HOA Audit Requirements by State: 2026 Compliance Guide

We built BoardStack because volunteer treasurers kept telling us the same story. A management company or a prior treasurer assured the board that QuickBooks output was good enough, nobody commissioned a CPA engagement, and three years later a homeowner’s attorney sent a demand letter pointing at the statute the board had been ignoring. At that point the directors learned that the business judgment rule protects good-faith decisions, not decisions that violate the governing statute.

Audit requirements are one of the most reliably ignored rules in community association law. They are also one of the cheapest to comply with and the most damaging to skip. This guide covers what the major states require, how the engagement tiers differ, and what personal exposure directors take on when they decline the work.

The three engagement tiers

Before walking through state statutes, the board needs a clear picture of what “audit” actually means, because statutes use specific terms of art.

A compilation is an engagement where a CPA takes the association’s books and formats them into financial statement form. The CPA does not test anything. No assurance is provided. A compilation is useful for producing clean-looking statements for a lender or a member meeting, but it does not verify that the numbers are right.

A review is a middle-tier engagement. The CPA performs analytical procedures, things like comparing current-year expense categories to prior year and asking the treasurer to explain variances, and inquires of management about the books. The CPA issues limited assurance, which in plain language means “nothing jumped out, but we did not look deep.” A review costs two to three times a compilation and takes a few weeks.

An audit is the top tier. The CPA tests transactions, confirms cash balances directly with the bank, confirms receivables and payables with counterparties, observes year-end procedures, and issues an opinion on whether the statements are fairly presented. An audit is the only engagement that produces third-party verification strong enough for a lender covenant or a D&O insurance renewal. It costs substantially more and takes longer.

When a statute says “audit,” a review does not satisfy it. When a statute says “review,” a compilation does not satisfy it. Read the statute carefully.

Audit tier by revenue band

The pattern across states is remarkably consistent. Small associations get a compilation, mid-size associations get a review, and large associations get a full audit. The revenue breakpoints differ, but the structure repeats.

Boards should treat this table as a general map, not a substitute for reading the statute. Several states also key off unit count rather than revenue, and a few use both as independent triggers.

California

California Civil Code Section 5305 requires associations with gross income of $75,000 or more in a fiscal year to prepare a review of the financial statement for that year by a licensed CPA, following generally accepted accounting principles. The review must be completed within 120 days after the close of the fiscal year and distributed to members. Associations below the $75,000 threshold are not required to hire a CPA, though the board still owes members accurate financial reporting.

Larger California associations frequently require a full audit in their governing documents. Before accepting a review as the required tier, the board must read the CC&Rs. A declaration that specifies “audit” overrides the statutory floor.

California does not let homeowners waive the CPA review by vote. The review is a floor, not a ceiling.

Florida

Florida’s condominium statute, Section 718.111(13), ties engagement tier to revenue in concrete bands. Associations with total annual revenue between $150,000 and $299,999 must prepare a compiled report. Revenue between $300,000 and $499,999 triggers a review. Revenue of $500,000 or more triggers a full audit. Associations under $150,000 may prepare a report of cash receipts and expenditures.

The post-Surfside reforms tightened several of these provisions. The board should confirm the current text, because Florida has amended Chapter 718 in almost every recent legislative session. Florida also requires distribution of the required financial report within a specific window after fiscal year-end, and skipping the engagement is a direct statutory violation the Division of Florida Condominiums can act on.

Texas

Texas takes a different approach. Chapter 209 of the Texas Property Code, the Residential Property Owners Protection Act, does not impose an annual audit mandate on planned communities as a matter of state law. Texas instead leaves the engagement tier to the governing documents. Many Texas HOAs nonetheless commission annual audits because their CC&Rs require it or because the board recognizes the fiduciary exposure of going without.

Texas condominium associations under the Texas Uniform Condominium Act have their own set of obligations regarding financial records and member inspection rights. Treasurers in Texas should pull the declaration and bylaws before assuming no engagement is required.

Nevada

Nevada Revised Statutes 116.31083 requires associations to prepare financial statements and requires an audit or review for larger communities. The Nevada Real Estate Division administers the chapter and has published guidance on the thresholds and the acceptable engagement tier. Nevada is notable for active regulatory oversight; unlike states where the statute exists but enforcement is homeowner-driven, Nevada’s NRED does inspect and sanction.

Hawaii

Hawaii Revised Statutes Chapter 514B governs condominiums. The statute requires annual financial statements and, for associations above a specified size, an audit prepared by a licensed public accountant. Hawaii’s enforcement is concentrated in the condominium space; planned communities outside Chapter 514B fall under general nonprofit law.

Washington

Washington updated its common interest ownership law to RCW 64.90, which requires audits for associations above a unit threshold and spells out minimum content for the financial statements. Smaller associations can provide compilations. Washington’s statute also ties reserve study obligations to financial reporting, so the two requirements move together.

Illinois

The Illinois Condominium Property Act, 765 ILCS 605/18, requires an annual independent CPA audit for condominium associations that meet the statutory threshold. Illinois also permits unit owners to request an audit by vote, giving members a mechanism to compel the engagement even when the statute would not otherwise require it. The combination of a statutory audit floor and a member-triggered audit right makes Illinois one of the stricter states.

New Jersey

New Jersey’s Planned Real Estate Development Full Disclosure Act and the nonprofit provisions that govern common interest communities require regular financial reporting. Larger associations are expected to provide audited financials, and governing documents frequently lock in the audit requirement regardless of statute. New Jersey also has active consumer protection oversight through the Department of Community Affairs.

Virginia

Virginia’s Property Owners Association Act at Section 55.1-1840 and the parallel Condominium Act require certain financial disclosures and condition member meetings on timely financial reporting. Virginia associations above specified revenue or unit thresholds should expect to engage a CPA annually. The state’s resale certificate requirements also key off current financial statements, which means an association without a current audit cannot produce the disclosure package required for unit sales.

North Carolina

North Carolina’s Planned Community Act, Chapter 47F, requires annual financial reporting and conditions several association activities on the financials being current. The statute does not impose a uniform audit mandate on every community, but governing documents commonly do, and North Carolina lenders routinely require audited financials before financing unit sales in a condominium project. Self-managed boards in North Carolina often underestimate how much friction an unaudited financial statement creates at closing.

What happens when the board skips it

Three things go wrong, in sequence.

First, homeowners notice. The annual meeting packet is supposed to contain the reviewed or audited statements. When it does not, at least one owner will ask. A board that responds with “we decided not to do the review this year” has just admitted to the breach in writing.

Second, lenders and insurers notice. Fannie Mae and Freddie Mac condominium project approvals reference current financial statements. D&O carriers increasingly ask for audited financials at renewal. An association that cannot produce them pays more for insurance, if it can get it, and loses warrantable status with the agencies, which kills conforming financing for unit sales.

Third, if anything is actually wrong in the books, commingling of operating and reserve funds, unrecorded vendor liabilities, a bookkeeper skimming, the board’s failure to engage an auditor converts a recoverable loss into personal exposure. A timely audit would have found the problem. The absence of the audit is the board’s fault, and courts do not apply the business judgment rule to statutory violations.

How BoardStack fits

We built BoardStack so the financials produced during the year actually close cleanly when the CPA arrives. Operating funds and reserve funds sit in separate ledgers at the database layer, not as an accounting memo the treasurer has to remember to honor. Reserve transfers are dated, documented, and board-approved in the system. The audit trail the CPA needs, who entered which transaction and when, is built into the record by default.

None of this replaces the CPA engagement. The statute requires a licensed independent accountant and BoardStack is software. What BoardStack does is ensure the books the CPA is auditing are the books the board actually kept, with the separation of funds the statute assumes and the trail the auditor needs to test.

What to do next

Read your statute. Pull the governing documents. Confirm which engagement tier applies based on current-year revenue or unit count. Contact CPAs in Q4 before year-end, sign an engagement letter, and diary the statutory distribution deadline. If the board has skipped the engagement in prior years, commission a catch-up review for the most recent closed year and document the board’s decision to bring the association back into compliance. That record, a dated board resolution acknowledging the gap and engaging a CPA to close it, is the directors’ best protection if a homeowner later challenges the historical lapse.

DEFINITION

Audit

The highest-assurance engagement a CPA performs on financial statements, involving tests of transactions, third-party confirmations of balances, and an independent opinion on whether the statements are presented fairly. Required by statute for larger HOAs in several states.

DEFINITION

Review

A CPA engagement limited to analytical procedures and inquiries of management, issuing a narrower form of limited assurance rather than a full opinion. Many states require a review at mid-size revenue thresholds where a full audit would be disproportionate.

DEFINITION

Compilation

A CPA engagement that formats management's financial data into statement form without any assurance. The CPA does not verify the numbers. Lowest cost and lowest assurance; required only at the smallest revenue tiers in most statutes.

DEFINITION

Gross Income

Total revenue recognized by the association during the fiscal year, including regular assessments, special assessments, interest income, and any other operating receipts. Most state audit thresholds key off gross income rather than net income or expenses.

DEFINITION

Engagement Letter

The written contract between the board and the CPA that defines the engagement tier, scope, deliverables, timing, and fee. Signing an engagement letter that specifies a review when the statute requires an audit does not cure the underlying non-compliance.

DEFINITION

Going Concern

An auditor's assessment of whether the association has the financial resources to continue operating for the next twelve months. A going concern qualification in an audit report is a serious signal to lenders, insurers, and prospective buyers.