Co-op & Condo Fraud: Commingling

Given motive and opportunity, many individuals will unfortunately steal. Bounced checks are frequently the first red flag that something’s wrong. Fraud must leave a trail, because it involves the movement of money.

One of the biggest areas of fraud occurs when an Association has commingled accounts. Many managers oversee numerous HOAs and therefore pool all the money together into one shared account to make their job easier. This is a disaster waiting to ripen into a crime. When managing agents go to pay the bills for co-ops or condos, they often write one big check for all of the accounts under their care.

Board members may grow suspicious that they are in the process of becoming a fraud victim if they see a lump sum check being written to an outside account. They should go to the bank and demand bank records if they don’t already have access to them. They should also demand that the manager does all transactions through the Association’s individual account so that bank records reflect all activity.

Even people that have had a long and trusting relationship with an HOA can suddenly change. The fact that someone has been reliable and honest in the past is not a guarantee that they will continue to be that way in the future. Always stay alert.

About cozbycpa

Heather L. Cozby is a CPA on the South Shore and Cape Cod. The managing partner of Cozby & Company, LLC, Heather has the resources and experience necessary to provide quality professional services on a timely basis and at a reasonable cost. She specializes in tax planning & preparation; audit, review & compilation services; management advisory services; bookkeeping; and accounting. Her unique niche is in working with homeowners’ associations and condominium trusts, advising with rental real estate, and providing outsourced financial consulting for mid-sized companies. She is more entrepreneurial than most accountants, and offers the best of both worlds - providing the services of a larger firm while retaining the ability to connect with her clients on a personal level.
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