Our Auditor

BCC budgets $6,000 for our audit. While the BOD may be happy with the auditor’s performance, BCC owners should demand more than the lame audit we got. “Audited” and “Auditor” is in quotes throughout this blog because of the quality of the product we received.

The purpose of the audit is to protect BCC owners whose money is being reported on. It is supposed to assure us that the BCC Board of Directors are properly controlling and accounting for our $2 million+ in annual maintenance fees.

This 2008 “Audit” doesn’t do it! It’s time to insist the BOD engages an auditor who realizes his responsibility is to BCC owners, not the BOD. Owners need and deserve an audit that highlights problems and suggests solutions, not one that glosses over mistakes and attempts to bury them with “prior period adjustments”.

Bernie Madoff’s outfit was "audited" too!

64 DAYS LATE AND $31,669 SHORT

The Board of Directors’ explanation for delay in releasing 2008 audited year-end Financial Reports was puzzling. In his July 1, 2009 Affidavit to the Florida State Department of Business and Professional Regulation, board V.P. George Lauth claimed that:

1. The “Audited” Financial Report was received too late to make the state-required April 30 deadline for release to BCC owners; and,
2. On receipt, “errors were noted by the Association’s accountant” and investigation and correction was required.

The facts are:

A. The report was available for review April 13 and, despite numerous reminders and promptings from various sources, was not included on the April 23 BOD meeting agenda or even reviewed by BCC’s Treasurer until early June.
B. “Errors …noted” were confined to rental and dock deposit accounting. (More on deposit accounting follows.) These problems were certainly apparent in the September 2008 (if not earlier) monthly Financial Reports. Why wasn’t a correction made earlier in the year?
C. Delay in releasing year-end financials was caused by BOARD failure to do their job. An identical failure in 2003 (made by mostly the same people) resulted in a $4,800 fine from Florida State.

IT'S ONLY MONEY, RIGHT?

BCC requires security deposits for each unit rented ($300 - $1,000) and for each boat at our docks (three months dockage fee). These deposits are supposed to be kept in separate, non-interest bearing accounts and, absent damage, returned to the renter or boat owner on termination of the lease.

Standard accounting practice requires that these deposits be shown on the books as an Asset (under cash) and as a Liability (because they will have to be repaid). The Assets and Liabilities should be equal with, perhaps, some minor difference caused by transaction timing on individual deposits.
Our “Audited” 2008 Financial Report is not close to balancing deposit Assets and Liabilities. [Total Cash Deposits (Assets) of $141,673 ($120,308 Rental + $21,365 Docks). Total Deposits Liability of $127,317.] Last year’s 2007 Financial Report had Deposit Cash and Liabilities balanced with a minor difference. The 2008 imbalance, therefore, developed during this BOD’s 2008 term.

The amount of cash in Dock deposits makes absolutely no sense. The “Audited” 2008 Financials as well as the accountant’s Monthly Financial shows $21,365 Dock Deposit Cash. Our Accountant’s Monthly Financials for 12/31/08 has the offsetting Docks Liability at $8,726. Dock Cash and Liability amounts are not close to balanced. (The “Auditors” report does not break out Security Deposit Liability into Rental and Dock, but presumably the total liability of $127,317 shown includes $8,726 Dock Liability.)

1. The security deposit for each boater is equal to three months of his dock fee.
2. Total dock security deposits should be three times the total monthly dock fees.
3. Monthly dock income was budgeted at $3,000 a month and has actually been less.
4. Dock security deposit cash should not be more than $9,000 (3 X $3,000).
5. Dock Deposit Cash cannot logically be $21,365. Where did that number come from?
6. As of 10/31/08 Dock Deposit cash was $52,412. On 11/30/08 Dock Deposit Cash was $21,360. Where did the $30,000+ go?

A cursory look at BCC financials reveals obvious discrepancies within the reports themselves. In his report, our “Auditor” made no comment on the mess in the Deposits accounting nor did he suggest a closer investigation or a remedy. If such an obvious discrepancy was allowed to exist, what might be buried in more obscure areas?

UPDATE 8/12/09: ADDITIONAL AREAS OF QUESTIONABLE ACCOUNTING HAVE BEEN DETECTED. FOR DETAILS, PLEASE CLICK ON COMMENTS BELOW.