Financial Audits- Requirement Or Just Good Practice?

It is important for every association board to have a good hold on its finances. Accordingly, most associations hire a certified public accountant (“CPA”) to audit the Association’s records periodically or have the board and/or property manager complete an audit. The question becomes: how often should we audit the books, and are we required to do so?

First, look to your governing documents. Some provisions in the declaration and/or bylaws for your association may specify, for example, that the board must conduct a financial audit on an annual basis.

Other documents, for example, provide that a CPA must complete an audit when a majority of the board members or majority of the owners vote to do so.

Ohio law does not specify how often the books should be audited by the board or a CPA (per R.C. §§5311 & 5312), so technically, there is no specified requirement by law.

However, the board has several duties to the association, which include, simply put, acting in the best interests of the association. Simply going for years without having a CPA conduct an audit of the association’s books would likely be considered negligence on the part of the board. If there are inconsistencies in the books or money is being misappropriated, it is much more likely that an irregularity will be spotted by an accounting professional.

Accordingly, while there may be a cost to do so, we recommend that our boards hire a CPA to conduct a financial audit on an annual basis. If you would like us to provide you with a list of CPA’s who conduct audits for community associations, please contact our office, and we would be happy to provide you with a list of CPA’s we have worked with.

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