Instances of out-and-out fraud are rare in the world of condos and homeowners associations, but that doesn't mean you shouldn't look out for them and know how to spot signs of trouble.
Consider this—most board members are volunteers, and even if they're on the finance committee or elected as treasurer, they may not be financial professionals in real life. Sure, boards do have their own financial professionals, but how often do they interact with them?
That's why it's important for board members and their managers to know as much about their development's finances as they can, and know the warning signs that something may be amiss, either in the form of poor record-keeping or outright fraud. Once your board and managing agent know this information, they'll be able to recognize the signs of financial problems before they get completely out of control.
Usually, an association delegates its day-to-day oversight of its finances to the managing agent. Even so, the board's treasurer must keep in contact with the manager to make sure that the finances are in order.
Abe Kleiman, managing partner of Kleiman and Weinshank, a Manhattan-based accounting firm that provides audits for 180 condos and co-ops in New York and New Jersey ranging from units up to more than 1,700, says that in his experience, the management company typically acts as bookkeeper for the association, with oversight by the board treasurer.