HOA audits are critical to ensuring transparent financial reporting. They can be internal or external, depending on the size of the HOA and relevant state laws. So, how often should an HOA be audited? This guide explains everything you need to know about HOA audits and why it is essential.
The Importance of HOA Audits
Tracking HOA expenses, budgeting, and preparing financial statements can be challenging for homeowners associations. In any case, HOAs comprise volunteers with minimal accounting experience. As such, the chances of errors and discrepancies in financial reporting are incredibly high. Here’s where professional HOA auditing comes into play.
HOA auditing is the scrutiny of an association’s financial records. It verifies if the provided documents are accurate and updated. The primary objective of an audit is to catch and correct errors before they become significant issues. Audits also provide board members and the HOA community with critical financial insights determining the association’s fiscal health.
HOA audits can also help with financial planning, budgeting, fee setting, fraud prevention, and risk analysis. They ensure transparency and integrity for enhanced management of HOA resources.
Florida HOA Audit Requirements
Different states have varying audit guidelines for homeowners associations, and Florida is no exception. According to Chapter 720 of the 2018 Florida Statutes, HOAs with annual revenues exceeding $500,000 must file audited financial records.
The HOA audit frequency is once a year. However, members can vote for an audit if they notice discrepancies or the finances do not add up. The petition must pass with 20% of members voting for the audit in a special meeting. Once passed, the HOA board must enlist licensed external auditors or certified public accountants to conduct the process within 90 calendar days.
HOAs with annual revenues of $300,000-$500,000 do not require audits. They must submit reviewed financial statements when reporting for that fiscal year. HOAs with an income of $150,000-$300,000 only submit complied financial statements, while those with less than $150,000 report cash receipts and expenditures.
HOA audits in Georgia are annual, like in Florida. HOA audits do not have stringent requirements for states like California and Colorado. It is up to the board and members to decide if they want their financial statements audited.
Consult HOA Accounting Professionals for Accurate HOA Audits
A qualified HOA accountant can help your community determine when to audit an HOA. Abel Accountants have the experience and expertise to conduct an HOA audit based on your state laws. We provide affordable audit assistance services to HOAs in Georgia and Florida. Call us today to schedule a free assessment and learn more about our audit process.