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Fraud Prevention Checklist for Homeowner Associations (HOAs)


Homeowners Associations (HOAs) are particularly vulnerable to fraud for a number of reasons, which include a high level of trust.  Because volunteers run many associations, there’s rarely suspicion of deceptive behaviors. One of the first steps is accepting that it could happen in your community.  Secondly, you need to put checks and balances in place to reduce your community’s susceptibility and remove opportunities for temptation.

Below is a fraud prevention checklist that can help you become more alert to possible gaps that could lead to fraudulent activities.  Becoming aware of the gaps in the way your association operates helps identify changes to help avoid or reduce the potential for deception.

Fraud Prevention Checklist

  • Conduct background checks on employees, vendors and Board members
  • Hire CPA to develop financial procedures
  • Implement multiple signatures for checks
  • Divide and rotate tasks
  • Do not allow cash payments
  • Divide deposit and bank statement reconciliation responsibilities
  • Review and reconcile bank statements in a timely manner
  • Require adequate supervision of employees
  • Secure your supply of blank checks
  • Regularly update signature cards, PINs and authorization codes
  • Insist that employees or directors involved in positions of trust be bonded
  • Use direct deposit or daily deposit for dues & assessments
  • Require original invoices and mark paid
  • Have duplicate bank statements sent to different people
  • Issue checks in numerical order
  • Require employees to take vacations or time away from work
  • Demand full disclosure of potential conflicts with vendors

Part of the HOA Board’s duty is good stewardship of association funds. Protecting them from fraud is basic. Involving more people in decision-making and financial management processes reduce the chances of fraud.  Seek the help of a CPA who is knowledgeable in HOA finances to help you identify and fix gaps in your financial processes.  A community management company also has experience in implementing fraud prevention techniques.

Implementing techniques in this checklist reduces your potential for fraud.  Everything is not always within your control, so make sure your association has insurance coverage for loss due to fraud. Talk to your professional advisors (financial, legal, and property management) for additional suggestions and to ensure you’ve done all you can to protect your community. Remember, an ounce of prevention…

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Wise Property Solutions serves condominium and homeowners associations by addressing their financial, association and facilities management needs. The only certified and licensed community association management firm serving the Mountain South (Virginia, North & South Carolina, Tennessee) with offices in the Tri-Cities and Knoxville.  Wise Property Solutions provides condo and homeowners association management services in Johnson City, TN; Bristol, TN; Kingsport, TN; Knoxville, TN and the surrounding region.

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