Every condominium association needs condo fee income to survive. These fees are kept in an operating account or in a reserve account. If the money is embezzled by either a trustee, a unit owner, or by a manager the results can be disasterous.

Here are some recent examples of theft losses and how they took place:

 

 

 

Financial controls go a long way towards preventing theft. If you are unlucky enough to suffer a loss then correct safeguards should uncover it quickly.

 

Countersignatures-Set up a procedure with your bank to make it mandatory that checks over a certain dollar amount require two signatures.
Division of Duties- Set up a system where the person who reconciles the bank statements does not make deposits.
Review Bank Reconciliations- Bank statements should be reviewed by trustees monthly.

Every condominium should have crime insurance. The coverage selections under a typical crime policy include; fidelity, forgery and wire-transfer. You can go to our website for coverage selection definitions. Crime policies were originally designed for typical situations where there are employers and employees. Condominiums rarely have employees but very often do employ a management firm. If you have a property management firm you must be sure that your policy includes a rider naming the property manager. Without this endorsement the crime insurance will not cover theft by the management company. 

 

Are unit-owner's paying their monthly condo fees through a website or a third-party vendor? Crime policies will not cover the third-party vendor. You should review what crime insurance you have under these arrangements.  

 

Confused over how much insurance is enough?  First be sure that you are in compliance with the Condo law 183A and Fannie Mae's single familiy 2009 selling guide. These regulations are only guidelines. We also suggest you discuss what you need with your insurance agent or your accountant. Make sure it adequately covers the operating and reserve accounts.