2009 May 18
Last edit: 2010 Feb 17. Click on History for changes and updates.
__MOA has had two different auditors (CPAs) in the years since 2000. Significant changes were made in the format and content in the review/audit reports by the CPA from 2000 to 2005. A major restatement of MOA's 2000-2004 income statement and other accounts was made in 2005 to correct the handling of the losses in the Pines Club Corporation. Beginning in 2006, a new CPA firm was engaged, who made further changes in both format and content. The new CPA used a different method for entering PCC's losses into MOA's accounting.
__MOA members are rightfully confused. No one on the board has explained what has happened and why. Without intervention by someone, the same errors and discrepancies are likely to be carried over into the audit reports for 2008.
__The continuation of this post is my email to MOA's CPA commenting on the 2007 audit reports which contain the possible errors and discrepancies.
Don Nordeen===========
- Key Words:_ Accounting Practices (MOA), Financial Information (2007), Financial Information (2008), MOA Operations (General/Total), Preservation Fund, accounting principles; AICPA Audit & Accounting Guide for Common Interest Reality Associations; AICPA Audit & Accounting Guide; audit; CIRA; Common Interest Realty Association; consolidated financial statement; preservation fund; transparency
Comments on the 2007 Audit Reports (continued)
____ From: Don Nordeen
_____Date: 2009 May 18 17:43:55 EST
______ To: Dave Myler
______ Cc: Brenda Durant, Carolyn Study, Jay Welter, Kirk Yodzevicis,
_________ Rich Gaubatz, Tad Latuszek, Vicky Rigney, Todd Chwatun
___Subject: Comments on the 2007 Audit Reports
2009 May 18
Mr. Dave Myler
Myler and Szczypka, P.C.
Ann Arbor, MI 48104
Dear Dave:
Re: Comments on the 2007 Audit Reports (Michaywé Owners Association, Pines Club Corporation)
__This email includes comments on the 2007 Audit Reports for Michaywé Owners Association and Pines Club Corporation prepared by your firm. Most of the comments concern generic issues and questions which likely apply to the 2008 audit reports currently being prepared.
__I am writing directly to you to ensure that my concerns are available to you without editing. I also want to provide the comments and concerns before reports are completed and approved. Corrections and adjustments are a lot easier to make before the reports are issued and approved.
__A summary of my comments and concerns is listed below. The attached PDF file provides additional information which hopefully makes this email self-explanatory.
- IRS 501(c) classification — MOA likely does not meet the requirements which should be reviewed annually according to the AICPA A&A Guide for CIRAs. Moreover, there is no benefit to MOA from this classification since MOA does not make a "profit".
- Since PCC is wholly-owned by MOA, GAAP requires a consolidated statement. This is not just a matter of convenience. The financial status is not adequately described by two separate audit reports.
- There is something wrong in the adjusting/closing entries for MOA and PCC. The combined operating loss for the two organizations is about twice the sum of the operating losses before the adjusting/closing entries. A method is needed that conforms to GAAP that properly reflects the consolidated operating loss.
- Accounting for dues income, accounts receivable and related accounts and categories results in omission of major information from the financial statements and double counting of dues income for prior years. Specifically, the amount of uncollected dues and the accounts receivable for uncollected dues are not included in MOA's statement of financial position. (added 2010 Feb 17) See Booking of Association Dues and Related Accounts and Transactions.
- The distribution of dues income between the operating and replacement funds needs to be explained. Currently, MOA does not provide this distinction in its financial reports resulting in MOA's reports understating the operating loss.
- (edited and added 2010 Feb 17) The use of the revenue recognition and matching
balancingprinciples for dues income corrects some of the omissions in the statement of financial position, and the misleading amount for bad debt expense. See Bad Debt Expense. - The booking of PCC's operating loss into MOA's accounting is likely wrong, but certainly requires much more explanation.
- The accounting for the Replacement Fund is incomplete. The shortfall in cash set-asides is not clearly stated. I believe that about $80,000 of Replacement Fund cash was used for operations in 2007, but the audit report doesn't clearly state so. The annual set-asides should be $161,000, not $48,000. Many other issues. The supplemental information is incomplete.
- Additional and more complete notes are required to assist MOA members in understanding the audit reports.
- The related-party transaction for MOA services requires breakdown. The PCC expenses should be net of MOA services to show the expenses related to operation of PCC. (added 2010 Feb 17) As presented, it is not possible to create a consolidate statement of activities (revenues and expenses). Many expenses would be double counted.
Please refer to the PDF file (Attachment) for additional information and specific concerns.
__I am available to answer any questions by email or by phone.
__Thanks for your consideration.
Don Nordeen
Gaylord, MI 49735
(989) 939-8240
Attachment — Detail Comments on the 2007 Audit Reports — (Attachment edited 2010 Feb 17)
cc: MOA Board of Directors, Todd Chwatun
- History: _
- 2010 Feb 17 — Review and edit to ensure that the writing applies to the 2009 audit.
- 2009 May 18 — Initial Post
- Links:_ Comments on the 2007 Audit Reports at [http://swagmanmwpoa.blogspot.com/2009/05/comments-on-2007-audit-reports.html]
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