A financial audit is an independent review of your HOA financial statements and accounts in detail. Typically, it’s conducted annually to identify potential issues in your association’s financial management. Do you need an independent audit performed every year? Several situations either require or strongly suggest a financial audit is needed for your community association.
Legal Directives for Homeowner Associations
- If your homeowner or condominium association covenants specify an annual financial audit or review at other regular intervals, it is your fiduciary duty to comply.
- Some state laws require an audit or review, depending on the HOA size.
- Your association has a bank or mortgage loan that requires an annual audit.
Other Reasons for Auditing Community Associations
- An audit is a good idea when you have a new Board of Directors or financial team.
- Fraud or potential misappropriation suspicions strongly suggest that an audit should be conducted.
When an audit is not required or warranted, associations sometimes opt for a financial review. This is a less intensive analytical procedure that verifies that your financial statements comply with generally accepted accounting principles. A recent blog, Do You Really Need an Audit?, by Blackburn, Childers & Steagall, PLC discusses less expensive review services to consider when an audit isn’t required.
Performing regular financial checks offers multiple benefits. It adds a layer of protection for the association, Board members and your financial team. Risks can also be identified before they grow into major problems. Establishing a formal process to check your association’s financial health is key to good HOA management.
Wise Property Solutions is a property management company serving East Tennessee with offices in Knoxville, TN and the Tri-Cities, TN-VA. Specializing in Condominium Association Management, Home Owners Association Management, HOA Management and Gated Community Association Management.
Tri-Cities, TN-VA: 423-926-7373
Knoxville, TN: 865-643-8989