How to Find the Right CPA for Your HOA
One of the most challenging tasks a homeowners’ association (HOA) faces is proper financial management. Regardless of size, every HOA—even those that are professionally managed—needs a certified public accountant (CPA) to stay on the right course. With a fiduciary duty to act in the best interest of the association, the board is ultimately responsible for maintaining its financial health. Having a professional service provider, like a CPA, by your side will ensure accuracy in accounting practices, increased efficiency, and much more. Read on to learn how a CPA can help stabilize your association’s financial future and tips for finding one you can trust.
HOA Experience is Crucial
Even if one of your board members happens to be a CPA, odds are they don’t have HOA-specific experience. To keep from getting into a situation where a conflict of interest may arise, hire an independent accountant without any ties to the board.
The primary service a CPA provides to an HOA is preparing tax returns. Tax returns can be confusing for anyone, especially when filing for your HOA. For federal tax purposes, an HOA is considered a business, so your HOA will likely need to file a corporate tax return just like any other corporation. A CPA also provides services such as a:
- Compilation. The CPA gathers financial statements and relevant reports. This is just a snapshot of HOA finances; the CPA doesn’t analyze or verify the accuracy of the reports. A compilation results in “no assurances.”
- Review. The CPA conducts a basic analysis of HOA financial statements. A review results in “limited assurances,” which means the CPA hasn’t conducted an in-depth analysis but has determined that no material is missing from the reports.
- Audit. The highest level of assurance and a time-intensive process, the goal of an audit is to prove all financial statements are error-free and 100-percent accurate. The CPA auditor must thoroughly understand the HOA’s structure and policies and review all contracts, board meeting minutes, and records. Some states and HOA bylaws require annual audits. An audit results in “positive assurances,” which means the CPA guarantees accuracy of the reports and the HOA’s financial health.
6 Questions for Finding the Right CPA
Finding the right CPA for your HOA will take time and effort, but the cost and accountability benefits are immeasurable. Be sure to ask:
Does the CPA have experience with HOAs?
An HOA has unique tax criteria, unlike other businesses. Even a CPA experienced in corporate and personal tax matters won’t have the expertise an HOA needs. And you don’t want to be their guinea pig as they strive to master the complexities of HOA accounting.
Is the CPA truly independent?
Avoid hiring a CPA with any ties to your board, its vendors, or your management company. You want a third party who will provide an honest assessment with no potential perception of impropriety or conflict of interest.
Does your CPA understand the difference between 1120 and 1120H tax forms?
Most HOAs can use either form. A knowledgeable CPA can choose the most advantageous form for your situation. Using one form might lower your taxes, but using the other might reduce the likelihood of a government audit.
Is your CPA knowledgeable about exempt income versus exempt-function income?
A CPA who understands the intricacies of reporting an HOA’s various revenue streams can help reduce your tax liability.
Does the CPA come recommended?
Do your research, read reviews, and conduct in-depth interviews. Ask about the size of their practice and whether they have time for you. Consider their availability, and try to get on their calendar in advance of tax season.
Does your management company already employ financial resources?
Some HOA management companies provide financial services, such as accounts receivable, accounts payable, collections, insurance, and generation of financial reports.
Keeping a Trusted Eye on Finances
A CPA can help an association in many ways, including finding irregularities in financial documents. Every business or organization is susceptible to fraud, and an HOA is no exception. Read “How to Prevent HOA Fraud, Theft & Embezzlement” to learn the warning signs and how to mitigate the situation if it happens.