How do we set up an audit committee of owners to check the HOA's books?

By OurHOA · General information · Revised October 18, 2026

How an HOA board sets up an owner audit committee: who can serve, a charter to copy, monthly spot checks of bank statements and invoices, and what it reports.

Part of the HOA board handbook: treasurer and money.

The short answer

Create the committee by board resolution as an advisory committee: two or three owners who are not directors, not the treasurer and not related to anyone who signs checks. Give it a written charter, read-only access to the bank statements, the general ledger and the paid invoices, and a short checklist to work through every month or quarter. It finds and asks. It does not approve payments, fix entries or talk to vendors. It reports in writing to the full board, and the board answers in the minutes. It does not replace the annual review or audit by an accountant, and it is not a substitute for the treasurer's own monthly work. Committee rules come from your state's nonprofit corporation law, your HOA statute and your bylaws, and they differ from place to place. Treat this as general education, not legal advice.

Advisory committee or board committee

This choice decides who can serve, so make it first. Most state nonprofit laws separate committees that exercise the board's power from committees that only advise. Texas: Business Organizations Code section 22.218 lets the bylaws or a board resolution create committees that hold board authority, but a majority of members must be directors. Section 22.219 lets the board appoint committees "that do not have the authority of the board," and does not require those members to be directors. An owners' audit committee belongs under 22.219. Florida: section 617.0825(1) requires a majority of directors on any committee of the board. Subsection (8) allows advisory committees with any number of non-directors. They are not committees of the board, cannot exercise its powers or bind the association, and may make recommendations. Subsection (6) gives non-director members of a board committee the same fiduciary duties as directors, which is one more reason to keep this one advisory. Colorado: section 7-128-206(6) of the nonprofit act allows advisory committees with any members, and a body with non-director voting members cannot use powers reserved to the board. In all three states, read the bylaws next. Some bylaws name standing committees or say how committee members are appointed, and those rules control.

Who should serve

Two to three members is enough. Each member needs to be comfortable reading a bank statement and a spreadsheet. A retired bookkeeper, a small-business owner or someone who reconciles accounts at work is ideal. Rule out: - any director, and the treasurer above all - anyone who signs checks, approves payments or has online banking access - spouses, relatives and housemates of those people - the manager or bookkeeper, and anyone who works for a vendor the association pays - an owner with a delinquent account or a pending dispute with the association Ask every volunteer to sign a short statement before appointment: no relationship with a signer or vendor, and a promise to keep owner account details confidential. Appoint members for staggered one-year or two-year terms so the committee does not walk out the door at once.

A charter the board can adopt

Adapt this to your documents and have the board adopt it by motion at an open meeting. "Audit Committee Charter. 1. Purpose. The Audit Committee is an advisory committee of owners. It reviews the association's financial records between annual accountant engagements and reports its findings to the board. 2. Members. The board appoints two to three owners who are not directors, officers, check signers, managers or vendors, or related to any of them. Members serve two-year staggered terms at the pleasure of the board. 3. Access. The treasurer or manager will provide, within 10 days after month end, read-only copies of all bank and investment statements, the general ledger, the reconciliation reports, the accounts payable list and supporting invoices, and the board-approved budget. 4. Limits. The committee does not approve or make payments, change records, contact vendors or owners about accounts, or act for the association. 5. Confidentiality. Members keep individual owner account information confidential and refer to accounts by number in all reports. 6. Reports. The committee delivers a written report to the board each quarter and at any time it finds an unexplained transaction. 7. Review. The board reviews this charter each year." Motion for the minutes: "Motion to establish the Audit Committee as an advisory committee under the attached charter and to appoint [names] for terms ending [dates]."

What the committee checks

Give the committee a fixed list so its work does not depend on who volunteers. Each month or quarter: 1. Match the ending balance on each bank and reserve statement to the reconciliation and the balance sheet. Any difference, even $12, gets a question. 2. Read the list of every withdrawal, ACH debit, wire and card charge on the bank statement. Pick 10 to 15, always including the three largest, and pull the invoice and the approval for each. 3. Confirm each sampled payment went to a vendor with a contract or a history with the association, at the address and bank account on file. 4. Look for payments to new vendors, round-dollar amounts, payments just under the board's approval limit, and any payee that matches a director's or manager's name or address. 5. Check that every transfer out of the reserve account has a board vote behind it in the minutes. 6. Compare total assessment deposits to the number of homes times the dues, less known delinquencies. A gap of more than one or two homes' dues needs an explanation. 7. Compare spending to the budget by line and note anything more than 10 percent over. Our guide on how an HOA reconciles its bank statement walks through the reconciliation the committee is checking.

How the committee reports

Keep the report to one page. List the period reviewed, the records received and when, the payments sampled, and each question raised with the answer received. Then give one of three conclusions: no exceptions found, exceptions found and resolved, or exceptions open. A sample line: "Check 2147 for $1,850 to Ridgeline Paving: no invoice in the file. Treasurer provided invoice dated March 3 on April 14. Resolved." Questions go to the treasurer or manager in writing, with a copy to the president, and the committee waits 10 days for an answer before marking an item open. If an answer suggests money is missing or a director is involved, the committee reports to the full board at once instead of waiting for the quarter, and it stops asking questions on its own. From there the board decides whether to call the accountant, the bank, the insurer under the fidelity or crime policy, or counsel. The board should read each report at an open meeting, note it in the minutes, and record what it did about every open item. In Colorado, section 38-33.3-308(2)(a) opens meetings of the executive board "or any committee thereof" to all members, so plan on open committee meetings there. Florida section 720.303(2)(a) applies open-meeting rules to a committee when it makes a final decision on spending association funds. An advisory committee that only reviews should fall outside that, but many boards open it anyway.

Where it fits with the CPA

The committee's spot checks are not a compilation, review or audit, and they do not satisfy a legal requirement for one. Florida section 720.303(7) still requires the annual financial report at the level set by revenue: under $150,000, a report of cash receipts and expenditures; $150,000 up to $300,000, compiled statements; $300,000 up to $500,000, reviewed; $500,000 or more, audited; and an audit for any association with 1,000 or more parcels. In Colorado, section 38-33.3-303(4)(b) lets owners of one-third of the units demand a review, and an audit when revenues or expenditures reach $250,000. The committee's report is no answer to that demand. The two fit together well. Send the committee's reports to the accountant with the year-end package, and ask the accountant to send the committee a copy of any letter on internal control weaknesses. Our guide on hiring a CPA firm for an HOA review or audit covers the annual engagement. The committee also helps directors. Texas Business Organizations Code section 3.102(a)(6) lets a director rely in good faith on reports from a committee the director does not sit on. Florida section 617.0825(7) and Colorado section 7-128-206(5) make the opposite point: creating a committee does not by itself satisfy a director's own duty of care. Directors still read the statements.

Mistakes to avoid

Appointing the treasurer's friend or spouse defeats the purpose. So does letting the treasurer pick which records the committee sees. The charter should name the records, and the committee should get bank statements directly, by read-only online access or by the bank mailing duplicates to a committee member. Other mistakes come up often. A committee that starts approving payments or correcting entries has taken on board work and blurred who is responsible. A report that names owners and their balances leaks private information into the minutes. A committee that waits a year to look finds problems too late to fix. A board that receives a report and never responds teaches volunteers that nobody reads it. A sample first year for a calendar-year association: adopt the charter in January and appoint members. In February the treasurer sets up access and the committee reviews January. Quarterly reports go to the April, July and October board meetings, and the fourth goes to the accountant in January with the year-end package. In December the board reviews the charter and refills any open seat.

Sources

These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.

More on dues & money

Or browse all hoa dues, fees & money guides.