How HOA Boards Should Respond to Fraudulent Behavior

Some people have the idea that accountability within a volunteer group is not an important factor. From local charities to parent-teacher associations, these volunteer groups have the responsibility to be held accountable for how they handle money and donations that come in. The same goes for HOA boards. Having access to funds can bring about the temptation to deal in embezzlement, scams and overall fraudulent activities.

Board members who act dishonestly can take advantage of the fact that some fellow volunteers don’t understand the scope of how money is handled in an HOA. Plus, things like busy home lives, jobs and recreational living can add to the distraction element, opening up more enticing to act fraudulently around money. With this in mind it’s important to look at how HOAs as a whole should respond to fraudulent behavior after it has been uncovered.

Investing in HOA Insurance

While HOA members can do their best to stay alert of dishonest behavior happening around them, it pays to have a solid backup plan in an HOA Insurance program, which provides reimbursement, among other features. While fraud can’t always be avoided, having HOA insurance with crime coverage in place will supply peace of mind in picking up the pieces after something happens. Let’s look at some common types of fraud in an HOA setting and how to respond to them.

Types of Fraud

Embezzlement

As noted above, embezzlement is a common type of fraud that occurs within an HOA group, especially since access to funds isn’t always checked. This happens when someone illegally takes money or property that has been entrusted to them by someone else, in this case, money that an HOA holds.

Kickbacks

This occurs when a board member or group of members within a board colludes to give contracts or preferential treatment to vendors who have offered up financial kickbacks in return for business. This is a form of HOA fraud because the kickback money is a portion of the monies paid to the contractor.

Rigging Elections

Being on an HOA board is an esteemed position within communities, but some have gotten on boards by fraudulent elections. Individuals join up to get their friends, family members and/or associates on the board, and in turn operate out of prurient interests.

What to Do If Fraud is Detected

Board members who have a hunch or have proof that something illegal is happening within their board should be careful in their pursuit of uncovering possible activities. It’s important to gather information that back up your suspicions as some suspected fraudulent activities may just be simple mistakes.

Law Enforcement

If you believe members from your local HOA are demonstrating fraudulent behavior, you should feel encouraged to report it to the police or other local law enforcement. The authorities will investigate the crime and once this occurs the case may be sent to the county district attorney.

It’s important to have as much information as possible and not act with bias. Be careful to point the finger at those who you suspect and always be sure to have proof to support your suspicions before moving ahead with any official claim.

About Kevin Davis Insurance Services

For over 35 years, Kevin Davis Insurance Services has built an impressive reputation as a strong wholesale broker offering insurance products for the community association industry. Our president Kevin Davis and his team take pride in offering committed services to the community association market and providing them with unparalleled access to high-quality coverage, competitive premiums, superior markets, and detailed customer service. To learn more about the coverage we offer, contact us toll-free at (877) 807-8708 to speak with one of our representatives.

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