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5 Tips to Prevent Community Association Fraud.

Posted 3/11/2019

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Be Transparent About Risks

When community members know the potential risks of fraudulent activity to the homeowner’s association finances, associations can establish a culture of responsibility and accountability to prevent losses. This will ensure that oversights and discrepancies are quickly discovered and rectified.

Training and Education

In an association where management is often handled by members of the community itself, it is wishful thinking to assume that forensic accounting will be utilized. Consider bringing in an expert to train the management board members in fail-safe accounting procedures and to review typical fraud and embezzlement risks.

Diversify Responsibility

This might seem like common sense, but the person that is in charge of allocating funds on behalf of the community should not be the same person that verifies and logs those same invoices. Diversifying the roles of the purchaser for goods or services and the record-keeper will reduce the risk of any one person committing fraudulent activity.

Investigate All Discrepancies

The key to catching fraudulent activity before it causes any lasting damage is to raise the red flag whenever something doesn’t add up. Investigate every financial discrepancy and consider investing in outside expert help for situations that go beyond the community management's knowledge base or expertise.

Protect Community Investments

Lastly, remember that criminals will always seek ways to outwit the system. In worst-case situations—where fraudulent activity managed to get around all preventative measures—it is essential to make sure that the community’s insurance has coverage for the investigation and prosecution of these specific types of crimes.

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