Unfortunately, community associations in the Pacific Northwest are not immune from becoming victims of embezzlement. Last week it was reported that several homeowner associations were victimized to the tune of over $1.5 million. Many of our clients are now left to wonder: “Could this happen to us?” and “What can we do to prevent this?” The good news is there are ways that associations can protect themselves and reduce the risk of embezzlement or theft. Here are some suggestions:
- Review your financial reports carefully and ask for copies of statements issued by your bank.
- Talk to your association manager about their company’s internal controls and ensure at least semi-annually that the procedures and controls are actually being used.
- Require two-person signing of checks or require that the person who signs checks be separate from the person who reconciles the bank statements. These procedures should be followed for both operating and reserve accounts.
- Ensure both your Association and management company have fidelity and anti-crime insurance coverage with policy limits sufficient to cover the association’s assets.
- Maintain strict control of who has access to electronic user names and passwords for the association’s financial accounts–change passwords regularly. Do not use the same password for more than one account.
- Ask questions if anything seems out of the ordinary.
As always, the best advice we can give is for association boards to be an active part of the team and to keep a watchful eye on their assets.