To keep an HOA functioning and serving the community,regular fees are assessed for homeowners. It is a good idea for HOAs toregularly audit their finances to make sure there are sufficient funds and thatnothing has been mismanaged.
Audits can help an HOA identify financial errors or problemsbefore they get out of hand. By conducting regular audits, the HOA may verifyits financial accounts and records, identify unpaid fees or fines, and avoidpotential legal disputes about financial mismanagement. While a licensed CPAmust conduct the audit, an attorney can help the HOA comply with the audit andfulfill any duties it may have throughout the process. If mismanagement orfraud is uncovered, the HOA’s lawyer can help take action to correct theproblem.
Call our Arizona housing association governance lawyers atHalk, Oetinger, and Brown at (520) 229-3377 and ask for a free legal evaluation.
What is the Purpose ofan HOA Audit in Arizona?
An attorney can assist an HOA during an audit and in futureaudits by helping it comply with applicable rules and laws. An attorney canalso help the HOA address any financial issues that arise during the audit.
Verifying FinancialRecords and Accounts
First, regular audits do not necessarily mean anything bad.Conducting regular audits can help an HOA verify its financial records, reviewfunds that may be sitting in any accounts, and understand its current financialsituation.
Regular audits often help HOAs catch financial issues earlyand resolve them before they become problems. You might realize that the HOA isoverspending, and you can adjust budgets so that the HOA remains in the black.
Identifying Unpaid Feesand Fines
Second, if the audit uncovers unpaid fees or fines fromhomeowners or others and the HOA is owed money, our Arizona housing associationgovernance lawyers can help your HOA take steps to recover the money owed.
The first step may be to notify the homeowners or others whoowe fees or fines to the HOA of their outstanding debts. If these people do notmake payments, your attorney can send demand letters stating that payment isdue and that legal action may be taken if fees or fines remain unpaid.
Avoiding Potential LegalDisputes
Finally, having a lawyer guide you through regular auditsmay actually help you avoid legal disputes in the future. Many disputes arise,and homeowners may file claims against an HOA because of financialmismanagement.
The HOA has a duty to use and manage funds for the benefitof the community. If money is mismanaged, community members could take legalaction against the HOA. Regular audits may help catch financial mismanagementor errors before they become a problem.
How a Lawyer Can Helpwith Regular HOA Audits
A licensed CPA should perform regular audits, but that doesnot mean a lawyer cannot help you throughout the audit process. If legal issuesarise while you are audited, your lawyer should be ready to help.
Ensure Legal Compliance
An audit requires a certain degree of cooperation from theparty being audited. You must provide the CPA conducting the audit with thenecessary records and access to HOA information to complete the audit.
There are also various legal requirements about when auditsshould be conducted and what to do with the final audit report. In Arizona, anHOA may need to complete an audit no later than 180 days from the end of theHOA’s fiscal year. Final reports may also need to be made available to HOAmembers and homeowners within the community.
Investigating Fraud
Sometimes, HOAs are surprised to learn, during an audit,that someone among them has committed fraud. Another board member might haveillegally dipped into HOA funds for personal use or has been embezzling fundsfor an extended period. This can be a very uncomfortable situation to dealwith, and your lawyer can help.
First, your attorney should help identify where the fraudoriginated, how long it has been ongoing, and who is responsible. Once thosefacts are known, your lawyer can take steps to remove the person responsiblefor the fraud from the HOA board and enforce any necessary penalties, includingcontacting law enforcement and filing a criminal complaint.
Enforcing the Audit
If someone refuses to allow an audit, your attorney canenforce the HOA’s obligation to audit. Audits are a necessary aspect ofoperating an HOA, but some board members may be hesitant or resistant to theidea. Perhaps they say that hiring a CPA is too expensive, or the audit issimply not necessary.
If someone stands in the way of necessary, regular audits,your lawyer can step in and help legally enforce them. Refusing to audit maymean the HOA is not in compliance with applicable state laws, and a major partof your lawyer’s job is helping to ensure compliance.
FAQs About RegularAudits for Arizona Communities
What is an HOA Audit?
An HOA audit is when an HOA board has a certified CPA auditthe HOA's financial records and accounts. The purpose of the audit is oftensimply to verify financial records, look for financial mismanagement, andcomply with state laws regarding the operating of HOAs.
How Often Should an HOAConduct an Audit?
Under Arizona law, an HOA board must conduct an annual auditnot later than 180 days after the end of the HOA’s fiscal year. This is theminimum imposed by state law, but your specific community may require morefrequent audits, especially if the community is larger and has more significantfinances.
Do You Need a Lawyer foran HOA Audit in Arizona?
A CPA must conduct the audit, but a lawyer can help ensurethe HOA’s compliance. An attorney can help the HOA board make sure that theycomply with all necessary state laws and handles any issues that may arise,like fraud or financial mismanagement. If something is very wrong with theHOA’s finances, an attorney can help the HOA take legal action if necessary.
What Happens if an HOAAudit Uncovers Fraud?
If an audit uncovers fraud, the HOA should immediatelycontact its lawyer for help. An attorney can help determine who is responsiblefor the fraud and what legal steps are necessary to correct it. They can alsodetermine if the fraud warrants a criminal complaint.
Get Help Now from OurArizona Housing Association Governance Attorneys
Call our Arizona housing association governance lawyers atHalk, Oetinger, and Brown at (520) 229-3377 and ask for a free legal evaluation.
