How to do my own hoa audit

You won't be able to do an audit, as privacy laws will not give you access to individual lot files.

You can do a mini financial review:

You should ask for:

Minutes of Board meetings - this should show what expenditures are done.
Treasures reports to the board (which should be part of the minutes but if written are not always attached)
Bank Statements for all accounts - This will show deposits, expenditures
Deposit slips - depending how they are filled out, you could recreate lot ledgers.
Receipts - Supports payments going out.
Budgets for the years involved
Financial statements (spreadsheet, balance sheet, etc.) created for the Board.

Keep in mind that most governing documents and applicable State laws only allow you to review these items vs. having copies made for you. If copies are made, you can be charged the cost of making those copies (including labor). This can become expensive if you are looking at a lot of records.

If your State has open meeting requirements, you should also attend as many board meetings as possible. Keep in mind that you are there as an observer and not as a participant.

And then you need to look for the story behind the numbers - do you have a number of owners who are delinquent in paying assessments? How many and what's the total amount owed the association? What's being done to collect? What about rules enforcement - is it possible some of the maintenance issues are due to tenant misuse and abuse? And don't forgot, you'll get more wear and tear when people move in and out all the time. Finally, note how quickly certain expenses have increased vs. assessments - believe it or not, there is such a thing as assessments being too low (inflation, remember?)

Oh, yeah, what about reserves? Does the community have a reserve fund? When was the last time the board had a reserve study done? Is anyone applying the recommendations to the annual budget? Has the board dipped into reserves to cover shortfalls in the operating budget (because of unexpected repairs, deferred maintenance and of course delinquencies?) Start going to board meetings and listen to what's being said.

You said there aren't many owners living there and you may not want to hear what I'm about to say, but that may be a big part of the problem. Too often, off-site owners don't get involved in the running of the community and they want to keep fees as low as possible so they can maximize their profit from renting the place out. Meanwhile the owner/occupants have to try and keep things going, but get discouraged because the investors don't bother educating their tenants about the rules and rent to anyone with a pulse. And sometimes those folks tear stuff up (what do they care, they can always leave when the lease is up)

It's true your board of directors isn't doing much of anything, but it may also be true they're doing the best they can and no one's helping because most homeowners live off site and so the problems are out of sight, out of mind. Frankly, I think you might be the second or third investor owner I've seen on this board who's actually asking question about how the community is run and where the money's going. That's the first step in turning things around, but you may as well know, you may be in for a long road ahead and you'll need the support of your fellow homeowners (ALL OF THEM, not just the investors).

So talk a walk around the community, introduce yourself to your neighbors (that's what they are, whether you live onsite or not because you own a home in the community). I'm sure the owner-occupants are just as concerned as you are about their investment (after all they live with the falling stucco every day). You may very well hear some of things I've said (I'm an owner occupant myself and frankly, I've seen this movie too many times in my own community. That's also why I tend to give investors the stink eye).

When all of you understand you shouldn't be able to tell the difference between an owner occupant and a renter because everyone's complying with the rules, you may find you're more successful at finding people who will want to live in the community (renters can and do turn into homeowners eventually). Good luck!

May I also say that a million dollar payout on insurance does NOT equal a "windfall". It usually means there is a million dollars worth of damages to cover. So the items your seeing not repaired may be that way until the insurance claim could be processed. Now the money has come in, the HOA is to spend that money on those items part of the claim.

A HOA is to be a non-profit in most cases. Make sure to understand if your HOA is or not. It makes a difference when viewing and understanding records. Which could mean the million dollars is going into the budget to do the repairs.

We don't know what the insurance claim was about. Why would the insurance company pay out to the HOA? That is a little odd. Plus is the insurance going to dump the HOA after the payout? We are not talking the HOA paying out to someone it did not seem. It seemed the HOA made a claim on their own insurance. It's a bit unclear.

Just a little update it turns out they received 2 million as a settlement and 1 million of it went to "attorney fees"

That still means your HOA had a million dollars of damages in order to get that award. Are you wanting some kind of rebate now that you heard of this "Win Fall"? You did not want an audit before the lawsuit did you?

There is a reason for a judgement win and there is a purpose for that judgement win. You hear about people winning thousands or millions of dollars in a car accident? Guess what? They most likely can't walk again or use a part of their body for the rest of their lives.... That cost may go to keeping their ventilator going as long as they live.

It's not much different from what your HOA may have sued over and won. Our HOA we could have won a case for Masonite siding. It would have paid out for owners to replace their siding. Could have won lots of money... We still would have to replace the siding or disclose to buyer's the Masonite siding is bad and they can not make a claim as it was already paid out... Now the new owner is going to have to replace that bad siding on their own dime. If they find out before the purchase... They won't buy or make it your responsibility before they will.

So our question that you have not answered is what the lawsuit was about and why now the audit?

And FYI this claim was paid over a year ago and no repairs or maincance to the commons areas have been made.

Ok, have you gone to the board with any of your concerns? If so, what was the response? If not, why not?

I'm not saying an audit of some sort wouldn't hurt, but you may want to start with talking to the people who make the decisions. That can become very important down the road if things escalate - I asked X on such and such a day, was promised Y by Z date, but nothing happened. Or....I was told the money was supposed to go for X, but I looked at the budget and didn't see any line item reflecting that expense or deposit....

Getting answers from the board could also serve as a start to your audit - does the paperwork and numbers line up with what was said in the minutes?

I have finally received some documents today. I was given the balance sheet and from what I'm seeing there's about 1.3 million dollars missing from the accounts. They said they can't give me the bank reconciles yet because there not ready and they also can't give me the minutes yet because they have to review them. Not sure what that means? How do I proceed?

Since we are talking audit, which take considerable time and effort to do properly, have you considered talking to an auditor to give you some guidance on how to proceed (or just hire him/her to review the documents for you?) Try googling HOA audit and see who's out there in your area. You may have to go back 3-5 years to get a good picture of what's going on, so you may be biting off a lot more than you can chew.