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One of the most common services a CPA can provide an association is completing the association’s annual tax return. While not in the business of making a profit, associations are still classified as a corporation in the eyes of the Internal Revenue Service (IRS) and State of Illinois and are required to file tax returns at year-end. CPAs can guide the board in making the right decision on what tax form to file, which helps the association not only avoid risk but avoid unnecessary tax. While it may seem that the most common tax Form 1120h filed by associations is simple, without the help of a CPA the board may unknowingly omit taxable income and risk future penalties and fines. If ever audited by the IRS, a CPA can help guide the association through the stressful process.
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Another common service handled by CPAs for many associations is monthly bookkeeping. Maintaining accurate financial statements is not only a fiduciary responsibility of the board but financial statements are a necessary tool for the board while making decisions. Having a CPA prepare the monthly bookkeeping for the association saves time and energy for each of the volunteer board members, particularly in self-managed associations. It also provides peace of mind knowing the bookkeeping is prepared to a professional standard, which can help the association avoid the risks of inaccurate financial statements. Accurate monthly financial statements are very necessary for the board to make strong, educated, and good decisions about the community finances with all of the available information.
A yearly service that CPAs can offer an association is preparation of their annual compilation, review, or audit engagements. While each engagement has its advantages and disadvantages, including price, procedures performed, and assurance or conclusion provided, each engagement does provide value to the association. For a volunteer association board, having a CPA perform year-end services can provide an additional level of confidence to the veracity of the financial statements. Having an extra set of eyes to look at the association’s activity for the year can save the association money in the long term. Recommendations provided to the board during the year-end engagement provide additional value, helping guide the board in future decision making. Another service CPAs can offer is to attest to agreed procedures, which is a tool boards may use when they want specific procedures performed by the CPA, but don’t feel a complete audit, review, or compilation is necessary.
An overlooked service a CPA can provide an association is assisting with vote tabulations, such as at the annual meeting elections. Having a CPA oversee a vote tabulation provides reassurance to the individual homeowners of the accuracy of the results. The most common vote tabulation performed for Associations is the annual election, but any vote by the unit owners can be audited and supervised by a CPA, including a vote on possible deconversion or approval of special assessments and/or bank loans.
There are some additional services a CPA can offer to community associations. One of these services is helping the board maintain a special assessment or chargeback schedule. While never an easy decision for a board, passing a special assessment or charging back certain costs to the homeowners can be necessary to the financial health of the association. It is important to make sure all unit owners are charged their appropriate portion and that when payments are made, they are applied correctly. Some special assessments and chargebacks can be complex and require detailed special attention to avoid mischarges.
As noted in the beginning of this article, board members of an association can alleviate much of the stress of the volunteer position by surrounding themselves with community association industry professionals. A CPA is just one of the many professionals who can provide a wide range of services to help board members make the best decisions possible for their association. Give that CPA a superhero cape!
$ $ $ 22 | COMMON INTEREST® • Winter 2023 • A Publication of CAI-Illinois Chapter
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