What Is the Purpose of a HOA Audit?

What Is the Purpose of a HOA Audit?

What Is the Purpose of a HOA Audit?

 

In the USA and Europe, almost any neighborhood is managed by a special organization – the homeowners association. Living in a community managed by HOA offers several perks for a house or an accommodation owner. You get shared amenities, your common areas are maintained, and you feel this sense of community. By making decisions and spending money all together, you get a living area that suits your needs.

 

But how do you ensure your HOA is working properly? Do they spend your fees efficiently? For this, locals conduct the so-called HOA audit. There are dozens of tips for how to audit an HOA. Yet, let’s focus on the procedure basics, and discover how it works and who truly needs it.

Understanding the HOA Audit: Checkup for Your Living Area

First of all, you should understand how it works in essence. Imagine your homeowners’ association as a large household with numerous residents. Everyone contributes money, called HOA dues or HOA fees, to maintain this household. It includes:

  • shared spaces (gardens, streets, public pools);
  • maintaining lawns and local flora;
  • fixing the buildings and construction;
  • painting hallways, etc.

 

Meanwhile, a HOA audit is like having a trusted person (outside the community, of course), to check if you do everything correctly. How? This person checks your bills, records, delegated jobs, and budget planning. After that, the specialist indicates the strong and weak points of the association. This is essential to build a good community fund and to spend money with maximum efficiency.

HOA Guide: Who, How, and Why Performs It?

What you should understand is that the audit is beneficial for all the community residents. It is not a strict check-up to criticize people and find violators. None of you are professional economists. The HOA audit is needed to help and provide useful advice on how to maintain your association’s territory. Here’s how it works.

Who Can Perform the HOA Audit

Unlike a neighbor reviewing their checkbook, an HOA audit requires a professional. This specialist is called a Certified Public Accountant. This person is a professional accountant, focused on households and their financial tracking. These independent accountants bring a fresh perspective. After all, they have the experience to analyze your financial records.

The Goal of HOA Audit

The goal is to make your HOA more efficient, of course! This procedure is made to check all the expenses and common decisions of your household and find possible mistakes. It can be seasonal expenses – for example, maintaining common areas in Spring is cheaper than in Summer. Also, the community may hire too expensive (or too cheap) specialists for public jobs.

Benefits

Finally, what do you receive after an audit? The accountant gives practical advice, connected specifically with your HOA and possible mistakes. As a result, the community receives a bunch of perks:

  1. Financial Transparency: Audits ensure the HOA’s financial records are clear and fair. Homeowners gain peace of mind knowing their fees are used correctly;
  2. Detection of Errors: Mistakes happen. Even small errors can cost you a lot of money or further fees. Audits can find such mistakes at the very beginning and prevent them.
  3. Preventing fraud: It is a rare occasion, yet fraud is possible. Accounts can determine fraud, finding some contradicting records.
  4. Improved decisions. Audits provide insights into the HOA’s financial state. After that, the community can use this information for better decisions, to save funds, and prevent expenses.

 

After all, this is about compliance with regulations. There are no official laws forcing HOAs to conduct audits. Yet, this is an organization working with people’s fees and maintaining their stability. Most HOA members prefer to conduct audits and keep calm about their budgets.

How to Conduct a Successful Audit: Tips for Homeowners

According to figures, houses within the HOA community cost 4% more than accommodations outside HOAs. It shows that people indeed prefer to live within such associations and are ready to pay for it. However, HOA won’t make any sense without smart budgeting and audits. To perform the best checkups, follow these pieces of advice:

 

  1. Always plan the audit in advance. Give the administration time to prepare all papers and make the reports clear for a person from outside.
  2. Selecting a professional. Choose only a qualified accountant with experience in HOA management.
  3. Define the scope. Determine what aspects of the organization’s financial records will be reviewed. Otherwise, it won’t make much sense.
  4. Analyze the report and make it clear. Once the audit is complete, the accountant should provide a detailed report of the strong and weak sides. The members should treat it seriously and examine papers. After all, the audit is needed to gain useful feedback. If something is unclear, you can directly address the accountant.
  5. Be fair about financial management. Sometimes, the management structure itself is useless. If your community struggles with the current administration, no audit shall help. Better work not finding experts among neighbors (economists, managers, etc) to provide better

 

Overall, an HOA audit is a valuable tool for maintaining trust and financial accuracy. It helps HOAs to spend money wisely and be fair with each other. In case of any fraud risks or suspicious spending, the audit can else determine fraud at early stages. Overall, this procedure is beneficial for all the homeowners and HOA’s administration.