21 Nov / Condo Financal Statements
Condominium owners often wonder about their Association’s requirements when it comes to financial reporting. While the Michigan Condo Act is vague when addressing this issue, the conservative approach suggests that the Association have their financial statements audited or reviewed annually by a Independent CPA.
The Act reads as follows when addressing the issue “The books, records, and contracts concerning the administration and operation of the condominium project shall be available for examination by any of the co-owners and their mortgagees at convenient times and all books and records shall be audited or reviewed by independent accountants annually. Such audits need not be certified.”
The Act also requires that financial statements be distributed annually to all owners. Without the assistance of a CPA, these financial statements are often incomplete. Financial statements are also a great tool for attracting new owners to the complex. Properly prepared financial statements can reflect the strength (or the troubles ) of an Association and their ability to properly plan for future major improvements.
Attorney’s are also aware of the vagueness of the Act when it comes to financial statements, and often their reaction is to draft the By-Law’s of the Association in a way that clarifies what the Association’s responsibility is.
Remember that the By-Law’s will trump the requirements of the Michigan Condo Act. The Act only provides a minimum requirement, and often the Association By-Law’s requirements are more stringent.
Jeff Schultz, CPA