Balancing Audit Cost with Quality
By Bobby Boyd, partner
Independent audits provide essential accountability and transparency for housing authority operations, as well as invaluable information that helps management, the authority’s board of commissioners and public stakeholders assess the housing authority’s stewardship of public resources. That being said, when it comes to housing authority audits, you get what you pay for. Cheaper isn’t always better, and overpaying can be just as bad.
The following explains in greater depth how to balance audit cost with quality.
Finding a Middle Ground
Low cost audits
As the executive director of a housing authority who is charged with controlling costs, contracting with a firm for a low-cost audit may seem like a good idea. However, substandard audits increase the chances that an auditor misses something significant, such as fraud, that can have a huge impact on your organization’s bottom-line.
An audit of a public housing authority reduces management bias in financial statements. It also demonstrates to your board, as well as the residents and community, that competent and knowledgeable professionals manage the housing authority and exhibit good stewardship of public funds. Is your reputation worth the cost savings?
According to an article published on the HUD website, HUD’s Real Estate Assessment Center (REAC) “has identified instances in which unsupervised trainees at CPA firms performed 75% of the fieldwork at large public housing authorities.” As a result, many low-cost audits being performed today do not uncover large breaches and areas of significant noncompliance.
Should an issue arise after a low-cost audit is performed, the blow back will be directly on you as the executive director, not just your auditor, and it can jeopardize your housing authority’s reputation with HUD.
The flip side of paying too little for your audit is paying too much for an overblown audit. While it makes sense that you want your auditors to dive deep into your organization’s finances and operations, audits can also overreach.
Auditors who lack experience working with housing authorities oftentimes don’t know how to correctly scope the audit or how to select the right risks or controls to assess. They take a conservative approach to compensate and leave no stone unturned, unnecessarily driving up cost and disruption in your authority.
A balance can be achieved. A quality audit is performed by a CPA firm that has years of experience working with public housing authorities and knows the common areas of risk and pitfalls that authorities face. They can complete an efficient audit that minimizes your staff’s involvement, without accruing unnecessary risks.
The Bottom Line
As an executive director, being fiscally responsible is important, but your housing authority audit is not the place to try to save money. Remember: HUD will subsidize your audit costs, so always focus on quality!