It takes a lot of money to properly run a homeowner’s association. Maintenance, security, capital, and other expenditures all require a large reserve fund that is available to the association at all times. Because HOAs are run in large part by volunteer board members and may lack proper checks and balances, they unfortunately become easy targets for theft. Embezzlement amongst HOA board members is an alarmingly common crime that can have crippling financial and reputational effects on an association.

Even the most carefully guarded accounts are susceptible, so it’s imperative that HOA boards take steps to ensure their funds are safe and can be recovered if needed.

Protect Your HOA with Crime and Fidelity Insurance

In simple terms, Crime and Fidelity Insurance protects against exposure to financial losses incurred due to dishonesty; this includes embezzlement, computer fraud, wire fraud, check fraud, and invoice padding. Where an Employee Dishonesty Policy typically only covers current employees, Crime and Fidelity Insurance may cover past and present employees (paid or unpaid will depend on the policy and its expansions), volunteers, their spouses, community managers, and accountants. This type of coverage is not typically included in an association’s master policy, so it must be added on and renewed yearly.

How Much is Needed?

Boards should refer first to both state law and their association’s covenants and bylaws to determine the amount of coverage needed. The premium will then be calculated by the insurance company and is determined by the number of people with access to the funds.

Prevention Tips

Even with the safety net of Fidelity Insurance, it’s important for HOA boards to implement smart and effective practices to prevent theft and protect their hard-earned funds:

Safety in numbers. Don’t leave it all up to the treasurer. HOAs should always have those responsible for finances and who are continually aware of what is being done with the money in the accounts.

Discuss regularly. Never glaze over matters of finance in monthly board meetings. It’s a good idea to assign a committee to reconcile HOA expenses each month.

Double up. Requiring double signatures on checking accounts and other transactions is an extra step worth taking to prevent one individual from underhandedly stealing or misappropriating funds.

Ask questions. While honest mistakes are sometimes made, boards need not be hesitant to inquire about discrepancies when it comes to the association’s money.

In the HOA world, theft is common, and even the most well-prepared associations are at risk. Contact Blue Lime Insurance Group today to speak with an agent about obtaining affordable, reliable protection for your HOA.