A To-Do List to Keep the Condo's Books

By Benny L. Kass
Saturday, April 14, 2007

Q: I have just been elected treasurer of our condominium association. Recently, I read that a property manager in Virginia may have embezzled thousands of dollars from associations with which he was associated. I am scared because I am ill-equipped for this task.

What can I do to safeguard our association's money?

A: Your nervousness is a sign that you take your responsibilities seriously. That's a good attitude to have.

In the past 10 years, if memory serves me, there have been three well-publicized local episodes where property managers have stolen their clients' money. While this is clearly traumatic for the association -- and especially its treasurer -- in the total picture this is a small number.

However, you need to protect your association. There are steps you should follow to do so.

First, meet with your association accountant. Arrange to spend as much time as necessary with him or her, even if this will be an additional expense for your association. The accountant should explain how the books are kept and should give you tips on how to spot problems. You may even want the accountant to meet with you every month for a couple of hours until you have a good understanding of the books and records.

Next, meet with your property manager and review your association's financial policies as implemented by the manager. Ask questions if you don't understand things. After all, the property manager works for your association and should be responsive to your concerns.

Finally, meet with the association's insurance agent. Satisfy yourself that there is adequate coverage for any and all kinds of embezzlement from anyone -- whether it is at the hands of the property manager, one of the board members or even an owner.

Once you have a decent understanding of your association's financial picture, here are some suggestions that you and your board should seriously consider. I have made these suggestions in the past, and they're still valid:

  • Make sure that the management firm is appropriately licensed in your property's jurisdiction. Some jurisdictions require the manager to maintain a current property manager's license.

  • When you consider hiring a new manager, check out the company carefully. Consider obtaining credit reports on the firm and the property manager who would be working with your association. They should not object if they want your business.

  • Keep control of your funds. Generally speaking, there are two types of accounts in a community association: operating accounts and reserve accounts. All accounts should be in the sole name of your association and must not be mixed with other funds controlled by the manager.

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