2014 Financials

April 17, 2015

Salem, Oregon

OREGON ASSOCIATION OF REALTORS®

REPORT TO MANAGEMENT

YEAR ENDED DECEMBER 31, 2014

1500 NE Irving St., Suite 440 Portland, OR 97232,4208

BOTTAINI, GALLUCCI & O'HANLON, P.C. ACCOUNT ANTS & CONSULT ANTS

PHONE: (503} 233,1133

FAX: (503) 233-0427

To the Executive Committee and Management Oregon Association of Realtors® Salem, Oregon

e-mail: info@bgocpas.com Home Page: www.bgocpas.com

In planning and performing our audit of the consolidated financial statements of the Oregon Association of Realtors® as of and for the year ended December 31, 2014 in accordance with auditing standards generally accepted in the United States of America, we considered the Oregon Association of Realtors'® internal control over financial reporting (internal control) as a basis for designing auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Association's internal control. Accordingly, we do not express an opinion on the effectiveness of the Association's internal control.

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as discussed below, we identified · certain deficiencies in internal control that we consider to be significant deficiencies.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the organization's consolidated financial statements will not be prevented or detected and corrected on a timely basis. We did not identify any deficiencies in internal control that we consider to be tnaterial weaknesses.

A significant deficiency is a deficiency or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the following deficiencies in Oregon Association of Realtors'® internal control to be significant deficiencies:

OREGON SOCitTY OF CERTIFIED PUBLIC ACCOUNTANTS · AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS- PCPS \f1][iltf'!

Preparation of Full Disclosure Financial Statements

Oregon Association of Realtors® March 10, 2015

Page 2

Creating full disclosure financial statements including footnote disclosures, involves two necessary steps. First, management must identify and analyze the risks of material misstatement to the Association's audited financial statements. Second, management must determine how to control those identified risks. By doing this process, management maintains internal control over the consolidated financial statements and helps ensure that they are properly presented. In order to perform this process, an organization would need sophisticated staff knowledgeable about disclosure requirements. Small organizations often do not have personnel with such expertise so they delegate that role to their auditors. Oregon Association of Realtors® has elected to have its auditors prepare the consolidated financial statements and disclosures. This delegation is a significant deficiency common to small nonprofit organizations. At this point, given your organization, no action is required.

Intercompany Accounts

Intercompany accounts between entities need to balance. The intercompany balances were different prior to our adjustments. We recommend the Association create a spreadsheet to reconcile the intercompany accounts. A review of intercompany balances should be done monthly to make sure the accounts are reconciled and the financial statements are accurate. The Association should record funds collected or paid for intercompany items as an intercompany liability or asset; not as revenue or expenses. More detail should be required for interco1npany transactions to ensure proper recording of the transactions and proper authorization. Proper reconciliations need to be done and reviewed. In 2015, the Association has new accounting personnel who is addressing the above recommendations and is currently taking steps to remedy the intercompany account issues.

Budget

The usefulness of a budget is found by closely approximating expected expenditures and receipts to the actual amounts. While reviewing the budgeted amounts to amounts actually incurred, it was found that many of the revenues and expenses were over budgeted, while many were under budget. The Association currently does not have a budget for the Oregon Realtors® Political Action Committee and the Oregon Association of Realtors® Home Foundation. We recommend the Association create a budget in compliance with industry guidelines for each entity. Due to the transition of finance staff in 2014, the Association did not have a budget team in place and the budget was created on a best guess scenario with the staff available. For 2015, the Association has the appropriate staff that has created the budget and has implemented strong budgeting procedures and processes.

Rental Income

Oregon Association of Realtors® March 10,2015

Page 3

Rent paid to the Oregon Realtors® Plaza, LLC (LLC) should be at the proper amount each month. While reviewing rental income for the LLC we found two renters that were missing July rent. After further review, it was found one payment was incorrectly inputted in QuickBooks while the other renter did not pay rent in July. The LLC did not increase the rent according to the rental agreements. This happened due to a change in accounting personnel. In the future, every effort should be made to insure all renters are making the correct monthly payments according to the lease agreement. The LLC will send out a letter stating rent will increase if the LLC does not invoice the renter monthly. The finance director will make sure the correct rent is paid by each renter monthly and will make a best effort attempt to collect the amount due.

We will work with the accounting personnel to ensure that the above recommendations are implemented.

This communication is intended solely for the information and use of Management, the Executive Committee and others within the Association, and is not intended to be and should not be used by anyone other than these specified parties.

Bottaini, Gallucci & O'Hanlon, PC Portland, Oregon March 10, 2015

Oregon Association of REALTORS® 2110 Mission Street SE

Salem OR, 97302