Operating a homeowners association company makes you responsible for maintaining and upkeep common areas in a residential community. And the management itself involves several parts, the most crucial being financial management.
And though you don’t need to be a CPA to be a successful HOA manager, understanding financial concepts will help you do your job more efficiently. You’ll be able to work easily with your day-to-day accounting tasks alongside planning big-picture projects, like audits, and budgeting. As HOA finances are essential, accounting can’t be overlooked. As the board is solely responsible if there are any problems. Considering this, a board may feel more comfortable hiring a professional whenever needed, but many deny this. So, let’s look into the aspects of how hiring a CPA can be of assistance.
Benefits of Hiring a CPA for Your HOA
The importance of hiring a CPA for an HOA is undeniable. Why? Here are some reasons,
- Tax Concerns and Resolves
Associations have the right to choose annually between Form 1120 and Form 1120-H, and a CPA can share valuable advice about an association’s choice of tax forms. Here, a well-informed decision requires a great deal of knowledge as well as an in-depth understanding of the crucial attributes of a particular association. There is no “one-size-fits-all” advice for this topic. So, a CPA can assist an association with the preparation of its tax return.
- Comprehensive Annual Audit
Apart from the monthly or quarterly financial reports, a CPA can also prepare the annual audit of the association. The annual audit will present results from the current fiscal year and the HOA board will be able to see how the HOA’s actual income and expenses compare to the amounts they initially budgeted. This audit also accounts for upcoming projects that are being considered for next year’s budget.
Given the expertise of the professional, the HOA board can expect a detailed and complete assessment at the end of each year. Apart from that, a CPA can walk the board through important changes and provide detailed recommendations in the report.
- Boost Operational Proficiency
By hiring a CPA, you can dedicate your other resources and staff to prominent business development measures, allowing your team to emphasize addressing initiatives that assist your association’s financial viability.
Considering that you outsource routine and basic accounting tasks, your in-house staff can dedicate their time, resources, and energy efficiency to core services.
- Experience and Expertise
Professional CPAs deal with a diverse client base and thus possess knowledge and experience more significant than any usual in-team resource. For example, aside from handling your HOA accounting, they also contribute towards your company’s betterment by managing several tasks, including assessment collections, accounts payables, and rendering detailed financial reports and analyses. So, in the hands of the right professionals, your board would get more precise and informative results.
- Comprehensive Annual Audit
Given the expertise of a CPA, the HOA board can expect a detailed and complete assessment at the end of each year. This audit presents results from the current fiscal year and through it, an HOA board is able to see how the HOA’s actual income and expenses performed compared to the amounts they initially budgeted for.
Further, a professional CPA provides a walkthrough to the board about important changes and possible recommendations too. Thus, it empowers an HOA board into having all the information they need to prepare for the next fiscal year.
- Guidance on Other Related Matters
Aside from basic accounting and finance, a CPA can also assist you to deal with other related matters. For example, if the HOA has a new reserve study, a CPA can help the board members understand the report. They can also explain funding options that the HOA can take and how this will affect their overall finances in a fiscal year. In a few cases, if a community takes out an HOA loan, the accountant can help the board to keep the track of all the necessary expenses.
Although homeowner associations are not organized as for-profit corporations, they still have certain financial obligations that require the assistance of a CPA. Do note that an HOA will incur much higher costs if it contacts the CPA after the fact. Therefore, if you are unsure whether your association requires the assistance of a CPA, contact your manager, or attorney, or consult a CPA prior to making any financial decision.