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Audit Requirements Depend On Revenue

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Q: I recently asked to inspect the financial records of my homeowners’ association. As part of that inspection I discovered that the association has not had an audit for at least the last seven years. When questioned, the treasurer stated that the association does not have to perform audits. Doesn’t every association have to have an annual audit? (A.G., via e-mail)

A: No. The type of annual financial report required depends on the total annual revenues of the association. Pursuant to Section 720.303(7) of the Florida Homeowners’ Association Act, only an association with total annual revenues of $500,000.00 or more is required to prepare audited annual financial statements. Associations with annual revenues of at least $300,000.00 but less than $500,000.00, are required to prepare reviewed financial statements. Associations with total annual revenues of more than $150,000.00 but less than $300,000.00 are required to prepare compile financial statements. Associations with annual revenues less than $150,000.00 are only required to prepare a report of cash receipts and expenditures.

Additionally, regardless of the annual revenues of your association, the membership can vote to waive the statutorily required financial reporting by majority vote of the voting interests present (in person or by proxy), at a properly called meeting of the association. Additionally, 20% of the owners can petition the board to increase the required level of financial reporting for any particular year and if such a petition is received the association must call a meeting of the membership and upon a majority vote of the total voting interest in the association, the members can require additional financial reporting.

Further, the board of directors has the right to obtain a higher level financial report than the minimum required by statute. Sometimes, the bylaws may also impose year-end financial reporting requirements higher than the minimum requirements of the statute.

The Florida Condominium Act contains the same monetary thresholds and the same rules generally apply to condominiums.

Q: Does the Florida law permit homeowners association board members to be on the architectural control committee/design review committee? (Z.K., via e-mail)

A: There is no prohibition against this. The answer will also depend on your homeowners’ associations governing documents.

Chapter 720 of the Florida Statutes, The Florida Homeowners’ Association Act, does not address committee composition. To further complicate matters, the Florida Not For Profit Act, Chapter 617 of the Florida Statutes (which also governs not for profit homeowners’ associations), authorizes the formation of committees, but only speaks to committees comprised entirely of board members, which is typically what is referred to as an “executive committee.”

In the absence of any provision in your homeowners’ association’s governing documents to the contrary, I generally interpret the law to permit the board to create committees and that board members may be committee members. However, one major exception involves fining and suspension committees, sometimes called grievance committees or compliance committees. Both the Florida Condominium Act and the Florida Homeowners’ Association Act specifically require that such committees be comprised of individuals who are not officers, directors, or employees of the association, or the spouse, parent, child, brother, or sister of such persons.

Joe Adams is an attorney with Becker & Poliakoff, P.A., Fort Myers. Send questions to Joe Adams by e-mail to jadams@beckerlawyers.com. Past editions may be viewed at floridacondohoalawblog.com.

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