By Deborah Goonan
Just about every week I read about another case of embezzlement or fraud in a homeowners or condo association. In the last couple of weeks, for example:
- a condo Treasurer from Wisconsin has been charged with diverting $25,000 from the HOA account
- a Pennsylvania woman, the daughther of a developer, faces charges of allegedly stealing $70,000 from the HOA they built and managed over several years,
- a property manager allegedly took $228,000 from a Florida condo association,
- a Colorado man has been charged with taking a half million dollars from an HOA he managed – this was his second offense, as he awaits sentencing on previous charges
- a former condo manager from the Florida Keys was sentenced to three years in prison for diverting $200,000 to her personal account
Is anyone wondering who keeps track of these white-collar crimes in our Association-Governed Residential Communities? In the US, we keep track of crimes against our governments. In fact, we even have specific laws with strict penalties for anyone convicted of violating the public trust, and mishandling taxpayer funds.
But even though HOAs are often regarded as mini-governments by elected officials, they are still private corporations in the eyes of the law. Therefore, when money disappears from an HOA, it’s handled as if the HOA were like any other business in America that experiences a theft. File a police report, and a claim with your insurance company.
HOA white-collar crimes hit too close to home, though. Perhaps there ought to be a special designation of criminal charges involving theft and fraud of assessments paid by homeowners. Then policy makers could track the relative impact upon homeowners and residents, and they would have the information they need to better craft solutions to the growing problem.
4 thoughts on “Is anyone keeping track of HOA Embezzlements?”
Reply from a NC Attorney:
§ 47F-3-118. Association records.
(a) The association shall keep financial records sufficiently detailed to enable the association to comply with this Chapter. All financial and other records, including records of meetings of the association and executive board, shall be made reasonably available for examination by any lot owner and the lot owner’s authorized agents as required in the bylaws and Chapter 55A of the General Statutes. If the bylaws do not specify particular records to be maintained, the association shall keep accurate records of all cash receipts and expenditures and all assets and liabilities. In addition to any specific information that is required by the bylaws to be assembled and reported to the lot owners at specified times, the association shall make an annual income and expense statement and balance sheet available to all lot owners at no charge and within 75 days after the close of the fiscal year to which the information relates. Notwithstanding the bylaws, a more extensive compilation, review, or audit of the association’s books and records for the current or immediately preceding fiscal year may be required by a vote of the majority of the executive board or by the affirmative vote of a majority of the lot owners present and voting in person or by proxy at any annual meeting or any special meeting duly called for that purpose.
There is an identical provision in the North Carolina Condominium Act in 47C-3-118(a).
Michael S. Hunter
Attorney at Law
Horack, Talley, Pharr & Lowndes, P. A.
Mary, I am not an attorney. I think it depends on the laws in your state. Perhaps an attorney reading this could reply.
Can members demand the Association have an outside independent audit if the HOA isn’t required too? Can a member pay and have an audit?
Jim, we need to keep publicizing these reports, to increase general awareness. Many homeowners may believe this cannot happen to them! It can happen in any private owner’s association.
In general, it is preferable to prevent HOA theft than it is to prosecute offenders.
Here’s a great resource for owners that want to take control of their HOA finances. The principles apply in homeonwers associations as well as condo associations.
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