Depending on the amount of income, an Association is required to prepare Compiled and Reviewed Financial Statements at the end of its fiscal year. In some cases, the only report necessary is a spreadsheet showing the cash receipts and expenditures.

In the cases described above the external auditor does not render an Opinion, since the scope of his work is below the guidelines he must follow to express it.

However, if a condominium Association has income over $400,000.00, the law requires that the books of the corporation must be audited.

The spirit of the legislator when creating this rule is clearly inferred: Audits are necessary to prevent deliberate misstatement of fact, to assure that judgment decisions are not unduly biased in favor of any one, to assure accounting records are dependable and trustful, guarantee that Generally Accepted Accounting Practices (GAAP) have been consistently followed, and to make certain that the disclosure is complete.

It is extremely important for Board of Directors to read the Auditors Opinion very carefully.

There are four types of Opinions: Unqualified, Qualified, Disclaimer and Adverse.

These are the implications:

1. Unqualified Opinion - financial statements present fairly the financial position and operating results of the corporation in conformity with GAAP.

This is the best Opinion, and the one responsible Boards member must require from the management company.

2. Qualified Opinion - statements are fair, “subject to” or “except for,” because some area was not able to be tested or there was a situation that required deviation from the normal procedures.

3. Disclaimer - the auditor was unable to render an opinion on the fairness of the financial statements.

4. Adverse Opinion - the auditor feels the statements are not presented fairly and the situation remains unresolved.

Anytime a Board member reads an Opinion by the external auditor that state “We do not express an Opinion”, or that “statements do not fairly represent the financial situation” of the entity being audited, he/she must be alerted that something very wrong is going on with the Accounting of the Association by the property management company.

Likewise, when an Association has revenues above $400,000.00 and the auditor is asked to perform a Review, interested party should question why this departure from the law.

The Board must also be aware of the undesirable legal consequences on their fiduciary responsibility of questionnable financial statements, misrepresentations which, in many cases, have translated into lawsuits affecting their own personal assets.

As per the Association itself, severe qualified financial statements can have dire consequences in case external financing is required, since banking institutions seldom lend to potential clients with shoddy financial statements.

Highly qualified financial statements has proved to be a big burden for many Associations adversely affected by hurricanes Katrina and Wilma, unable to get much needed funding to restore the damaged assets and their standard of living.