Financial management and accounting are some of the most challenging parts of running a planned community. HOAs not only have to record all their transactions but also ensure all records are accurate. Some are even required to perform an annual audit, which is where an HOA CPA comes in.
An HOA CPA, or certified public accountant, can compile, review, or audit an HOA’s financial accounts and records. These services are essential for communities that want to ensure no fund misappropriation or mistakes in the accounting process. Additionally, some CPAs may prepare financial statements and handle tax filings.
If you have no background in accounting, the terms bookkeeper, accountant, and CPA might all seem interchangeable. However, these are distinct positions that play different roles in an organization. Here is how they differ:
An HOA CPA offers high-level services that regular bookkeepers and accountants cannot. Here are the three primary services they offer.
A compilation is the lowest-level report a CPA can prepare. It involves compiling the association’s financial statements and reports to represent how the community managed its finances. In a compilation, the CPA mainly looks for obvious errors but does not guarantee their accuracy.
A review covers all the bases of a compilation with additional analysis. Instead of just compiling the statements, the CPA reviews the financial records to provide low-level assurance of conformity. They will also analyze the financial statements without diving into accounting records.
An HOA third-party audit is the highest-level report a CPA can offer. The CPA extensively reviews the association’s accounting records and guarantees their accuracy. They also verify all the amounts with creditors, such as HOA debtors, and inspect the community’s assets and inventories. Moreover, the CPA examines all contracts and board minutes to double-check the records.
Through this process, the CPA can spot fund misappropriations and misstatements. It’s best to guarantee transparency and hold the board accountable for missing funds.
Isn’t a bookkeeper or accountant enough for homeowners associations? It truly depends on several factors. Firstly, it’s essential to check the governing documents to determine whether an annual compilation, review, or audit is necessary. If so, then an HOA CPA’s services are undoubtedly required.
In addition, homeowners associations should check state law to see if there are any requirements when it comes to audits. If state law requires it, the HOA may need to seek help from an HOA CPA.
For example, the Florida Homeowners Association Act Section 720.303(7)(a) states that HOAs with total annual revenues of $500,000 must prepare audited financial statements. Meanwhile, HOAs with total annual revenues between $150,000 and $300,000 need only prepare compiled financial statements, and those with revenues between $300,000 and $500,000 must prepare only reviewed financial statements.
What if neither state law nor the governing documents require an audit? In this case, a homeowners association might not be legally required to hire an HOA CPA. Nonetheless, it’s still a good idea if the budget allows. This is because CPAs offer several benefits, including the following:
Homeowners associations must find a good CPA who understands the inner workings of a community association. They should also be familiar with HOA taxes and tax exemptions. Here are some steps you can take to find the best CPA.
HOA board members must look for reputable accounting firms to hire the best CPA. Make sure to look for someone in your local area who understands your local laws. A quick Google search can help you start, but it may also be wise to ask other communities about CPAs they recommend.
Once you’ve narrowed your search, interview each candidate to select the best one. Ask the following questions so you can gain better insight into their past experiences:
It’s also important to verify whether the CPA is truly independent. To avoid conflicts of interest, they should not be affiliated with any third-party vendors or board members.
HOA management companies have an extensive network of industry professionals with experience working with HOAs. Ask your HOA manager or management company if they can recommend a CPA who has already worked with planned communities. This saves time and ensures continuity, as the CPA will already know how to work with the management company.
Transparency and accountability should be top priorities in homeowners associations. HOAs should reassure their residents that the board is appropriately managing the community’s finances. Hiring an HOA CPA will help you allay people’s fears and establish trust.
Vanguard Management Group is a trustworthy HOA management company in Florida. Call us now at 813-930-8036 or contact us online to learn more!
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