Why would $4,779,709 of “Taxable Income not Recorded on Books” be reported on page 29 of the 2009 SCA Tax Return signed  by Auditor/Tax Preparer Gary Lein, CPA?

That page of the 2009  tax return also reports the $4,779,709 amount was a “Carryforward per Revenue Ruling 70-604 from 2008.”  So, this would seem to confirm that none of the multi-year retained assessment surpluses were ever “returned” as claimed by SCA Directors under penalty of perjury on the income tax returns filed each year since before 2005.  That would appear to be a case of possible tax fraud.

But, why would that off-the-books procedure not be caught/mentioned in the annual audit?   Would that be evidence of the Board, Finance Committee, RMI and auditor failing to comply with standard accounting rules?  If so, why would they do that?

Some may recall that the SCA Finance Committee under the leadership of Don Manning  in  2008 went crazy when the board and/or FC committee were questioned by members on anything.   The FC even went so far to claim they could not be mistaken because they said:

“The current FC is comprised of members who have combined business, financial and accounting experience in excess of two hundred (200) years. Four of the current FC members are retired CPA’s and have worked in both industry and public accounting. All FC members have degrees in accounting or finance, or have MBA degrees and extensive financial budgeting and management experience. One of the CPA members worked in public accounting for over twenty five (25) years and was a partner for over fourteen (14) years in one of the four (4) largest accounting firms in the world. Past FC’s have generally had similar levels of experience.”

But, for all the FC’s claimed education and experience, the IRS has shown the Committee and Board filed its taxes incorrectly, and now it seems the auditor/tax preparer was willing (for the first time) to disclose there was $4.8 Million in taxable income carried off the books.

How could a CPA who prepares the association taxes, and is personally aware of huge surpluses in off-book accounts (locations unknown) and reported it in the annual tax return, fail to mention the $4.8 Million in the annual audit of SCA?