In the state of Florida, most condominium associations are required by law to conduct annual audits, which means it is the responsibility of the Board of Directors to comply with this mandate according to the level of annual revenues generated. It should be kept in mind however, that the term 'audit' in its strictest financial sense only applies to associations generating $500,000 or more in annual revenues, which means a full-blown financial audit. For the category between $300K but less than $500K, a lower level review is required, and for those with revenues greater than $150K, but less than $300K, a compilation is necessary. Below $150K or less than 50 units regardless of revenues, you simply need to produce a report of cash receipts and expenditures.
To differentiate between the levels of financial reporting necessary for a condominium association, an understanding of each is useful.
- Audit. An audit includes transaction testing, balance drill-downs, contacting third parties involved with the association, and a thorough review of the association's internal controls. The end result of an audit is not so much to confirm that every line of every statement is accurate, but to determine whether all statements in general are presented accurately and that there are no gross errors or misstatements among them.
- Review. A review is the mid-level financial reporting category, and still involves some inquiry and analysis of financial statements, but is not as rigorous as an audit, although a bit more so than a compilation. It involves an assessment of whether or not changes are needed to financial statements, and a determination that they have been prepared using the Generally Accepted Accounting Principles (GAAP).
- Compilation. This is the most basic of financial reporting services and only seeks to determine whether accepted general accounting procedures were used in the preparation of financial statements.
More Reasons to Conduct an Audit
- It is a highly desirable objective of the financial audit that the integrity of the organization is maintained, and that its financial practices be above reproach. An audit of processes and procedures will confirm this.
- Since it is the Board of Directors which is responsible for providing the required financial reporting, compliance with the level of legal requirement serves to protect the Board, both legally and ethically.
- When an audit is conducted by well-qualified accountants, which now includes only those CPA Firms who participate in the Peer-Review process, there is a built-in review of internal controls, so any vulnerabilities or areas of non-compliance can be identified and corrected.
- In some cases, an association has an existing bank loan and the bank often requires some level of reporting. If this is not complied with, the consequences could lead to additional fees or even recalling the loan.
- If any kind of management turnover occurred during the financial year, it would be a good idea to conduct an audit, so as to ensure that the new management is not inheriting a financial disaster.
Vero Beach Audit Services
Ensuring that a condo association is in full compliance with regulatory requirements is best done by Certified Public Accountants with a long history of experience and success in the field. In Vero Beach, Florida, contact the firm that can be trusted with financial reporting audits - Kmetz, Nuttall, Elwell, Graham, PLLC.