When Is a Review or Audit Required or Recommended? - Oregon

When Is a Review or Audit Required or Recommended? - Oregon

Oregon State Law - Requirements

Oregon Planned Unit Development Act
ORS 94.670 (5) (Subject to ORS 94.671)
The association of a planned community that has annual assessments exceeding $75,000 shall cause the financial statement required under subsection (4) [“Balance Sheet and “Income and Expense Statement”] of this section, to be reviewed within 300 days after the end of the fiscal year by an independent CPA licensed in the State of Oregon in accordance with the Statement on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. (AICPA)

ORS 94.670 (6)
The association of a planned community created on or after 1/1/04, or the association of a planned community described in ORS 94.572,  that has annual assessments of $75,000 or less shall cause the most recent financial statement required by subsection (4) of this section to be reviewed in the manner described in subsection (5) of this section within 300 days after the association receives a petition requesting review signed by at least a majority of the owners.

ORS 94.670 (7)
An association subject to the requirements of subsection (5) of this section may elect, on an annual basis, not to comply with the requirements of subsection (5) of this section by an affirmative vote of at least 60 percent of the owners, not including the votes of the declarant with respect to lots owned by the declarant.

Oregon Condominium Act
ORS 100.480 (5) (subject to ORS 100.481)
The Association of unit owners of a condominium that has annual assessments exceeding $75,000 shall cause the financial statement required under subsection (4) of this section [Balance Sheet and Income and Expenses Statement] to be reviewed within 300 days after the end of the fiscal year by an independent certified public accountant licensed in the State of Oregon in accordance with the Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. (AICPA)

ORS 100.480 (6)
The association of unit owners of a condominium that has annual assessments of $75,000 or less shall cause the most recent financial statement required by subsection (4) of this section to be reviewed in the manner described in subsection (5) of this section within 300 days after the board of directors receives the petition requesting review signed by at least a majority of the owners.

ORS 100.480 (7)
An association of unit owners subject to the requirements of subsection (5) of this section may elect, on an annual basis, not to comply with the requirements of subsection (5) of this section by an affirmative vote of at least 60 percent of the owners, not including the votes of the declarant with respect to units owned by the declarant.

Recommendations:

Oregon law allows an exception to the Review requirement. Our firm has identified ten circumstances where we strongly suggest that a Review or Audit be performed. They are as follows:

  1. When large amounts of money are received for unusual circumstances. Two examples are construction defect settlements or large insurance proceeds.
  2. When there is unusual replacement fund/reserve activity. This may be when there are large reserve projects, when the Association is severely underfunded, or if the Association is not meeting budgeted expectations.
  3. When there is a change in management companies. (This is not an absolute, but it seems to be a good time to ensure that the transition between the management companies results in the correct balances being carried over and properly set up on the new books.)
  4. When there is little or no internal control. An example of this would be when the Association is self-managed, and the treasurer writes the checks, signs the checks and prepares the bank reconciliations.
  5. When the board has not been receiving financial statements on at least a quarterly basis. This is especially true when there is no standard accounting system in place.
  6. When there is suspected fraud or embezzlement. (Please tell your CPA of your suspicions before the engagement begins! Possibly, the CPA will refer you to a Forensic Accountant rather than the standard GAAP/GAAS audit.)
  7. When there is a lot of political infighting among the board members or there is a transition from one board to another which is not pleasant, such as the case of a recall.
  8. When the developer turns over control of the Association to the homeowners. (Even when not required by the state law.)
  9. When the Association is having financial difficulties. It may seem strange that the Association should spend more money when it is losing money. But, it may be that the Association needs a professional to spend some extra time on the books to ensure that everything is being properly recorded. When an Association is in financial trouble is when they need help the most.
  10. Associations with over $500,000 in annual assessments.