What is better in HOA Management? Transparency and Accountability or Feel Good?

What is better in HOA Management? Transparency and Accountability or Feel Good?

May 22, 2007

Mostly as a result of the Enron and Worldcom scandals, the Sarbanes-Oxley Act of 2002 known as the Public Company Accounting Reform and Investor Protection Act of 2002 and commonly called SOX; was enacted to provide business executives with less wiggle room, less finger-pointing and ultimately hold these executives accountable to shareholders for their actions
The Act was approved by the House by a vote of 423-3 and by the Senate 99-0. The legislation is wide ranging and establishes new or enhanced standards for all U.S. public company boards, management, and public accounting firms. The most important part of the Act establishes a new quasi-public agency, the Public Company Accounting Oversight Board, which is charged with overseeing, regulating, inspecting, and disciplining accounting firms in their roles as auditors. The Act also covers issues such as auditor independence, corporate governance and enhanced financial disclosure. It is considered by some as one of the most significant changes to United States securities laws since the New Deal in the 1930s.

SOX requires executives to 1) Certify they know what is in the financial statements, 2) They certify that the financials are accurate and 3) There is process to guarantee 1 and 2 above.

Earlier this year, when accounting regulators gave companies new standards for valuing certain investments, according to the Wall Street Journal (April 30, 2007) FTN Financial saw an opportunity saying that their new marketing pitch was not “necessarily within the spirit” of the new accounting rule, reminiscent of the recent tax shelters peddled by big accounting firms and ultimately dis-credited by the IRS.

The current globalization initiatives place a premium on rules-based decision-making, as compared to the mostly “feel” used by FTN Financial and the CZ Master Association board of directrors.

The CZ Master Association board of directors has gone on record as saying that the HOA/CID legislation intended to bring democratization to CID non-profit organizations are mostly government intrusion and - ”micro-management”. The same board that refuses to even acknowledge the countless instance of conflict of interest, including the use of association funds in attempts to protect family and friend’s interests, or using their positions as delegates to keep a stranglehold on community politics.

Most recently, the Pentagon released (May 4, 2007) a survey with troubleing battle ethics breaches. “It is disappointing," said analyst John Pike of the Globalsecurity.org think tan referring to results of the survey "But anybody who is surprised by it doesn't understand war. ... This is about combat stress”

Eight years after the U.S. government accused Harvard University economist professor Andrei Shleifer of seeking personal profit from his management of a foreign-aid program in Russia, the university and Mr. Shleifer agreed to pay nearly $30 million to resolve civil claims. Some of the claims involve Shleifer benefiting from the open market he was creating. CZ board members like to make frequent use of GM or even Vice President Gore analogies to show themselves as victims of a conspiracy. That is, a conspiracy by critics of the board. These critics believe that family and friends of the CZ Board of directors deriving benefit from the board’s decisions is analogues to professor Shleifer’s actions.

Seems like businesses, universities and even the Pentagon are worrying about ethics

The questions for business transparency and accountability is no different that for wannabe HOA/CID politicians: What is best, Rules-Based decision making frameworks, or Feel Good frameworks?
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