HOA audit checklist: Your complete guide

What is an HOA audit?

An HOA audit is an independent review of an association’s financial records by a certified public accountant (CPA). The CPA looks closely at the association’s financial statements and supporting records to confirm that the information is accurate and complete.
 

Are HOA audits required in Minnesota?

Associations governed by the Minnesota Common Interest Ownership Act (MCIOA) generally need to have their financial statements reviewed once a year by a licensed, independent CPA (Minn. Stat. § 515B.3-121). However, Minnesota law does not require every association to complete a full audit.

A full audit may still be required by the association’s governing documents, a lender, or another agreement. Boards can also choose to complete one when they want a closer look at the association’s financial records.

Learn more about understanding HOA documents, rules, and regulations in our webinar for board members in Minnesota.
 

Average cost of HOA audits in Minnesota

Full HOA audits typically cost a few thousand dollars, depending on the size of the HOA. Several factors influence the final price, including the HOA’s location, the volume of financial transactions, and whether the association has faced financial discrepancies in the past.

A thorough audit can be invaluable to maintaining the health of your HOA. Opting for the lowest-priced auditor available can backfire if the auditor lacks expertise, so boards should carefully vet CPA firms to determine whether they have experience with community associations.
 

HOA audit checklist

Start with these records:

• Financial statements: Include the year-end balance sheet, income statement, and any other financial reports your CPA requests. These reports give the CPA an overview of the association’s financial position and activity.
   
• Bank statements and reconciliations: Gather statements for each association bank account, along with the related reconciliations. This helps show that the amounts in the association’s records match the activity reported by the bank.
   
• Assessment records: Provide records showing what owners were charged, what was collected, and what remains unpaid. This helps the CPA review one of the association’s main sources of income.
   
• Reserve records: Include current reserve balances, contributions, withdrawals, and the reserve study or planning information the board uses. This gives the CPA context around money set aside for future repairs and replacements.
   
• Invoices and payment records: Keep invoices, payment approvals, and supporting documentation for association expenses. These records help connect what appears in the financial statements to the actual purchases and services the association paid for.
   
• Vendor contracts: Provide current contracts for vendors whose work created a significant expense or ongoing financial commitment. This can help the CPA compare payments with the terms the board approved.
   
• Board meeting minutes: Work with your board secretary to include minutes that document major financial decisions. These records help show how and when the board approved important expenses.
   
• Annual budget: Keep the board-approved budget with the audit records. The CPA may use it to compare what the association planned to spend with what actually happened during the year.
   
• Tax records: Include the association’s filed tax returns for the period being reviewed. Your CPA may also request records from prior years if they need more context.
   
• Governing documents: Keep the association’s governing documents available for the CPA. They may contain financial requirements that affect how the association manages and reports its money.

Keeping your HOA audit checklist current throughout the year can make the review process easier and give the board a clearer view of the association’s finances.
 

Tips for board members

1. Start preparing early

   Do not wait until the CPA asks for records to start organizing HOA paperwork. Keep your HOA audit checklist updated throughout the year so important financial information is easier to find when you need it. Starting early also gives the board more time to address missing records or questions before the review or audit begins.
    

2. Keep operating and reserve funds clear

   Your board should be able to see how operating funds and reserve funds are being used. Minnesota law requires financial statements prepared by an independent CPA under § 515B.3-121 to separate operating activity from replacement reserve activity.
    

3. Reconcile accounts regularly

   Bank reconciliations should be completed throughout the year, not only when an audit or review is coming up. Regular reconciliations help catch differences early and keep the association’s records current.
    

4. Document major financial decisions

   When the board approves a major expense at a board meeting, the financial records should clearly connect back to that decision. Good documentation can help show why the expense was approved and how it was carried out. This makes it easier for the CPA to understand important transactions during the HOA audit checklist process.
    

5. Ask your CPA what they need

   Your HOA audit checklist is a helpful starting point, but your CPA may ask for additional records based on the association and the type of engagement. Ask for their document request early and review it carefully. That gives the board time to gather what is needed and avoid unnecessary back-and-forth once the review or audit is underway.
    

6. Follow up on the results

   The process should not end when the CPA sends the final report. Take time to understand any findings and decide what the board should address next. If the CPA identifies an issue, use that feedback to improve how the association handles its finances going forward. Those lessons can also shape next year’s HOA audit checklist.

How to prepare for an HOA audit

Before the HOA audit, boards should see that their financial records are organized and up to date:

• Gather financial documents: Bank statements, ledgers, invoices, and reserve fund records should be organized and accessible.
   
• Review internal controls: Assess processes for collecting dues, approving expenditures, and managing financial records to identify potential gaps.
   
• Document reserve funds: Reserve studies and funding plans should be up to date and aligned with future capital needs.
   
• Communicate with homeowners: Keeping residents informed builds trust and supports a smooth audit process.

If you’re looking for more ways to optimize your community’s financial health, FirstService Financial specializes in financial services designed exclusively for HOAs. From securing competitive loan options and guidance on budgets and reserves to providing insurance coverage expertise and more — they can help your board make decisions that benefit your association’s long-term financial health.
 

How often are audits conducted?

Audits are usually conducted every 1 to 3 years, often prompted by financial milestones like major capital improvements or insurance claims. Leadership transitions also create a natural opportunity for an audit, giving new board members a clear financial picture. If homeowners express concerns about financial management, an audit can help address those questions and provide reassurance.
 

Why HOA audits matter for Minnesota communities

Regular HOA audits can help boards identify risks early and avoid financial mismanagement. With clear financial data, the board can plan budgets, manage reserves, and anticipate future costs more effectively.

Financial accountability can also strengthen trust between the board and residents, reinforcing a sense of stability within the community by giving homeowners confidence that their dues are being managed responsibly. By keeping financial records in order and working with a qualified CPA, boards create a stronger foundation for long-term success.

FirstService Residential partners with HOA boards across Minnesota, providing financial expertise, property management services, and technology that simplifies audits and financial oversight. If your board is preparing for an audit or looking for better financial management solutions, our team is here to help.

To learn more about how property management services can benefit your HOA, contact FirstService Residential today.

This information is provided for general informational purposes only and is not intended to constitute, and should not be relied upon as, legal, regulatory, financial, or operational advice, or as a representation or guarantee of any specific services, capabilities, or outcomes. Property management needs, regulatory requirements, market conditions, and available services vary by jurisdiction, property type, and community. FirstService Residential provides services through locally based affiliates and associates, and services and results may vary by community, region, contractual terms, and applicable law.