Embezzlement in Homeowners Associations
Embezzlement in homeowners associations can quickly become a reality. Either a board member or someone in the management company having access to funds is generally responsible for committing embezzlement in homeowners associations. For example:
- The management company’s CFO admitted to $3 million embezzlement in homeowners associations his company managed over a four-year period.
- The business manager of a condominium association was arraigned on charges she stole $226,000 from the association.
- Property manager found guilty and sentenced to prison for $860,000 embezzlement in homeowners associations.
The above cases cite the potential for embezzlement in homeowners associations. Therefore, HOA board members should make certain that financial controls are in place to lessen the possibility of embezzlement in homeowners associations. Consider the below:
1. Require more than one signature on association checks exceeding a relatively small amount
2. Delegate two different individuals to positions of president and treasurer
3. Require a person other than the individual writing checks and paying bills to reconcile the monthly bank statements and review reconciled statements previously prepared by the manager or the treasurer
4. Determine if your bank provides online access to designated persons (such as all members of the board) to view account activity (not conduct business)
5. Set up separate operating and reserve accounts
6. Require the management company to keep the association’s accounts separate from the accounts of other associations managed by that group
7. Do not allow checks to be written payable to cash, signed blank, or with a signature stamp
8. Thoroughly review invoices and supporting documentation before signing payment checks
9. Keep records current and require regular financial reports at each board meeting
10. If you don’t already have, seriously consider a fidelity insurance policy. These policies help to reimburse HOA funds in event of theft.
Learn more about preventing embezzlement in homeowners associations; pick up your copy of Business Fraud: From Trust to Betrayal today!