Transition audits

What a transition audit actually checks

A transition audit is an independent certified public accountant's review of the association's financial records, covering everything from the association's incorporation forward, not just the final year of developer control. It checks whether assessments were collected and deposited correctly, whether reserve contributions were made as promised, and whether the developer's own expense payments match what the books show.

This is different from an ordinary annual review. The board isn't auditing its own recent decisions, it's auditing every financial decision the developer's appointees made while owners had no seat at the table.

Florida requires one; most states don't say

Florida is the clearest example of a state that makes this mandatory. Whether your state requires a transition audit at all, and who pays for it, depends on your state's statute, check your own condominium or common interest community act before assuming Florida's rule applies to you.

"[Records] must be audited for the period from the incorporation of the association."

Source: Florida Statutes, section 718.301, The Florida Senate

The audit is prepared by an independent CPA, at the developer's expense, under generally accepted accounting and auditing standards. Florida's homeowner association statute imposes a parallel requirement for non-condominium communities.

If your state's statute is silent

Most states have no equivalent statute. That doesn't mean a financial review is a bad idea, it means it's a choice the board has to make on its own rather than a box the law forces the developer to check. A board that never sees an independent look at the developer-control-era books is trusting the developer's own numbers with no outside verification.

The Foundation for Community Association Research and the Community Associations Institute publish a Best Practices Report: Transition from Developer Control that walks through this and other turnover steps in more detail; it's worth reading directly if your state leaves the decision to the board.

What a clean audit does, and doesn't, prove

An audit confirms the numbers in the books are accurate and consistent with standard accounting practice. It does not confirm the developer negotiated fair contracts, funded reserves at an adequate level, or finished every promised amenity. Fold the audit into a full financial turnover review alongside bank-account turnover and records turnover, and treat it as one input, not the whole picture.