The potential for theft or unauthorized use of association funds should be one of the highest priorities of every director. Unfortunately issues dealing with governance, budgetary and financial concerns, repairs and maintenance, enforcement of house rules, policies, and other association issues usually take precedence.
Most boards assume that the funds handled by the association’s managing agent is safe and secure. Confirmation of this attitude comes from the annual audit that invariably gives a clean opinion to the prior year’s financial transactions.
The reality is that too many managing agents have a poor system of internal controls. A strong internal control system is the single most important factor in preventing or minimizing the unauthorized and illegal taking of association funds. Most managing agents that handle multiple associations easily deal with tens of millions of dollars of association funds.
Clearly, this lack of attention to what is one of the most important functions of a director is very disturbing. Is your association prepared for a loss of hundreds of thousands of dollars? What good is it to blame the managing agent after the funds are gone? What are the financial risks to the association? How does the Board prevent or minimize these risks?
This White Paper deals with these risks and how to minimize and/or prevent loss of association funds. In this paper, the terms, embezzlement, fraud and theft are used interchangeably.