Is it possible to audit the accounts of a homeowners’ association?
Can Owner’s Community Be Audited?
In the current context of economic austerity and increased scrutiny of expenditure in homeowners’ associations, it has become increasingly common for owners to seek greater transparency in the management of their association’s finances. One of the measures that have gained prominence is the performance of audits of accounts to evaluate the income, expenses and actions taken by the property manager. This practice seeks to optimise expenses and guarantee the quality of the services provided.
Transparency and good governance in communities of neighbours.
Nowadays, it is highly valued that both the property manager and the president of the community perform their roles with transparency, honesty and efficiency. This is due to the need for efficient management and the increased awareness of owners of their rights and responsibilities in the community.
In order to achieve more transparent and efficient management, it is essential that property managers provide owners with the necessary information and documentation and are ready to respond to their questions and requests. In addition, it is crucial to have the right technology in place to facilitate property management and improve owner care.
The Right of Access to Information.
The Horizontal Property Law (LPH) establishes that the owners have the right to access the information and documentation of the community of owners on an individual basis, as long as their request is objectively justified or is of general interest, and the data protection laws in force are respected.
Every year, the community of owners is obliged to present a justification of its accounts to all owners. However, the LPH does not specify how this presentation of accounts to the neighbours should be carried out, which can lead to different interpretations by property administrators.
The Importance of the presentation of accounts.
Despite the lack of detail in the LPH on the presentation of accounts, it is essential that owners receive full and detailed information on the finances of the community well in advance of the Annual General Meeting. This information should include:
Debtors (unpaid debts and debts owed by owners).
Creditors (outstanding debts of the community).
Bank receipt supporting the community balance.
Budget proposal for the next financial year.
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Audit of accounts in communities of owners
Although the LPH does not explicitly address the performance of audits of accounts in homeowners’ associations, it is important to note that the Instituto de Contabilidad y Auditoría de Cuentas (ICAC) has clarified that the review and verification of the financial statements of these associations are not considered to be an audit of accounts subject to the regulations governing this activity.
However, this does not mean that an audit cannot be carried out in a homeowners’ association. If the owners consider it necessary to hire a company specialised in audits to evaluate the community’s finances, they may do so. However, this audit must take into account that it is a community of owners and that the results must be presented and discussed at a General Meeting of Owners for approval.
Conclusion, opinions and analysis.
The search for greater transparency and efficiency in the management of homeowners’ associations has led to an increase in the performance of audits of accounts. Although the LPH does not explicitly establish this practice, owners have the right to carry it out if they consider it necessary, as long as it is carried out properly and the results are presented to the General Meeting of Owners for approval. The audit of accounts can be a valuable tool to ensure responsible and efficient financial management in homeowners’ associations.
Normative frame of reference.
Horizontal Property Law (LHP)
Institute of Accounting and Auditing of Accounts (ICAC).
Questions and answers.
Are you satisfied with the administration in your community, do you want to apply for a grant for your community’s projects, is there delinquency in your community, do you pay too much for the services you get, how do you save money without affecting good service, etc.?
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