Forensic accounting: the answer was that nothing was missing
The outgoing board president said roughly $75,000 was unaccounted for. Nearly four years of assessments and cash balances said otherwise, and that is what the report said.
Two members of a homeowners association asked for a review of monthly assessments and of operating and reserve cash balances, after the outgoing president stated that roughly $75,000 might be missing from the association’s accounts.
Go to the underlying packages, not the summary
Monthly financial packages from both management companies across the period, including check registers and bank statements, together with the association’s reviewed financial statement.
Test the assessment side against what the units should generate
Assessments for every period were compared against what the association’s unit count at the stated monthly rate would produce.
Tie cash to the income statement
Period-end operating and reserve balances were compared against the operating expenses reported for each period, and the reserve growth was assessed against them.
State the period the documents actually support
The review was asked to cover several years further back than the records reached. The finding is stated for the period the produced documents cover, and the report names where that period begins and ends.
A negative finding is still a finding
Assessments in every period came to at or near the association’s unit count at the stated monthly rate. Cash balances moved consistently with the operating expenses reported for each period, and the increase in reserves was reasonable. No funds appeared to have been taken over the period examined.
That result closes a question which would otherwise have sat over a board indefinitely, and it closes it on the association’s own records. An engagement that finds nothing is not an engagement that failed.
What we do not do
We do not describe a consulting engagement as an audit. This was performed under the AICPA consulting standards, and the report states on its face that it is not an audit, not an examination of internal controls, and not an attestation or review engagement — and that other procedures might have surfaced other matters.
We also do not extend a conclusion past the records. The board asked about a period beginning years earlier than the documents that were produced. Financial statements for the earliest years were never made available, the review therefore begins where the records begin, and the report names that boundary rather than papering over it.
A missing-funds allegation closed on the association’s own records
Testing the assessment total against what the association’s units should generate at the stated rate — which turned an allegation about a bank balance into an arithmetic check that either reconciles or does not.
Parties, jurisdictions and identifying facts are altered or withheld. Methods, data volumes and outcomes are not.
Recognise your case in this one?
Tell us which part. We will tell you what was actually decisive in it.