Audit

I live in a HOA development with a total annual revenue of over $400,000. Every year prior to the Annual meeting of the Association we receive the Proposed Budget and Proxy and are asked to vote to reduce the audit of the financial statements to Cash Statement of Receipts & Expenditures.

I understand that when total annual revenue is over $400,000.00 the cost of the full audit is included in the budget in the event the members do not waive this level of reporting.

To my knowledge we have never had an audit in all of the existence of this community which is over 20 years. Is it mandatory to have an audit every year or every three years. What is the rule. I was told that they can waive an audit for three years in a row only but then must have an audit.

Raina-

In CA, state law (CA Civil Code 5305(c)) requires an HOA budget >$75k to have an annual Financial "Review". As usual with this type of question, State law - or the lack thereof - will dictate the answer.

From the boilerplate cover letter on our Review:

"A review is substantially less in scope than an Audit, the objective of which is the expression of an opinion regarding the financial position as a whole. Accordingly, we do not express such an opinion."

Translation: We (the CPA performing the Review) are bulletproof. Don't bother suing us if the finances go bad.

In a Review, the CPA takes numbers supplied by the PM, throws them into a blender, and churns out an incomprehensible report. There is no independent verification of the numbers supplied by the PM.

I look at it this way. Our PM handles the HOA checkbook. The PM also writes checks *to themselves* for their own fees and expenses. Our budget is an inch shy of $1M/year. We have never had an official Audit AFAIK in 40 years, and this concerns me. I don't suspect any wrongdoing, but I'm very concerned about human error, cumulative and compounding errors; that sort of thing.