Selecting the right CPA firm is crucial, so make an informed decision
By: Lena Combs, CPA, CGMA
Courtesy of Withum, an RCI Affiliate Access® vendor
Choosing the right accounting firm is crucial to the sustainability of an owner’s association, whether it be a homeowner’s, condominium, timeshare or cooperative association. There are many accounting-related aspects of an association that can be complex and difficult to properly implement. Some of these include fund accounting in accordance with generally accepted accounting principles, budgeting, internal controls, the billing and collection of owner regular and special assessments, and extensive state legal, reporting, and compliance requirements.
A Certified Public Accountant with extensive experience in serving associations can be a great asset and, as a result, can allow an association’s management (i.e. the board of directors and/or management company) to focus their efforts building the strength of the association and serving its members. Of course, many services that CPAs can provide to associations can be performed by non‐certified accountants. But when you choose to hire a CPA, you make a choice to value the education, skill, expertise and peer oversight that comes with the CPA certification.
A common misconception is that all accounting firms are alike. However, this could not be further from the truth. Due to the wide array of industries in which an accounting firm may operate, the CPA firm will place increased resource on the areas where they have the most experience and greatest number of clients. Selecting a CPA firm with expertise and a concentration in your industry reduces the cost of services provided and increases the level of knowledge that firm can provide.
Choosing the right firm for your property
When an association’s board of directors or management team is making the decision to hire a CPA firm, the two primary considerations should be (1) expertise and experience with owner’s associations and (2) level of comfort with the CPA team (cultural “fit”). A supportive relationship is the key.
How can your association choose the right CPA firm to meet your needs and expectations? The board of directors and/or management should ask the following questions:
- What services do we, the association, need?
- What capabilities do we, as management of the association have, and where do we need assistance?
- What can the association afford and/or how much has been budgeted for these services?
These may appear to be easy questions on the surface, but there are multiple layers involved with each.
What services do we need
Management should determine whether regulatory requirements or loan covenants require the Association to receive (a) an audit, (b) a review, or (c) a compilation. This determination is vital as these different levels of financial statement preparation vary significantly in cost. Additionally, associations are required to file federal income tax returns and may be required to file a state income tax return (depending on state laws and the tax status of the association). A good CPA firm will be able to not only assist you in obtaining the appropriate level of financial statement preparation, but also provide advice on selecting the most advantageous tax status (depending on the operations of the association).
Where do we need assistance
This is perhaps the most important consideration. A good CPA firm should have the ability to assist management in implementing an accurate budgeting process and in developing internal control system (to the extent national accounting and auditing standards related to independence are not infringed upon). The best CPA firm can also offer information regarding best practices in the industry.
What are our financial considerations
While the third question, is essential, sometimes it causes associations to make short-term choices with long term consequences.
Generally, associations invite CPA firms to offer proposals for services to be performed. This allows management to determine which CPA firm is the best fit. On occasion, associations select firms based solely on the lowest fee quote for the services to be provided, rather than on the CPA firm’s knowledge and experience as well as the fee quoted.
A proposed fee from an accounting firm will likely reflect the quality of the work to be performed and related tax and operational advice that can be received. Do not be afraid to discuss the fees with proposing firms – a CPA, above all people, should understand the importance of your budget and financial constraints.
Additional questions for the interview process
When inviting various CPA firms to offer a proposal for services, these additional questions are often included in the proposal process:
- What is the policy of the firm on continuity of staffing on engagements? And what is the turnover rate of the firm?
- How many associations does the firm work with and what types of services are performed for them?
- How long has the firm been performing services for associations?
- Does the firm have any potential conflicts of interest with the association or its management?
- Does the firm have a system of quality control in place?
- Does the firm offer education to its clients to help them stay abreast of relevant issues?
- Is the firm enrolled in a practice monitoring program and, thus, subject to peer review requirements? Can I have a copy of that report?
- Can the firm provide references of similar associations that we can contact?
- What industry trade and profession organizations and activities is the firm involved with?
The answers to these questions can help the association’s board of directors and management make an informed decision when hiring a CPA firm. Associations should feel free to discuss the answers to these questions with prospective CPAs; the resulting dialogue is the foundation for building trust and a long-term relationship.
The hiring of a CPA firm is an important process for any association. Focusing on your needs, examining the experience of your prospective CPA firm in your industry and forging trust through the hiring process are important steps in making that decision.
Lena G. Combs, CPA, CGMA, is a partner at WithumSmith+Brown, PC in Orlando, FL. Founded in 1974, Withum ranks in the top 30 largest public accounting and consulting firms in the country with offices in New Jersey (including its Princeton headquarters); New York City, NY; Orlando and West Palm Beach, FL; Philadelphia, PA; Boston, MA; Aspen, CO; and Cayman Island. It provides clients in whole- and fractional-ownership associations and other industries with assurance, accounting, and tax-compliance services. You can learn more about their products and services by visiting the RCI Affiliate Access section of our website.
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