TRANSITIONAL AUDIT

Mary, I have tried to impress through several posts that the time of transition from the Developer to the Homeowners is critical.

The Developer usually has done everything possible to maximize his profit and protect his investment. They will do the minimum (or less) than what they offered when the controlling authority approved the developement. Often reserve funds are insufficient because the Developer is not interested in replacement of capital investments after they leave nor paying anymore than they are required for vacant lots during development. When the Developer is ready to move on to their next project they will try to DUMP the association onto unsuspecting, inexperienced homeowners.

Mary, it appears your Developer is trying to dump your Association without completing their requirements. Some homeowners, like you, are willing to serve but few have had experience and almost none are knowledgeable in HOA operations. Therefore, it is important to seak help from an experienced Managing Agent and Attorney. If you don't have the money right now then ask the questions "Can we afford not to hire professional help? How can we raise money? How can we keep costs to a minimum?"

Your Board should respond to the Developer regarding the attorney's letter. Advise them with copy to their attorney as to the following:
a) whether or not you accept appointment to the Board (probably a mute point since you are already functioning as such);
b) you will accept the resignation of the Developer's Board subject to completion of a satisfactory financial audit;
c) you will be doing an audit of the Development in regards to the Developer's commitments and will advise on improvements not yet satisfactorily completed.

Perhaps you have owners experienced in accounting that can review the financial records. Check that the Developer has paid all required assessments on undeveloped lots they owned and has not used HOA funds to pay bogus or unreasonable invoices. All funds need to be analyzed; and the longer the HOA was under the control of the Developer the more difficult will be the financial audit.

A transition audit is not required by law to my knowledge. The purpose of the audit is to assure the Developer has performed all required duties and the financial records are in proper order prior to the homeowners Board accepting responsibility. Your investigation which resulted in completion of the roads and retention ponds is an excellent example of a duties the Developer needed to do prior to acceptance. Make sure there are not drainage problems; if it is a gated community with private roads make sure road construction complies with required standards; in other words look at the big ticket expense items carefully.