CHECKS AND BALANCES TO PREVENT CONDOMINIUM AND HOMEOWNER’S ASSOCIATION FRAUD

An Opinion By David Goldberger
South Florida Property Owners Consulting LLC

Published October 21, 2025

HOA and Condominium boards do not need to recreate the “wheel,” in order to avoid being victims of fraud. Using the association’s by-laws, rules and regulations and State Statutes, along with common sense, will go a long way in preventing fraudulent activity from occurring.

Ultimately, the elected board is responsible for the day-to-day operations of their association as well as the protection of the association’s finances. The Licensed Community Association Manager (LCAM) has a fiduciary responsibility to guide and counsel the association’s board to act in the best interest of the community. In practice, many LCAMs take advantage of the board by advising them improperly and not always in the best interest of the board or the association.

Both the board and the LCAM should execute their duties in the interest of the association as a whole, as well as following Florida State Statutes (718, 719 and 720) and the individual association by-laws.

In order to safeguard the financial health of your community, consider the following strategies to prevent HOA/Condominium fraud:
This type of criminal activity is not exclusive to board of directors or management companies. Employees of the association, volunteer homeowners, and local vendors could orchestrate deliberate acts of deception in order to obtain illicit financial gain.

• HOA/Condominium Embezzlement – all payments related to association business should be paid in the name of the association, not individual board members. These payment requests need to be reviewed by two or more board members and the request for payment must be accompanied by an official association or vendor invoice and an IRS W-9 Form

• HOA/Condominium kickbacks – payments or gifts that a vendor provides to a board member in exchange for hiring their company is prohibited, and a crime.

Oversight is the responsibility of the board of directors and most fraudulent activity occurs due to the lack of oversight. A board must follow present, “checks and balances,” in place or they must initiate “checks and balances” to assist in the alleviation of missing or altered association funds.

• All vendor or personal checks should be made out to the HOA/Condominium association. Access to these checks should be limited to prevent unauthorized individuals from altering these payments.

• All association checks, issued for payment, must be signed by a minimum of two authorized signatures (2 members of the board) and an accompanying invoice, which must be reviewed by each authorized signor prior to approving payment. At no time should a management company or their representative be allowed to be one or more of the approved signatures.

• Delegate financial responsibilities to two or more board members.

• Require all board members to vote on the acquisition of new or renewal of all vendors (contracts).

• Make sure the HOA/Condominium association has appropriate fraud insurance to protect the financial status of the association.

By following these straightforward “checks and balances” an association decreases the chances of being a victim of fraudulent activity, but the board and management company are required to constantly lookout for signs of embezzlement and/or fraudulent activity. These mechanisms are not a onetime happening, they must be adjusted as schemes to de-fraud an association are constantly changing.

Vigilance is the key component to staying ahead of the curve in preventing fraud.
 

For more information please go to:

The Costly Schemes Draining Millions from Associations