fraud

Started by BradP • 10 replies • 1688 views

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BradP (Kansas)
Posts: 2,640

Posted:

A couple weeks ago I had posted about some possible misuse of association funds. Come to find out that our hunch was correct...the person used association funds to pay for their cell phone bill at least 5 times plus purchased a new computer as well. The extent of misuse we are not sure of as we continue to investigate but am thinking based on initial review it is between the $1,500-$2,500...two questions.

1) when is it appropriate and how much detail do we need to go into with our members? I do think at some point they need to know, but I want to have a clear handle on how we are handling this legally and know all the facts before I bring it up.

2) Does anyone have any language they have used in bylaws or covenants that speaks to financial controls? We have nothing and as I see it there will be two questions from the members a) how much did he take and what are we doing to get it back, b) how do we know you guys won't steal from us too.

BradP (Kansas)
Posts: 2,640

Posted:

to add one thing to this discussion, we have an annual budget of around $22,000, with the amount missing and the small budget I am not sure a full fledged audit is appropriate. However, we are in the process of attaining a lawyer to help start collections and will file a police report. Not sure we will ever see the money and it doesn't make sense to me to throw a ton of money at this to collect.

NoraW (California)
Posts: 6

Posted:

When you go file your police report, you should take all the evidence you have. i.e. cancelled checks or whatever as proof. If the police decide to investigate this case, they will do so. If the evidence is there to prove fraud/embezzlement they will turn it over to the District Attorney office. At that point it won't cost your association anything. The person will be prosecuted through the Court system.

TimB4 (Tennessee)
Posts: 21,059

Posted:

I would inform the membership that the Board (or recent audit, etc.) discovered some possible misuse of Association funds. The Board is continuing the investigation. It does appear that no-one currently serving on the board is involved (if you can make this statement) Once all the facts are known more information will be released.

Once you know more and have filed a police report, etc., I would release the following:

The Board concluded that there was misappropriation of Association funds and we have turned the issue over to the police for action. No one currently serving on the Board is associated with the misappropriation [or those possibly involved with the misappropriation have been removed from the financial affairs of the Association]. As there is a police investigation and a potential legal matter - the Board will not comment further until the issue has been resolved.

BradP (Kansas)
Posts: 2,640

Posted:

Tim:

I like that...thanks

JonD1
Posts: 2,350

Posted:

Is this person still on the Board?

If not when did this all take place?

Does this person still own property?

Are they aware someone has caught on to them?

IMO I would contact the police ASAP after verifying all your claims and removing any explanation for their actions.

Who has the computer now?

Good luck.

I would run any release to the owners through the attorney as nothing yet has been proven you don't want to make claims or statements which in the end might cause liability.

SusanW1 (Michigan)
Posts: 5,202

Posted:

I assume these purchases were NOT approved in the minutes OR a part of the equipment needed for his/her job as part of the budget.

Just HOW did this all take place?

PetunkaM (Florida)
Posts: 1,009

Posted:

Yep,s ome poor soul did steal $2K which is 10% of your funds. Whatever you do, don’t let it increase your blood pressure. Isn’t worth it.

BradP (Kansas)
Posts: 2,640

Posted:

This all took place over the past 3 years due to owner apathy....they are not aware anyone is on to them yet and are not on the board but still live here. There were no board meetings over the past 2+ years...We are going to file a police report and go from there. Will probably never know the exact amount...

HoaC (Florida)
Posts: 95

Posted:

I am in agreement with the above post. I just had a conversation tonight over dinner with a person from a local COA. They have had the same problem, as we did with a particular past president, and I told her that we created transparency with the software. She is going to review the information I offered her.
Even if you used a CAB / CAM (MC) they will have to use the software to manage our association, in the event we ever went back to a CAB / CAM (MC).
I have said this several times. I will say it again. Without communication, there can be no education. With no communication and or no education there can not be any transparency. And this will inevitably lead to greed and self serving members.
If you live in a glass house, you would not commit a crime for fear someone was watching you do it.

GlenL (Ohio)
Posts: 5,491

Posted:

Brad our CC&R's require all Board members to be bonded and the MC to provide a bond at their cost equal to the amount of Association funds they have access to. We had a similar situation a few years back where a long time Board member who was appointed treasurer made some unauthorized purchases. We had an executive session meeting with him and offered him the choice of repaying the money or the police. He left the meeting poorer and was no longer treasurer. No we didn't demand his resignation from the Board, elections were only a couple of months away and he wasn't running again.

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