Association Records – The What, the When, and the Audit

A former Florida condominium association bookkeeper was arrested earlier this month on charges of stealing almost $500,000 from the association since 2005. The individual allegedly wrote checks to herself, transferred association funds into her personal account, and submitted fraudulent invoices. It was reported last week that an audit of a Virginia community association discovered nearly $700,000 missing from its accounts. The association’s treasurer disappeared at the end of June. Proper maintenance and evaluation of association records can help boards avoid problems of this magnitude.

The state laws that govern Washington condominium and homeowners associations do not specify what records should be maintained or how long they should be kept. It can be inferred that financial documents like bills and receipts should be kept at least the length of time necessary for them to be reviewed during the annual CPA audit (mandatory for Washington condominiums consisting of more than 50 units and mandatory subject to annual waiver for all other Washington condominiums and also Washington homeowners associations with annual assessments of $50,000 or more).

The state law governing Washington nonprofit corporations requires them to maintain, among other documents, financial statements and meeting minutes at their registered offices. Washington condominium and homeowners associations that are nonprofit corporations should comply with this law. The state law governing Washington profit corporations requires them to maintain meeting minutes on a permanent basis and states that they must keep, among other documents, shareholder meeting minutes, annual financial statements, and communications to shareholders at their registered offices for at least three years. Boards could decide to comply with those standards as an added safeguard. The governing documents of many associations contain specific record-keeping requirements that must be followed as well.

Diligent maintenance and evaluation of association records can help boards make more informed financial decisions, defend against owners’ claims of misconduct, and spot theft of association funds more quickly. Boards should ensure that their association records policies allow them to take advantage of those benefits.

Condominium Safety – The Art of Preventing Injuries in Common Areas

Whitewater rafting can be an exhilarating experience. Who needs roller coasters when you can hurtle down a raging river at breakneck speed? However, the risk of striking sharp rocks that are obscured by water and foam is ever-present. Rafters must keep a watchful eye on the river ahead and steer clear of problem areas. Managing the common areas of a condominium requires a similar vigilance.

Condominium associations have a legal duty to maintain common areas in a safe condition. Failure to comply with applicable laws may be viewed by judges and juries as evidence of negligence. If the boards of condominium associations are or should be aware of dangerous conditions in common areas and fail to take prompt action to remedy those conditions, those associations and the members of their boards could end up on the losing end of negligence lawsuits and be liable for significant damages. It is therefore important for condominium boards to always be on the lookout for potential dangers in the common areas of their condominiums.

There are many ways in which an ounce of prevention can equal a pound of cure. Better lighting in common areas can reduce criminal activity and allow residents to spot tripping hazards in advance. Visual inspections of the premises by a board member can identify rotting wood in common area structures before a collapse occurs. Maintenance of sprinkler systems can limit the damage from a fire. Promptly clearing ice from entryways and sidewalks can reduce slip and fall incidents. The key is to spend time trying to anticipate hazards.

Condominium boards should make common area safety one of their top priorities. This involves taking owners’ safety-related concerns seriously, seeking professional guidance regarding the laws that their associations must follow, inspecting the common areas on a regular basis, and causing necessary maintenance, repair, and replacement of common areas to occur at the appropriate times. If boards perform their duties in this manner, they will help their associations avoid some of the rocks that lurk downstream.