Most accredited Association Management Companies (AMC) have strict financial policies in place in addition to checks and balance when it comes to keeping the books. An audit is not always warranted for Associations with budgets of less than $1 million. Here at Clemons & Associates, Inc. (C&A) the books are reviewed on a monthly basis by a CPA, the Director of Finance, the Executive Director and the board of directors. Add that we (C&A) do not sign checks, so there’s that additional layer of checks and balances.
If the board selects the option to perform an audit, it will cost approximately $5k - $10k. The accountant will spend considerable time confirming information with outside parties, testing selected transactions by examining supporting documents, completing physical inspections and observations and considering and evaluating the internal control system of the organization. This usually includes a visit to the headquarter office by the CPA, so there is the travel expense to consider as well. Overall, there are not that many transactions with small budgets of less than $1 million where this investment would be valuable.
A review will serve the same purpose, an analysis for assurance about the financial statements, and will cost between $2k-$3k. The CPA when performing the review will still look at significant matters affecting the financial statements. The CPA doesn’t perform in-depth confirmations/testing as they do in an audit. They review for material issues and obvious deviations from GAAP, but they won’t go in and test unique individual transactions in the same way an audit is done. The association will still receive a lengthy document, 20 pages or so, of information from the review, so the board of directors will feel comfortable with the information provided. In addition, the association will save money on a process that isn’t necessary for an organization with a budget of less than $1 million.