Embezzlement

Yep, its because no one watches the books. People just trust others to do it and are too lazy to pay attention to the finances. It happens everywhere and as the economy gets worse, it will happen more often.

Many times people will think the person writing the checks just does sloppy work, but what is really happening is they are embezzling. The sloppy bookkeeping ensures no one will ever makes heads or tails of the finances and thus never catch them. And they probably wont.

If you read the charges and how they did it, most times it's writing checks to themselves, many times as reimbursement for bogus purchases.

In the non-profit that I am treasueer for, (museum) I started a procedure that if someone submits a receipt for reimbursement, another person must sign off on the form indicting the items WERE purchased for the organization.

One woman I know went around and picked up recipts thrown away outside of a big box store and submitteed them for reimbursement from her church group. No one checked to see the items were indeed even voted on or received by the group.

A finance committee can go thru all transactions on a quartly basis and do do a mini audit of all accounts. Comparing bank statements to the treasurer's report is a good idea.

One HOA in this area had a treasurer that set up a PayPal account and made purchases with that. Since those are only seen on the checking account statment, it is important for someone to go over all those once in a while. Bank statments are on line now and at least two people should be looking over those.

More difficult to detect are schemes where a vendor submits an inflated bill for work and splits the excess with someone on the inside. I am currently investigating such a situation in our POA.

Our board hired an attorney to recover delinquent accounts. One board member worked with the attorney. The attorney's fees were far outside the envelope of reasonable for the work performed. Most of the board members wanted to end the attorney's contract but that one board member insisted that we continue on. We did and lost even more money. When the board finally terminated the attorney's contract, the vote was 8-to-1. Guess who voted "no?" The board member who had been working with the attorney quit in mid-meeting right after the vote. Given the circumstances, I have a strong suspicion that the board member was receiving kickbacks from the attorney.

I agree, very hard, to impossible. This is where multiple bids are helpful to see if one vendor is waay too expensive and is the vendor picked. Another good practice is to include a photocopy of the detailed bill from the vendor as part of the minutes. This way the members can review the bill and someone who knows prices for similar vendors can question an expense as too large based on his or her personal knowledge of similar bills. IE: If you had a landscaping bill that shows $1,000 per mowing when the price should be in the $500 range, its time to get more bids from other vendors.

Hmm interesting. A few years ago we had a sloppy bookkeeper. She had never been trained to be a bookkeeper so I thought it was lack of knowledge.

I wouldn't be so concerned about written checks. With so many financial transactions being done on line, I'd watch those kind of transactions, especially transfers and other electronic payments, like PayPal and electronic payments to other people's accounts.

That's why a Finance Committee needs to look at all transactions and have access to bank statments.

One thing I have noticed at my bank is that if I try to deposit a check made out to someone else at the teller's window, they will not accept it. If I deposit the same check in the ATM it sails right through without question. I do not know how widespread this practice is but it sure opens the door to a lot of opportunities to commit fraud.

All I can say is....WOW! So many problems, and no checks and balances. Now I can understand better how something good can go so wrong, especially in a HOA. But, some suggestions posted here are very good, and making a "post it" of them. Thank you.