Here at Spectrum Association Management, we love helping our customers navigate every aspect of HOA management. One topic that doesn’t get talked about enough is how to protect your association’s finances from fraud.
While the vast majority of all HOA volunteers only want to help their community be the absolute best it can be, it never hurts to optimize your board’s financial protection strategy.
We recommend the following tips:
- Create a well-monitored reimbursement strategy. Some volunteers regularly need to make purchases for the association. Having a well-communicated reimbursement plan in place will help cut down on the association’s risk.
- Audit your finances in accordance with state law or the governing documents. Most governing documents dictate how often an audit by a CPA should be performed, and it’s important to keep up to date with the governing documents’ expectations. If for some reason your governing documents don’t mandate regular audits, reach out to your community manager and ask them how often the service should be performed.
- Handle as much online as possible. Many instances of virtual fraud happen because the hacker has gained access to the files on their computer. As an added protection, consider insisting that everyone on the board having good antivirus software.
- Assume that your management company will handle all financial transactions. Board members sometimes receive requests to pay vendors or to wire money to an individual at the behest of another board member or community manager. This should be an immediate red flag.
- Establish a secondary confirmation habit. Any time you get a request of a financial nature either online or via text message, make a point to call the person making the request and receive verbal confirmation that it came from them.
- Purchase insurance. Sometimes, despite your best efforts, the worst happens. Thankfully, you can get fraud protection insurance to help mitigate your losses. Our friends at Blue Lime can help you find association-specific fraud protection!
- Communicate your fraud prevention policies. The best protection you can offer is to make sure everyone who might have access to your finances knows that you have protections in place and that your finances are being monitored regularly.
It is important to partner with your management company so you can both be vigilant in this area. Those who perpetrate fraud are getting better all the time. Prevention is the best policy when dealing with fraud.
Data security is also an important. For instance, SpectrumAM uses military grade encryption software (128-Bit encryption), an industry leading SSO, and we train our employees on the importance of data security. We recommend a Verified Vendor process, which eliminates the hiring of fake vendors (a common area where fraud occurs).
For more on fraud, we suggest you visit https://www.fraud.org/prevent_fraud