Real estate Q&A: Take steps to prevent HOA fraud

QUESTION: I've seen some news recently about officials stealing from community associations. What can we do to make sure it doesn't happen at our condo?

–Annie

ANSWER: Vigilance is the only sure solution to this problem. Whenever people are put in charge of other people's money, a very small minority will try to keep some for themselves. The perpetrator doesn't necessarily start out intending to steal, but it becomes a crime of opportunity. A manager takes $20 from the petty cash to buy lunch. Or a bookkeeper borrows $300 for her monthly mortgage payment. Both had planned to pay the money back until they discovered that nobody noticed it was missing.

To prevent this, associations should work with their accountants and attorneys to develop a system of checks and balances. Make sure all checks and withdrawals require two signatures, so that no one person can access the money alone. Everyone needs assistance and oversight, and the more hands and eyes on the accounts, the better.

If a manager is used, the board should check the books against the account statements on a monthly basis and ask questions about anything that seems out of line. Don't let vendors be paid in cash, and review employees' expense accounts.

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ABOUT THE WRITER

Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He is the chairperson of the Real Estate Section of the Broward County Bar Association and is an adjunct professor for the Nova Southeastern University Paralegal Studies program. Send him questions online at http://sunsent.nl/mR20t7 or follow him on Twitter @GarySingerLaw.

The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.

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