns about specific transactions, then you have a right to see the details of that transaction and the association has the obligation to provide you access to that information in a timely manner. But request for a year’s worth of detailed financial records without any specific concern identified will always be viewed by the courts as unreasonable and overly burdensome. No matter how you feel about the issue. If you feel that your are not adequately informed about a particular months income or expenditures and want more details about that month you are free to ask for those details and the association is required by law to provide them. But doing that month after month will always be viewed and unreasonable.
If you don’t trust your board to do the right thing for the association then work to remove that board or individuals on that board from that position. If enough people feel the same about the issue, they will sign the petition and vote to recall those board members. Otherwise, you must allow then to do the job you put them there to do.