By Michael J. Novak, CPA, CMA, CFA
In October 2022, I wasn’t looking for regulatory complaints. I was reviewing a reserve study.
Condominium owners had asked me to independently evaluate a reserve study prepared for the 175 East Delaware Place Homeowners Association, located on floors 44-92 inside the former John Hancock Center. It seemed like an ordinary engagement. Reserve studies are reviewed every day. As a forensic accountant, I expected to write a short opinion letter and move on.
Television has given forensic accounting a bad reputation.
We’re portrayed as people who begin with accusations and spend months trying to prove them.
Professional forensic accounting works exactly the opposite way.
We begin with documents.
The evidence determines the next question.
Our job is not to prove someone wrong.
Our job is to determine whether the available evidence supports the conclusions presented.
That distinction is the difference between advocacy and investigation.
As I reviewed the reserve study, one issue immediately stood out.
In my professional opinion, approximately $67.7 million of significant deferred maintenance and replacement projects had been excluded from the study’s 30-year funding horizon, including major façade, window, door, and riser projects. I concluded that those omissions materially affected the study’s funding recommendations and the reliability of its long-term financial analysis.
That finding did not establish misconduct.
It established another question.
If this reserve study influenced financial decisions, where else did those assumptions appear?
One document led to another.
Reserve studies.
Annual budgets.
Audited financial statements.
Federal income tax returns.
Board minutes.
General ledger accounts.
Professional standards.
Each document answered one question while raising another.
Eventually, I realized I was no longer reviewing a reserve study.
I was reconstructing years of financial reporting and governance.
One lesson every forensic accountant learns is that no financial document exists in isolation.
Reserve studies influence reserve contributions.
Reserve contributions influence budgets.
Budgets affect financial reporting.
Financial statements become the foundation for tax returns.
Tax returns rely upon accounting records.
Board decisions rely upon all of them.
When one document changes, every document downstream deserves another look.
That is why forensic accounting is less about finding isolated errors than evaluating whether the entire body of evidence tells a consistent story.
One misconception I frequently encounter is the belief that there is a single agency responsible for deciding whether financial reporting is "correct."
There isn’t.
Attorney disciplinary agencies evaluate attorney conduct.
CPA licensing boards evaluate professional accounting standards.
Tax authorities administer tax law.
Reserve specialists follow their own professional standards.
Corporate governance is governed by statutes, governing documents, and fiduciary principles.
Each organization has a different mission.
Each regulator asks different questions.
Each reaches conclusions based upon different legal standards.
That isn’t a weakness of the system.
It’s exactly how the system is designed.
During one regulatory proceeding, I felt it was important to correct a factual statement about my involvement.
I was never a member of the homeowners association.
I never owned a unit there.
I never served on its board.
My role was solely that of an independent forensic accountant retained to analyze financial records, reserve studies, tax filings, financial statements, and governance documents. After the matter concluded, I asked that the agency’s file accurately reflect that distinction because I believe factual precision matters regardless of outcome.
Professional credibility begins with getting the facts right.
As additional records became available over the following years, I continued comparing documents prepared months—and sometimes years—apart.
Reserve studies were reconciled to budgets.
Budgets were reconciled to audited financial statements.
Financial statements were reconciled to tax returns.
Tax returns were reconciled to supporting accounting records.
Whenever I found an inconsistency, I documented it.
Whenever new evidence became available, I updated my analysis.
That is how professional investigations should work.
Evidence comes first.
Conclusions follow.
Over four years, I realized something that extended well beyond one condominium association.
Most governance failures are not caused by a single bad decision.
They result from the gradual breakdown of transparency, documentation, oversight, and accountability.
When governance is healthy, mistakes are usually identified and corrected.
When governance is weak, small problems compound into larger ones because the systems designed to detect them stop functioning effectively.
That realization fundamentally changed my perspective.
The question was no longer:
"What happened here?"
The better question became:
"How do we measure whether an association has the governance necessary to prevent these problems in the first place?"
Public health depends on hygiene.
Organizations are no different.
Good governance isn’t defined by the absence of controversy.
It’s defined by the presence of strong systems.
Independent oversight.
Transparent reporting.
Reliable documentation.
Professional accountability.
Meaningful board engagement.
Objective financial information.
Those characteristics don’t guarantee that mistakes won’t occur.
They dramatically increase the likelihood that mistakes will be identified before they become crises.
When people hear about governance failures, they often ask:
"How did this happen?"
After years of forensic investigations, I think there’s a better question.
"Why wasn’t anyone measuring the health of the association’s governance before problems became crises?"
Condominium associations routinely inspect their roofs.
Their elevators.
Their boilers.
Their fire-safety systems.
Their reserve components.
But almost no one performs an independent assessment of the one system that influences every financial decision the association makes:
Its governance.
That’s why we created PATScore™ (Professional Association Transparency Score).
PATScore isn’t designed to determine whether fraud occurred.
It isn’t an audit.
It isn’t a reserve study.
It isn’t a legal opinion.
Instead, PATScore asks a simpler question:
How healthy is this association’s governance?
Does the board receive complete financial information before making major decisions?
Are significant decisions documented?
Are professionals operating with appropriate independence?
Do owners receive meaningful transparency?
Are internal controls functioning as intended?
Is accountability built into the organization’s decision-making process?
Those aren’t accounting questions.
They’re governance questions.
And unlike many people assume, governance can be measured.
Our goal isn’t to assign blame after something goes wrong.
Our goal is to help associations identify governance weaknesses before they become financial, legal, or operational problems.
Because every association deserves the same thing:
Healthy governance.
Just as reserve studies help boards plan for the future of their buildings, PATScore helps boards evaluate the future of their governance.
Strong governance doesn’t guarantee that mistakes will never happen.
But it makes them far more likely to be identified, questioned, corrected, and documented before they become crises.
That’s the mission behind PATScore.
If this article made you think about your own association, send it to another owner or board member and ask one simple question:
"Who is measuring the health of our governance?"
If the answer is "no one," perhaps it’s time to start.
Learn more about PATScore™ or request an independent governance assessment at: https://www.cia.mba/services-patscore
Moody’s doesn’t determine whether a city will default.
S&P doesn’t determine whether every corporation will succeed.
Credit-rating agencies evaluate risk.
PATScore applies that same philosophy to homeowners associations.
It evaluates governance risk.
Strong governance doesn’t eliminate every problem.
Weak governance makes problems more likely.
This Substack won’t simply chronicle one investigation.
It will explore the broader lessons that emerge from hundreds of hours spent reviewing reserve studies, budgets, audits, tax returns, board records, and financial statements.
Some articles will discuss forensic accounting.
Others will examine governance.
Some will explain financial reporting.
Others will explore why intelligent, well-intentioned boards sometimes make poor decisions—not because they lack integrity, but because they lack reliable information.
If those discussions help even one board ask better questions before making important decisions, they’ll have served their purpose.
Because good governance isn’t built by reacting to crises.
It’s built by creating systems that make crises less likely.
This piece continues on Substack with a subscriber-only bonus section, "The Forensic Notebook: Five Questions That Changed My Career." Paid subscribers can read that section, and support this reporting, on Substack.
Cases like this one are why we built PATScore™, a structured assessment that helps association boards identify governance and financial-control weaknesses before they turn into disputes, litigation, or regulatory complaints. If your association has never been independently assessed, explore how PATScore™ works, or start with a reserve study review if that is where your concerns begin. If you suspect something similar may be happening in your own community, our forensic investigations team can help you find out.
