Flickr photo credit: seaworthy

Imagine half a million dollars. Now imagine it as the amount your association employee stole from you. That’s just the situation a Newport Beach, Calif. condominium association is facing this week after the arrest of its president, who has allegedly embezzled $530,000 from the group. Forging the treasurer’s signature, the president is alleged to have paid contractors for work they were to have completed on the complex. They in turn gave most of the money back to the president, expecting to be receiving work. The work, the police say, never materialized.

This could be your condo association employee. Even the most dedicated employees – and in some cases, especially the most dedicated employees – can be discovered to be stealing from your association coffers. Experts in fraud detection and embezzlement cases say the typical embezzler is a lifer – an employee who has been in the job a number of years, who rarely takes a vacation, and who has complete control over the finances. That’s because it’s too risky for the embezzler to take time off. Another set of eyes on the books could unravel the theft.

It goes without saying – Employee Practices Liability Insurance (EPLI) is a must for any apartment, homeowner or condo association. Where money is exchanged or handled, temptation exists. A comprehensive EPLI policy will cover your condo association for theft, embezzlement, wrongful acts, and more. To increase your protection, consider the following preventative measures:

• Required time off. All employees must take vacation time away from the office.
• Routine audits. While the accounting employees are away, condo associations should conduct audits to ensure all accounts and bookkeeping records are accurate.
• Designate more than one money handler. Trouble brews when one person is in complete charge of your finances. Spread the duties out among a few employees to lower the risks. And make sure each of these employees takes a required vacation away from the office.

Just a little housekeeping can help your condo association avoid a large, devastating loss. With a combination of a customized EPLI policy and a little risk management, your financial risks will be lessened considerably.