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Preventing an HOA Scam

A Homeowner’s or Condo Association is a perfect storm for potential embezzlement. There is a lot of money available; HOAs collected $96 billion from residents in 2019. On the other hand, there is very little oversight; HOAs are run by volunteers who are also residents. Your HOA should invest in crime insurance in case of HOA scams, but also work to prevent common crimes like embezzlement.

Follow These Common-Sense Guidelines

  • Secure checks in a locked location and track check numbers.
  • Every check must be signed by two unrelated parties.
  • All expenses should be reviewed by two other board members.
  • Train board members on bookkeeping.
  • Conduct an annual audit, including reserve fund evaluation.
  • Conduct surprise audits. All audits should be conducted by third parties.

Look For These Behaviors

It’s important that the board is made up of individuals with the time to review the records and even if you aren’t on the board, you should make an effort to ask for a copy from time to time. When you review records you’re looking for warning signs like incomplete records, missing check numbers, duplicate payments or an unusual number of payments to the same person. Don’t be afraid to ask questions. It could be the monthly lawn service or it could be something not so easily explained.

An underfunded HOA can mean money out of your pocket in an emergency. Look for fraud. Prevent fraud.