Alternative to Audit/Compilation Review

Does anyone know of a cost-effective alternative to an Audit or Compilation Review that will meet the requirements of the Michigan Condo Act?

We are a 52 unit single-family home site condo with an annual budget of around 20K. We have been doing compilation reviews for the last couple of years and they run around $1000 in our area. Honestly, they don't seem to provide much more information than the end-of-year report we get from the management company and absorb almost 5% of our budget. It seems prohibitively expensive for a community of our size.

The Condo Law states:

"... all books and records shall be audited or reviewed by independent accountants annually. Such audits need not be certified."

Our Bylaws state:

The books of account shall be audited at least annually by qualified independent auditors; provided, however, that such auditors need not be
certified public accountants nor does such audit need to be a certified audit.

Any suggestions?

Yes, I thought I should be able to find something for much less too, but getting an actual "compilation review" apparently costs that much. That's why I'm wondering if there is something else that will meet the requirement.

Our old MC was NOT worth it AND expensive, but we shopped around last year and found one at <$5k. I believe that is reasonable and we get good service. It's worth it for the accounting, handling of the HO phone calls, bid processes alone. We are a newer community with incomplete infrastructure where the builder went bankrupt prior to formal transition to the HOA -- lot's of chaos as we try to settle things out. The MC advice alone has been worth it this year :-.

Very creative option ... do you have any idea how much interaction would be required with the MC for a compilation review? I wonder if the MC would be willing to participate like that?

Dee,

Both the state law and your bylaws say "independent" audit, review, etc. The key word being "independent". That means the auditor cannot be associated with the HOA, so that effectively lets out your MC. Frankly, that should be a given. Anyone preparing the financials of any organization should never be the one to audit them.

There are three types of studies that can be performed: audit, compilation or review. I believe a review is the least complicated and less costly. I would suggest contacting a CPA firm and asking which would be the cheapest and don't be afraid to dicker with them on the cost. Our PM was able to get us a much lower cost by simply bargaining with the CPA firm.

Dee,

I'm sure you've heard the expression "penny wise, pound foolish". Well, that may apply if you allow an unqualified individual to perform even a review and end up with a worthless piece of info.

Jan,

Following is the MI state statute for condos. As you can see, either an audit or a review must be conducted by an independent accountant. That means the accountant cannot have any dealings with the HOA. It does not say the accountant must be certified, only that the report does not have to be certified. Frankly, I believe this is a very poorly written statute; but what else is new! I would interpret the law to mean the audit or review does not have to be performed by a CPA. However, if I were on the BOD I would suggest a review be conducted by a certified CPA.

There are three types of studies that can be performed: audit, compiliation and review. Only a licensed, certified CPA can perform an audit and be in compliance with GAAP standards. An accountant who is not a CPA can perform a review and/or compliliation. I did both when I worked at a CPA firm and I am not a degreed accountant but I was performing the work of a degreed accountant.

CONDOMINIUM ACT (EXCERPT)
Act 59 of 1978

559.157 Books, records, and contracts; examination; audit.

Sec. 57.

The books, records, and contracts concerning the administration and operation of the condominium project shall be available for examination by any of the co-owners and their mortgagees at convenient times and all books and records shall be audited or reviewed by independent accountants annually. Such audits need not be certified.