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| Tuesday, January 06, 2009
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| IHG Insurance (National Insurance Provider) |
| Providing Community Association Insurance for over 25 years: D&O Liability, Crime Products, Umbrella Coverage and Property Manager's Errors & Omissions Liability. |
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| Author |
Messages |
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WilliamD
(Virginia)
Posts:13
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| 01/03/2007 2:54 PM |
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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. |
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WilliamT
(Arizona)
Posts:489
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| 01/03/2007 3:02 PM |
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All of our checks are written by the MC. The board does not handle the checks at all.
The treasurer and the president review every invoice that comes with the board pac each month. We'll looking for anything that is being charged in excess of what should be charged, and above what may have been authorized.
We examine the bank statements to make sure the income from lock box and direct deposits are properly credited to our account. It's always possible that your income could be credited to another HOA with a similar name.
We check everything so that we are confident that the financial statements are correct.
Since we don't handle the money we don't have to worry about board member problems with money.
We understand from a CPA that this type of auditing process is very good, providing we do it, and will catch problems much faster than an annual audit. Also it can catch things that an auditor would not even know about; like over charges, or high charges for certain types of work. |
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