Audit & Financial Records Review

A clean audit opinion is a statement about whether financial statements are fairly presented under an accounting framework. It is not a statement that the money was spent as budgeted, that the governing documents were honoured, or that anyone authorised the spending. Those are governance questions, and they sit outside the opinion.

The gap this addresses

Boards, councils, and trustee bodies routinely furnish members a set of financial statements and treat the delivery as the accountability event. In practice the statements are received, filed, and never tested against the four documents that would give them meaning: the entity’s own governing instrument, its adopted budget, its minutes, and the statute or bylaw that sets the deadline for producing them.

The review points below are the questions that comparison raises. Each is answerable from documents a member or the public can already obtain. None requires access to the entity’s books, and none asks a reviewer to form an accounting opinion.

The review points

14 points, grouped by what each tests. This set is a draft. It would be versioned, opened for public comment, and re-applied to every prior review when it changes, in line with our Methodology.

Reserves and long-lived assets

1. Required supplementary information. Where the reporting framework calls for supplementary information on future major repairs and replacements, is it presented — and where it is omitted, does the report say so?
2. Funded versus budgeted. The amount the adopted budget set aside to fund reserves, against the amount actually contributed in the year.
3. Governing-document covenants. Where the founding instrument commits a defined sum or percentage to a named fund, does a fund of that name appear in the statements, and is the committed sum in it?
4. Interfund transfers. Movement between operating, reserve, and designated funds — in particular any transfer that brings a designated fund’s equity to zero, and whether it was authorised.

Authority for spending

5. Professional and legal fees. Year-over-year movement in legal, consulting, and professional fees, tested against the minutes for a motion, vote, or resolution authorising the engagement or the payment.
6. Payment authority. Purchasing cards, signing limits, and standing authorisations — whether a written protocol exists, and whether it names an approver distinct from the spender.
7. Procurement. Whether competitive bids were sought where the governing documents or an adopted policy require them, and whether vendor concentration is disclosed. Tested in full under Procurement Integrity.
8. Related parties. Transactions with entities connected to a board member, officer, manager, or their firm — disclosed, or reconstructable only from other records.

Solvency and the member’s exposure

9. Liquidity at year end. Operating cash held, against accounts payable then outstanding.
10. Receivables and allowance. Movement in amounts owed by members, and whether any allowance for uncollectible amounts is recorded against it.
11. Insurance position. Where coverage has been asserted in another forum, whether the statements record a recovery, a receivable, or any note referring to it.

Timing and access

12. Delivery deadline. The date the bylaws or the governing statute require the certified annual report to reach members, against the date the report actually carries.
13. Sequencing of increases. Whether a rate increase or special assessment said to answer a year’s shortfall was adopted, and took effect, before the audited figures for that year existed.
14. Records access. Whether any confidentiality or non-disclosure provision, on its face, reaches records that a statute opens to members. Tested in full under Records Retention & Access.

Where this applies

• Residential community governance — reserve covenants in the offering plan or declaration, common-charge increases, special assessments, capital spending.
• Municipal governance — Business Improvement District assessment in against spending out; capital budget against capital spend.
• Hospital & health boards — related-party and trustee-interest disclosure; community-benefit spending against the amount reported.
• Corporate & institutional boards — audit-committee independence, and whether the committee has the staff to test what management presents.
• Public agencies — appropriation against expenditure, and the timeliness of the report that would show the difference.

How this connects to the rest of the work

Where a review point resolves against the entity, it belongs on a profile. Where it resolves against the law — no independent audit required, no reserve funding required, no deadline enforced — it belongs in a standard and then a model bill. The Model Financial Disclosure Standard in our Research Library is the current draft of that fix for residential associations.

The in-field evidence base for Focus 1 — building by building, firm by firm — is published at condoscoopsnyc.org, which documents the underlying statutory gaps this practice was built to detect.

Other review practices

TASFGA is pre-incorporation. This review practice is a published draft, not an offered service, and no engagement is available. Members of a governed body who wish to apply these points to their own entity are free to do so.