People’s reaction to conflict is often amusing. Last week’s battle with a management company is a great example.
When we first brought the issue to the attention of the management company, they told us that they had authorization to do the work and invoice for it. Never mind the fact that the minutes to the directors meeting didn’t say that the management company’s proposal was accepted and approved. The minutes were silent.
As I have pointed out in other blog posts, the minutes in this case were kept by the management company. This is so even though the bylaws state the board secretary is responsible for recording the meetings and securing the minutes. But even though the management company kept the minutes, the minutes did not provide approval.
They did the work anyways. And then billed extra. We questioned the transaction as we think any good auditor would.
The manager’s response? They updated the minutes.
Really? I know, it is wrong on so many levels. But even though they updated the minutes they still didn’t say that the board approved the transaction. Even they knew there is a line they can’t cross.
After that, we were met with silence. Three times we inquired as to additional proof that the transaction was valid and we were met with silence each time. They figured we would go away or worse, feel no choice but to accept their statement.
But there was a right way to handle this. First would have not been to do any work not explicitly authorized by the board. The management company, after all, works for the board the same as the auditor does. They have a contract which specifies the work they are to do and the compensation they are to receive. When there is work to be performed beyond the management agreement, that work needs to follow the basic rules the board has laid out.
The right way would have been to solicit three bids from reputable contractors. The manager would have presented these to the board so they could make an informed decision. The manager then would have contacted the awarded contractor and scheduled the work.
The right way would include not submitting a proposal from a contractor who didn’t agree to the terms that were apparently presented to the board. The right way would also not have the manager offer to step in to fulfill the service when the contractor said no.
From our perspective as the auditor, there is a right way and a wrong way. The right way means acting with integrity and intention. It means accepting responsibility when things go wrong and reconsidering your processes so that they can’t happen again.
The wrong way is to blame the CPA for questioning the transaction. The wrong way is to say that the board is wrong and to argue that everyone knew how hard you worked. The wrong way is to tell us that you can find five different CPA firms who will see it your way and that you will make sure we never audit another of your clients.
As auditors, C.O.R.E. Services follows a simple rule: Do it the Right Way. If at the end of the day, our clients, the boards of property owner associations and other entities, prefer to have us focus on their rules and compliance so they can feel good about the financial statements, then we will continue to offer our service. And if the market shifts and these same boards no longer want to know that things are done correctly, well then the market will win and we will have to find some other line of work where our integrity and intention will matter.
As we explained to this community manager, the cost for their referral was too high. I would rather starve then become beholden to a community management company who skates on ethical thin ice. And if the day comes when boards would prefer to have a community management company lackey as their auditor so they can avoid the conflict of challenging the manager’s decisions, then we will stand by waiting for the inevitable lawsuits to begin so we can offer our services in support of the litigation.
Do things the right way. Act with intention.
If you are a board who would like to ensure that your community manager is preparing financial statements you can rely upon, feel free to reach out to us. And, if you are a community manager who lives with intention and works with integrity, we would love to get to know you and help you by auditing your work on behalf of your boards. Our mutual client will be most grateful for the opportunity for us to work together on their behalf.
Have a great Monday.