Successfully operating and overseeing a homeowners’ association (HOA) is a big task. While HOAs must elect a board of directors to govern and lead the community, many boards partner with third-party professional advisors and service providers to assist with duties and get the job done right. A Certified Public Account (CPA) is a common HOA professional service provider. Read on to learn more about an HOA CPA, what they do, and why your HOA needs one.
What is a CPA?
A CPA is a designation given to a qualified accounting professional who has passed the rigorous CPA examination and fulfilled other state Board of Accountancy licensing, work, and educational requirements. CPAs can serve various industries, offering financial advice and support to individuals and businesses so they can make smart tax and financial decisions.
What Does a CPA Do?
CPAs are trusted nationwide to complete a variety of tasks. Typical CPA responsibilities include:
- Advising on financial decisions
- Understanding and managing financial information
- Examining financial records
- Calculating tax returns
- Preparing financial documents
- Conducting audits
- Filing reports
- Tax planning
- Forensic accounting
What Does an HOA CPA Do?
An HOA CPA can support a community in many ways. They can help with tax preparation, accounting knowledge, financial monitoring, bookkeeping, and more. Additionally, an HOA CPA can offer the following services:
The most basic service, a compilation is when the CPA assists management with the presentation of the HOA’s financial statements and reports. They don’t analyze financial results for accuracy; they just provide a snapshot of general financial management.
A review is when the CPA conducts a simple analysis of HOA financial statements. The CPA doesn’t conduct an in-depth analysis, but verifies that no material is missing from the financial statements or reports.
The most comprehensive service, an audit is when the CPA performs analysis and testing to provide reasonable assurance that there are no material misstatements. The CPA reviews the HOA’s structure and policies, records, HOA board meeting minutes, and contracts.
Understanding CPA HOA services and taxes can be confusing. Check out 7 frequently asked questions about HOA taxes.
Why Does My Community Need an HOA CPA?
The HOA board treasurer is responsible for managing the association's funds and maintaining financial records. However, even if your treasurer happens to be a CPA, odds are they don’t have HOA-specific experience. That’s why associations often choose to partner with a third-party CPA to conduct an audit or review or compile their financial statements.
Working with a CPA is invaluable, as they can assist with financial accuracy and regulation compliance and eliminate bias. Plus, many associations also continue to be required—both by their governing documents and relevant laws—to engage in the services of a CPA. Other reasons your HOA needs a CPA include:
- Stronger tax comprehension. Unlike many businesses, HOAs have unique tax criteria. HOA CPAs understand the complexities of these requirements.
- Tax form familiarity. HOAs can either use an 1120 or 1120-H tax form. A knowledgeable CPA can help choose the most advantageous form for your situation.
- Understanding of exempt income vs. exempt-function income. A CPA knows the ins and outs and intricacies of reporting HOA revenue streams and reducing tax liability.
- Save time. Financial management is one of the most challenging and time-consuming board tasks. A CPA can free up your schedule so board members can focus on other projects.
- Save money. Outsourcing accounting services has proven to reduce costs in many applications. With a CPA’s experience in the field, it could lead to higher-quality financial statements that are prepared according to professional standards.
Wondering what other professional service providers can help your board and HOA? Read our ebook, “The Community Partners & Professional Service Providers Every Board Needs.”
How to Find the Right HOA CPA
As with any service provider, it’s essential to do your homework before partnering with a CPA. If your association doesn’t already have a CPA, ask your community manager, other vendors, and neighboring communities for a recommendation. When interviewing potential CPA candidates, be sure to ask the following questions:
1. Do you have experience with HOAs?
With a non-profit status and differing incomes and expenses, it’s no surprise that HOAs are complicated. That’s why finding a CPA who specializes in the community association industry is crucial. Ask your CPA to share their experience with HOAs and provide references and relevant designations and credentials.
2. How much are your tax services?
Ask about the CPA’s annual fee and their firm’s increase history. Prices vary by service, experience, and location, but a full audit can cost an HOA between $4,000 and $6,000, and a review can cost between $1,500 and $2,000.
3. Do you have time to work with us?
Offering a specialized service for a growing industry, HOA CPAs are very busy—especially during tax time. Confirm the individual or firm has the time and availability to deliver the necessary services.
Get A Sample RFP for Your HOA CPA Candidates
Every HOA should have a CPA for proper financial management. To find the HOA CPA that best suits your needs, your board must draft and distribute a formal document that requests a bid for accounting services called a request for proposal (RFP). To help you select a CPA for your HOA, check out our ebook, “A Sample RFP For Your HOA CPA Candidates.” Download it now to solicit bids and information from your accountant candidates.