Audit - Compilation / Agreed Upon Procedures

Started by WilliamS1 • 5 replies • 1926 views

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WilliamS1 (South Carolina)
Posts: 113

Posted:

We don't need an audit and we don't have time to complete a review before our annual meeting. What to do?

Are there some typical questions asked by HOA's in either a Compilation or Agreed Upon Procedures? I have listed a few questions that come to my mind but I don't know if these are typical questions for a compilation or Agreed Upon Procedures.

1. I would like to make sure all HOA fees are placed in proper accounts.

2. Where is the threashold between monthly budgeted maintenance and long term maintenance? Has that line been kept?

3. I would like to see the checks that fall outside of the major contracts (ie. lawn care, pool, electric, water )

I will appreciate your seasoned comments.

CharlesW1 (Georgia)
Posts: 826

Posted:

WilliamS1,
I’m not really following you. You don’t need an “audit”
What do you need, exactly?
I’m thinking you will get some better responses with some additional information. I don’t know what information that would be. I can’t ask questions about something I don’t know about.

Sorry couldn’t be of more help.
Chuck W.

Charles E. Wafer Jr.

Jonathan (New Jersey)
Posts: 14

Posted:

William,

Chances are, your CC&Rs and/or By-Laws require that your Association have a yearly audit, which, by the way, would probably answer most of your questions.

Jon

RogerB (Colorado)
Posts: 5,067

Posted:

William, what you are asking for is what accountants refer to as establishing internal controls. If your association uses GAAP you can ask for a printout of the general ledger and view details on all transactions. That would include your items 1 & 3. Generally maintenance performed each year is in the annual budget. The reserve budget includes capital expenditures which can occur every several years. For example there can be a yearly landscape budget. About every 5 or 10 years you may want to make some major upgrade to landscaping which would be included in the reserve budget.

Sometimes it is not clear and is a matter of interpretation as to which of the two budgets an expense is charged.

WilliamS1 (South Carolina)
Posts: 113

Posted:

Thank you all for your response - Sorry for being so vague. Now for the rest of the story.

ByLaws - Yes they require an annual audit, which has NOT been followed through on in about 4-5 years. We should probably have one this next year. That being said, I have had several phone calls with the our MC and CPA asking what we should have done this year, to sure confidence in this area.

THE REASON - We are needing to raise regime fees quite a bit and my PINGS(residents that I bounce ideas off of to get initial responces) have told me they don't fully trust the managements handling of the books. They would like to see some confirmation that all is straight before the increase.

AUP or Comps - Both the MC and the CPA have come back and told me that an audit as well as a review are out of the picture this year because of time issues and money. They have recomended that we have a Compilation and or Agreed Upon Procedures looked at, and a report generated. They indicated that we could take a report of some elements into the meeting and then ask the homeowners if there would be anything further they would specifically like to look at.

I think is a good idea on the surface, but I really don't have a great deal of experience in this area, so I am asking the HOATalk Family for your ideas and experience.

Above I have listed a few things that I am concerned with - to expand on those...

1. We have had several problems this year with fees being posted to incorrect homeowners account. Late fees to lien notices resulted - now removed, raised the skepticism.

2. We have had a reserve study done this year and are getting more specific with that and so I want to make sure that there have been clear distinctions drawn in past yearly vrs reserve records influencing future budgets (ie. fence repair or fence replacement).

3. Small incidental check. I want to make sure they are making it into the correct account for tracking purposes (ie. making sure that the pool caulking goes into the pool maintenance account rather than getting stuck in general maintenance).

Any thoughts.
Take Care
William

RogerB (Colorado)
Posts: 5,067

Posted:

William, the word audit is very loosely used by most people. I don't know of any HOA that has ever done a real audit. At best most CPA's do a DRV - discovery, review, and verification. Most HOA's do a financial review which is limited to checking the bookkeeping.

Based on the serious errors made by your bookkeeper at the very least I would do a financial review which is more than a "Compilation" and set up internal control - "Agreed upon Procedures". Correct tracking can be verified from the chart of accounts when the account number is included with each general ledger item on a printout. The general ledger can be provided monthly with other financial reports including a balance sheet, income statement, cash flow, and accounts receivable.

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