8 Steps HOA Boards Can Take to Minimize the Risk of Fraud & Embezzlement

Because they rely heavily on volunteer homeowners with varying background experience and limited time that is devoted to providing services as a director, Homeowners Associations are extremely vulnerable to financial damage as a result of criminal conduct on the part of wrongdoers who take advantage of their position. By following some basic procedures, HOA boards can greatly reduce the chances of being damaged by insider embezzlement of funds and/or other fraudulent conduct by those who have access to HOA funds.

1. All HOA Funds Should be Deposited into HOA Accounts.

Funds belonging to the HOA should always be deposited into a bank account that is in the name of the HOA and established under the HOA tax identification number. Never comingle HOA funds into a property manager’s bank account.

2. Always Maintain a Separate Operating Account and a Reserve Account.

Reserve funds should always be maintained in an account that is separate and distinct from an the operating account that is used to pay bills. All disbursements from the reserve account should require the signatures of at least two board members (not the property manager).