Best practices for associations to avoid theft
Florida HOA Lawyer Blog
By Laura Manning-Hudson
10 September 2015
If it seems as if there have been more and more stories in the news
recently about condominium association's funds being stolen or
misappropriated by either board members or property managers, it's
because it's true. Many of the reports have been coming from Bob Norman
of Local 10 News (WPLG), the ABC affiliate for Miami-Dade, Broward and
the Keys.
Norman's latest story aired on Aug. 28, and it can be watched below.
The story discusses the arrest of the former property manager of The
Waterway condominium in Hollywood, Fla., for the alleged embezzlement
of $228,000 from the association.
simply showing up at meetings to vote
The information uncovered by Norman for this report is similar to that
of many other cases that he and other Florida journalists have
chronicled over the last several years which appear to be a disturbing
trend in condominium and homeowner associations. Board members should
pay close attention to the business of the association in order to
avoid becoming the next victim of an unscrupulous manager or director.
As we have discussed in the past, a board member's responsibility is
not limited to simply showing up at meetings to vote. Recall that board
members are charged with a fiduciary responsibility to protect the
interests of the entire association and all of its members. This means
being vigilant about the business of the association.
The association in this case broke one of the cardinal rules of
association management by allowing the property manager to sign checks
on its behalf. Board members should be the only individuals allowed to
sign checks, and I typically recommend that at least two board member
signatures be required. Looking at the supporting documentation, backup
and invoices for those checks is also important.
In addition, associations should be diligent when hiring new managers
including performing background checks and checking references. While
individuals who have been convicted of a felony (whose residency rights
have not been restored) cannot serve as directors, some associations
even go so far as to run background searches on candidates or seated
board members.
request duplicate statements
Associations should also request duplicate statements from their banks,
and the statements should be sent to someone other than the person who
is handling the bookkeeping. In addition, association accounts should
be independently and professionally audited at least once per year.
By taking these and other precautions, associations can help to avoid becoming the victim of fraud, theft and embezzlement.
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