If there’s one thing you do as a board member (and I mean if it’s literally the only thing you do as a board member because you’re too busy to be involved, or because the president or the property manager does everything), you need to make sure there is current fidelity insurance coverage for the association (protecting against loss of money from dishonesty, embezzlement, forgery, etc.).
Recently, I’ve had involvement with an association where two of the three board members were simply not involved at all in the operation of the association and the third board member embezzled funds, failed to pay bills, and let the insurance lapse. Finally, one of the lawsuits that had started to come in because of unpaid bills got served on one of the other board members and that clued him into the fact that something was amiss. Of course, the embezzling board member had let the insurance coverage lapse long ago so there was no coverage and the association had to levy a large special assessment just to pay the outstanding bills.
Embezzlement, forgery, and other similar things may sound like exotic, foreign things that only happen in big corporations or in the movies, but it happens wherever you are and in HOAs of all sizes. The HOA I mentioned above had less than 20 members. No one is immune. Besides the situation above involving a board member, I’ve had experience with an HOA where an employee of the property management company siphoned HOA funds for his personal use.
Even if you are actively and directly involved as a board member and you even look at monthly bank statements for your HOA, make sure they are the original bank statements, not something generated by a personal computer. In the HOA in this story: Police say woman stole from condo group, the treasurer used a computer to generate statements that made it appear that she was spending money on maintenance work that was never done.
[…] a quick follow up to my post on June 28, 2011, regarding embezzlement and fidelity insurance, this complaint underscores the […]