When you agree to join the board of directors of a condominium association, you agree to act in good faith and in the interests of the association.
George Bernard Shaw apparently wrote once that, “Lack of Money is the root of all evil.” It should come as no surprise that lack of money poses one of the more obvious risks to an association. Without money your association can’t repair the property or pay bills incidental to the association’s operation. Although we focus regularly on revenue as we should through budgeting and regrettably enforcement against those owner who fail to pay, we shouldn’t forget the risk that money may also be spent in a way the board neither budgeted nor expected – embezzlement.
Embezzlement is a foreseeable and manageable risk. We should focus first on putting internal controls in place that reduce that risk. Assume as a board member you have a duty to look after the association’s bank account. That duty may be discharged in any number of ways – regularly reviewing original bank statements for irregularities is one way. Setting up a system where original bank statements are mailed to someone other than a check writer is another. Hiring an independent certified public accountant to audit annually your financial records is yet another and may be a requirement of law in your jurisdiction.
If there is a risk, then there probably is insurance that insures against the risk. And that is the case here. Along with managing the risk through adopting internal controls and regularly auditing your books, your association should obtain fidelity insurance to insure against the risk that someone with access to your money may be placing their own financial needs before the needs of the association of owners.
Talk to your insurance broker. Get fidelity insurance.