What to Know About Condominium Association Audits in RI

When you are a condominium unit owner, you expect the condominium association or its board members to take care of the finances surrounding your community; things such as snow removal, garbage collection, utilities, and landscaping. You should know how much money of yours goes to what every month. In order to ensure that the association is “healthy,” the condominium association will be audited each year by a Certified Public Accountant (CPA). But what if you get the feeling that your hard-earned money is being used improperly by the association? Can you request your own audit?

Is There a Difference Between an Audit and a Review?

Although both audits and reviews are conducted by CPAs, they still differ. A review is a simple overview of the association’s finances and is conducted to ensure that finances are being managed properly. But while this looks at the financial records and documents of the association, it does not get into the nitty-gritty of the association’s financial state. Since they are much simpler in nature, reviews tend to be less expensive. 

Alternatively, condominium audits are much more detailed in nature and are conducted for the purpose of assessing the financial records, creditors, and debtors of the association to ensure that the numbers line up properly. An audit looks much more intricately at the legal compliance, financial forecasts, and financial records of the association. 

Things to Know Before Requesting an Audit

Before you request an audit, it’s best to inquire as to whether your condo association is compliant with the Federal Housing Administration’s (FHA) certification process since this would mean it would be required to carry fidelity insurance. Fidelity insurance can help protect against fraud and theft and for the liability of board officers should there be gross mismanagement and subsequent financial loss. That’s why checking to see if the association is FHA certified is a good idea prior to purchasing your unit. 

If your association is, in fact, certified by the FHA but you are still wondering what is going on with the finances, there are a couple more steps that you can take before requesting an audit. 

  1. You can ask your board to provide you with all relevant financial information so that you can do your own review; and/or
  2. You can ask permission for your accountant to perform a Level 2 or Level 3 audit depending on the type of audit that the board currently uses. Since these types of audits can be very expensive, they are generally only used when there is reasonable suspicion of fraud.

It’s also important to note that under state law, associations must keep their financial records and must make them reasonably available to be examined by unit owners or their agents upon request. 

PALUMBO LAW Helps Those in Rhode Island with Condominium Law Issues

If you have reviewed your board’s finances but still wish to request an official audit, it’s imperative that you understand what you are entitled to. 

At PALUMBO LAW, our experienced Rhode Island Condominium Law attorneys understand Rhode Island condo law and will work strategically to help our clients to get what they deserve. If you suspect that there is theft or fraud going on within your condominium association and its board, we can help. To learn more or to schedule a free consultation, call us today!