A lot of people visit healthcare providers for annual checkups to ensure optimal health. Similarly, to make sure your homeowners’ association (HOA) is always in good health and shape, you need to check it regularly through an audit. The auditing process can be expensive and time-consuming, but it can verify your association’s financial well-being. A provider of Scottsdale hoa management services can handle this audit for your HOA.
What to Expect from Annual Audits
An HOA yearly audit is a comprehensive review of an HOA’s financial statements. Third-party auditors usually conduct this process. But an internal audit can also be possible to furnish the board of directors with an audit report.
Your association’s financial situation can determine the ability of the board to sustain your community. A poor financial status can diminish the capability of the board to increase or maintain the value of property within the community. Because of this, your association should use all available tools to evaluate its financial health, so corrections can be made if necessary. The auditing process leads to the establishment of an authoritative document that the board can use to offer transparent support for the financial declarations they make.
In addition, the generated audit report may be given to potential homeowners to help them feel confident about buying into the neighborhood. This report may also be used to relieve fears from possible lenders.
Annual audits are required in most states and are the best practice in the industry. Other factors dictate the frequency of an HOA audit including the following:
- What the bylaws say. Even if an HOA audit is not legally required in your state, the government documents of your HOA may stipulate the need to conduct an audit at certain intervals.
- The need for board regulation. An audit can enforce a high transparency level regarding the board members’ financial management. It can offer internal controls to address instances of embezzlement, theft, or financial mismanagement.
- If you are bringing a new management company on board. If your HOA partners with a new manager, you must give them detailed insights into the finances of the company. The audit report is the most authoritative option.
Common Issues an HOA Audit Can Disclose
An HOA audit may disclose some problems that plague the finances of your HOA such as inappropriate use of petty cash, theft, fraud, and embezzlement, inadequate insurance coverage, and overbudgeting for some contracts. Also, an audit can bring to light issues such as budgeting for outdated contracts. Revealing these issues allows the board to take immediate action against them and prevent more issues from happening in the future.