WilliamD (Virginia)
Posts: 13
Posts: 13
Posted:
The annual budget for our HOA is approximately $39,000; the community's largest expenses are for landscape maintenance of common areas; no recreational facilities are provided. The Board of Directors prepares a budget each year which is approved by the Annual Members Meeting. The principal income is from an annual general assessment. The Landscape maintenance is performed by two companies under contracts which are negotiated and signed by an officer and board member. All receipts and expenditures are handled by the MC and monthly financial reviews are provided by the MC to the Treasurer who is responsible for confirming that all transactions are consistent the budget, contracts and questions the MC on any unexpected transactions.
The Association receives an annual Compilation from a CPA who also prepares the tax returns for Federal and State. No Audit has ever been performed although the President and Treasurer (both Board Members) have reviewed the internal controls of the MC to ensure that there is separation of check writing, payment approval and bookeeping.
Local CPA firms indicate that a Review would cost approximately $1,000 and an audit possibly $3,000 compared with $250 for the Compilation/Tax Return. Considering the small size of the budget, the facts that the major expenditures are covered by two contracts and approximately 90% of the income is from the annual assessment the increase in cost for review or audit do not seem justified.
However, the Board is not comfortable continuing with no independent "review" of the financial reports of the Association and would like to consider creating an Audit Committee which could carry out some reasonable review of the financial reports and provided an independent report to the members at the Annual Meeting.
I would appreciate any comments you may have on what we are doing and what we are now considering. If an independent Audit Committee is a viable approach do you have suggestions about how we can insure the independence of this group.
The Association receives an annual Compilation from a CPA who also prepares the tax returns for Federal and State. No Audit has ever been performed although the President and Treasurer (both Board Members) have reviewed the internal controls of the MC to ensure that there is separation of check writing, payment approval and bookeeping.
Local CPA firms indicate that a Review would cost approximately $1,000 and an audit possibly $3,000 compared with $250 for the Compilation/Tax Return. Considering the small size of the budget, the facts that the major expenditures are covered by two contracts and approximately 90% of the income is from the annual assessment the increase in cost for review or audit do not seem justified.
However, the Board is not comfortable continuing with no independent "review" of the financial reports of the Association and would like to consider creating an Audit Committee which could carry out some reasonable review of the financial reports and provided an independent report to the members at the Annual Meeting.
I would appreciate any comments you may have on what we are doing and what we are now considering. If an independent Audit Committee is a viable approach do you have suggestions about how we can insure the independence of this group.