What is a Forensic Audit?
First, let us explain our financials.
All of the accounting for our community is done in accordance with Generally Accepted Accounting Principles.
Each month, the Finance Advisory Committee, Chaired by homeowner Bill Wethe (CPA and current CFO of a $9 billion firm), review the community’s financials in detail with the controller and Associa, for GAAP compliance and accuracy.
At the end of each year, the community hires an outside independent Certified Public Accounting firm, to audit our HOA financials. This is standard for corporations to do to ensure that their financials have been done in accordance with GAAP and that they are a true reflection of the community’s financial sate. The Certified Public Accounting Firm we have used for 3 years, also audits approximately 40 other HOAs in the Coachella Valley, and has determined that each year our financials have been done in accordance with GAAP and materially reflect the financial condition of our community.
A forensic audit is only called for if someone sees something in the financials of a individual or business that might suggest some sort of fraud, embezzlement or theft . Let’s say hypothetically the Finance Advisory Committee might see that cost for pool maintenance have been 200% over their budget and no one has an explanation as to why. Then, the Board might ask for a internal forensic audit of the maintenance area. Another hypothetical is in the case of a publicly traded company that blows through $100 million in one year and has no paper trail of expenses.
There have been no indications of anything that suggests fraud, embezzlement or theft in our community. And a Forensic Audit for just one year is extremely expensive - for three years, the cost would require a special assessment of homeowners. Bill Wethe, Chair of the Finance Advisory Committee was asked if we needed a forensic audit and he replied that he saw nothing in our financials to indicate a need for a costly forensic audit.