Compilation audit

Started by LaverneB • 11 replies • 2075 views

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LaverneB (Florida)
Posts: 129

Posted:

The state wants a audit of financial records Instead of doing a full blown audit, our treasurer said we can do a compilation audit that would be less expensive. We have a HOA meeting to night because the homeowners have to vote if thet want to go this way.We have the monies in our budget for this, but a certified audit will be about 8-10,000.00 which we would have to do a assment. Any thoughts on this? Thanks

JC3
Posts: 290

Posted:

I recently talked to a CPA about this very thing. We haven't had an audit done for several years, and some owners had asked about it.
IIRC, he said
a compilation is fine unless we suspect something is wrong.
There is a step between the compilation and an audit. I forget what he called it.
An audit will check only this year's books, not previous ones. (That's a lot more expensive.)
So, we'll stay with the compilation for now.

SusanW1 (Michigan)
Posts: 5,202

Posted:

There have been several conversations here about compilations, audit review, and full audits.

The State does not require you to have an audit. It requires you to have financial reports and provide statements, based on your financial level.

Stay tuned.

LaverneB (Florida)
Posts: 129

Posted:

The state of Florida asked for it. Yes they will check only this years.But the cost is much more for full audit.This is what we are trying to avoid. Our budget does not have enough, so we have to do assments. Which I am trying to avoid.

LaverneB (Florida)
Posts: 129

Posted:

LaverneB (Florida)
Posts: 129

Posted:

Are you saying your state or this any state. Sorry if its a dumb question, but I am learning lots.This Florida.

JC3
Posts: 290

Posted:

I am not in Florida. My state allows compilations.
Laverne, call the office that is asking you for information and ask them if a compilation is satisfactory, or what exactly, is it they want.

AlvinK (Tennessee)
Posts: 1

Posted:

I am a homeowner in Sunset Bay TN and be have a renagade BOD that sure raises a flag. How can a single homeowner call for an audit? Alvin

JC3
Posts: 290

Posted:

Start off by reading your hoa documents, bylaws and CC&Rs, and your state law to find out what is required. Then find out IF, HOW, and WHEN that required action was taken, as well as by whom. then find out if that entity is state licensed, board certified, or whatever.

RogerB (Colorado)
Posts: 5,067

Posted:

Laverne, did the person who contacted you provide information on the requirement for an audit. If not, contact them and ask them for a reference to the state statute which requires an audit. Follow requirements stated in statutes or your governing documents. Big difference between want versus required.

DonN (Michigan)
Posts: 357

Posted:

Everyone seems to so concerned about the costs of audits, reviews and compilations without understanding the implications. An excellent article, "Understanding Compilation, Review and Audit" written by the AICPA is available at
http://www.raymino.com/understanding_compilation.htm.

Board members should not underestimate their fiduciary duty to protect the assets of the association. In a compilation, the board vouches for the veracity of the financial statements. Since board members are generally not experts in accounting, they may have no basis for vouching for the veracity of the statements. Consequently, board members could be personally liable for any mis-statements.

My recommendation is that the requirement for audit, review and/or compilation be specified in the bylaws. In my view, the members should be willing to pay for the audit to ensure competent accounting and financial information, and to protect board members from personal liability.

Don Nordeen
Governance of Property Owners Associations

DonnaS (Tennessee)
Posts: 5,671

Posted:

Laverne,
The State of Florida requires different levels of financial reporting depending on your associations annual income. If the State is asking for an audit, then your annual income must be $400,000 or over. The Statutes are very clear on this. I copied it for you below.

(a) An association that meets the criteria of this paragraph shall prepare or cause to be prepared a complete set of financial statements in accordance with generally accepted accounting principles as adopted by the Board of Accountancy. The financial statements shall be based upon the association's total annual revenues, as follows:

1. An association with total annual revenues of $100,000 or more, but less than $200,000, shall prepare compiled financial statements.

2. An association with total annual revenues of at least $200,000, but less than $400,000, shall prepare reviewed financial statements.

3. An association with total annual revenues of $400,000 or more shall prepare audited financial statements.

(b)1. An association with total annual revenues of less than $100,000 shall prepare a report of cash receipts and expenditures.

2. An association in a community of fewer than 50 parcels, regardless of the association's annual revenues, may prepare a report of cash receipts and expenditures in lieu of financial statements required by paragraph (a) unless the governing documents provide otherwise.

It is as clear as can be what the requirements are but yet we have people who regularly ask if they can do an alternate type of reporting. The State says no unless the entire emebership votes to use an alternate.

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