California associations: Davis-Stirling review requirements
Short answer: Under the Davis-Stirling Act (California Civil Code 5305), a common interest development association whose gross income exceeds $75,000 in a fiscal year must have a review of its financial statement, prepared under GAAP by a licensee of the California Board of Accountancy, and must distribute a copy to members within 120 days after the fiscal year ends. The governing documents can require more, such as a full audit. Separately, Civil Code 5500 requires the board to review key financial reports every month.
Key takeaways
- Trigger: gross income over $75,000 in the fiscal year (Civil Code 5305).
- Requirement: a CPA review of the financial statement under GAAP, not an audit, unless your governing documents require one.
- Who: a licensee of the California Board of Accountancy (or a CPA firm authorized to practice in California).
- Deadline: distributed to members by individual delivery within 120 days after fiscal year-end.
- Board duty under Civil Code 5500: monthly review of reconciliations, budget vs actual, bank statements, income statements, the check register, general ledger and delinquency reports.
- Your CC&Rs or bylaws can set a stricter standard, such as an annual audit.
What does Civil Code 5305 require?
California's Davis-Stirling Common Interest Development Act governs homeowners' associations, condominium associations and other common interest developments. Civil Code 5305 sets the minimum year-end financial reporting standard:
- When: any fiscal year in which the association's gross income exceeds $75,000.
- What: a review of the association's financial statement, prepared in accordance with generally accepted accounting principles (GAAP).
- By whom: a licensee of the California Board of Accountancy.
- Deadline: a copy distributed to members within 120 days after the close of the fiscal year, by individual delivery.
These are minimums. If your governing documents set a higher standard, for example an annual audit, the governing documents control.
What counts as "gross income"?
Gross income generally means the association's total income for the year: regular assessments, special assessments, interest, late fees, rental and amenity income, and other income. Most associations with more than a handful of units cross $75,000 quickly. For example, 40 units paying $200 a month is $96,000 a year before any other income. If you're near the line, a special assessment can push you over for that year.
What is a review, and how is it different from an audit?
A review gives limited assurance. The CPA performs inquiry and analytical procedures, such as comparing this year to last year and to budget and asking management about unusual items, and reports whether they're aware of any material changes needed for the statements to follow GAAP. A review does not include confirming bank balances, testing invoices or evaluating internal controls. That's what an audit does.
For most California associations, a review is the right balance of cost and assurance. Some boards choose an audit voluntarily for large reserve balances, a pending loan, litigation, or concerns about a management company.
Who can perform the review?
The statute requires a licensee of the California Board of Accountancy. In practice, that means a California-licensed CPA or a CPA firm that is authorized to practice in California, including out-of-state firms registered under California's practice privilege rules. Before engaging a firm, ask it to confirm its California status in writing.
When is the review due, and how is it distributed?
The review must be distributed within 120 days after the fiscal year ends. For a December 31 year-end, that's by the end of April. Distribution is by individual delivery under Civil Code 4040, which means first-class mail, or email for members who have agreed to receive notices electronically.
Plan backward from day 120. A CPA review usually takes a few weeks once your books are closed, so aim to close the year within 30 to 45 days and engage your CPA before year-end.
The board's monthly review duty (Civil Code 5500)
Davis-Stirling also requires the board to review the association's finances during the year. Unless the governing documents impose stricter standards, the board must review, on a monthly basis:
- A current reconciliation of the operating accounts
- A current reconciliation of the reserve accounts
- The current year's actual operating revenues and expenses compared to the budget
- The latest account statements from the banks holding operating and reserve funds
- An income and expense statement for the operating and reserve accounts
- The check register, monthly general ledger and delinquent assessment receivable reports
The board can do this at a board meeting or through a delegated review, as the statute allows. Document the review in the minutes. CPAs performing the year-end review will often ask to see that documentation, and it protects directors if questions come up later.
Other annual financial disclosures
- Annual budget report (Civil Code 5300): distributed 30 to 90 days before the end of the fiscal year. It includes the pro forma operating budget, reserve summary and assessment information.
- Reserve study (Civil Code 5550): a visual inspection of major components at least every three years, with the study reviewed annually.
- Reserve withdrawals: generally require two signatures from board members or a combination of board members and officers.
For HOA tax returns, see Form 1120-H vs Form 1120. For what CPAs check in reserves, see HOA reserves: what your auditor actually looks at.
When does a California association need an audit instead?
- Your governing documents require one. Many older CC&Rs and bylaws say "audit."
- A lender requires one as a condition of a loan for major repairs.
- The board decides the extra assurance is worth it, for example after a management change or fraud concern.
How to stay compliant: a simple checklist
- Confirm whether gross income will exceed $75,000 this year.
- Check your CC&Rs and bylaws for a stricter standard.
- Do the board's monthly financial review and record it in the minutes.
- Engage a California-authorized CPA before year-end.
- Close the books within 30 to 45 days after year-end.
- Distribute the review to members within 120 days.
Frequently asked questions
Does every California HOA need a CPA review?
No. Under Civil Code 5305, a review is required only for fiscal years in which the association's gross income exceeds $75,000, unless the governing documents require more.
Does Davis-Stirling require an audit?
No. The statute requires a review, not an audit. An audit is required only if the association's governing documents, a lender or the board requires one.
When must a California HOA distribute its financial review?
Within 120 days after the close of the fiscal year, by individual delivery to members.
Who can perform a Davis-Stirling review?
A licensee of the California Board of Accountancy, meaning a California-licensed CPA or a CPA firm authorized to practice in California.
What must a California HOA board review every month?
Under Civil Code 5500: reconciliations of operating and reserve accounts, budget vs actual, bank statements, income and expense statements, the check register, the general ledger and delinquent assessment reports.
GreyWood CPA PLLC is a licensed CPA firm headquartered in Richmond, Virginia (Virginia Board of Accountancy firm license #134961), serving nonprofits, community associations and businesses nationwide. This article is general information as of October 28, 2026, not legal or tax advice for a specific organization. Rules change, so confirm current requirements before acting.