Self-audits are an integral part of managing an HOA. The members of an HOA board should periodically assess their compliance with statutory law concerning their financial practices, recordkeeping, and self-governance. HOA audits are particularly important when there has been significant turnover on a board or an association has had to change management companies.

Procedural Considerations

HOAs should verify that they are following best practices and their own bylaws in how they hold meetings and elections. This type of examination reassures an HOA’s members that the board is handling the association’s business fairly and compliantly.

Financial Health

A financial audit needs to include a full accounting of an HOA’s income and expenses. In particular, it is helpful to look at outstanding dues, reserve account contributions, and ongoing monthly fees. HOAs must carefully review this information on an annual basis at a minimum in order to create an operating budget, but it is advisable for board members to review financial records more frequently to gauge how closely the association is sticking to its budget.

Recordkeeping

An HOA’s financial and legal recordkeeping procedures must be consistent with IRS requirements in addition to requirements imposed by the state. Boards have to take steps to ensure that records are easily accessible and well-organized.

HOAs need to be able to withstand the scrutiny of a third-party audit. Self-audits are an excellent preparatory measure. 

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