How to Protect Your HOA from Fraud

It’s a sad fact that homeowners associations and condominium associations often fall victim to theft, embezzlement and fraud. Because they generally have large sums of money on hand, have volunteers in charge of financing and have lax control over their assets, they are tempting targets for many unscrupulous people.

You may think that your association is immune to these problems, but the statistics tell a different story:

  • Skilled embezzlers can steal money for an average of 18 months before being caught.
  • The average embezzler steals $145,000, and 22% of embezzlers steal more than $1 million.
  • Smaller organizations tend to experience greater losses because of their weaker control measures.
  • 28% of all companies with 100 employees or fewer fall victim to fraud.

To protect your association from fraud and theft, there are several things to watch out for. Keep reading to learn more.

How to Protect Your HOA from Fraud, Theft and Embezzlement

Common Signs of Theft and Embezzlement

  • Multiple payments made to a vendor that should have only been paid once
  • Balances that exceed budgeted amounts
  • Vendor addresses that match employee or board member addresses
  • Delays in bank deposits
  • Missing bills, letters and other important documents
  • Duplicate payments
  • Money disappearing from petty cash funds
  • Services paid for but not received
  • Overbuying

Preventing Fraud in HOAs

Being proactive is the best first step in preventing fraud in HOAs. Take the time to inspect paperwork and records, and watch out for inconsistencies. Simply making yourself aware is the best way to quickly detect and address discrepancies that could point toward fraudulent behavior.

Maintain checks and balances. Make sure that the person who is authorized to sign checks isn’t the same person who is in charge of gathering invoices or checking invoices against services rendered and supplies delivered. If an employee takes in cash or money orders, that individual should not be responsible for reconciling bank statements.

Invest in proper training to ensures that volunteer board members actually know how to correctly handle the association’s finances. Keep your bank records updated, and investigate anything that seems suspicious immediately.

Preventing Fraud with Professional Financial Management

Outsourcing your association’s financial management needs to an expert is one of the best ways to avoid fraud as well as potentially costly mistakes. Board members are rarely professional bookkeepers, and entrusting them to handle the association’s finances on their own could be a recipe for disaster.

At AMI, we offer a full range of professional financial management services for homeowners associations and condominium associations. Our professional bookkeepers and accountants can help you prevent fraud and detect and potential discrepancies right way.

Why risk your association’s finances to just anyone? Contact us today to learn more about our professional financial management services and how we can help you avoid fraud, theft and embezzlement.

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