The larger issue may be a depletion of funds available, but a sound insurance policy can help your association recover more quickly. The underlying issue, however, could be more harmful in the long run. In order for an embezzlement to occur, at least in the minds of your residents, someone had to be ignoring something. True? No. But getting beyond that perception can be difficult, if not impossible.

1. If your association is the victim of embezzlement by one of your board members or staff, don’t attempt to hide it from your residents. Instead, become proactive in informing your residents on the situation and its progress through any legal channels.

       2.   Provide residents with written communication that details the alleged activity (and make sure not to blame anyone lest you set your association up for a libel or slander lawsuit), what is missing, and how your homeowner’s association board is addressing it.

        3.   Remember to continue your communications with your homeowners. Update them regularly even if there isn’t much to report. They need to see their homeowner’s association is on top of the situation and working toward a swift resolution to the issue. Reporting the problem to them and then ignoring further communication sends a signal to residents that the board is uninformed or ignoring the situation. While neither may be true, residents can’t know what’s being done without you telling them.

A number of business insurance policies cover damage to reputation and loss of income as a result of that damage. Contact your homeowner’s association broker to discuss what options are available to you. Your broker is an excellent source for developing a communications plan that puts the minds of your residents at ease. That can go a long way to alleviating any damage to your reputation or future business.

Flickr photo credit: Arenamontanus

I mean we’ve all heard stories about the waiters and waitresses at our favorite restaurant swiping our credit card numbers on a little theft gizmo before running the charge through for the meal.  I’ve actually been a victim of something similar.  Although I love the restaurant dearly (it serves the best Mexican food) I only pay with cash. period. 

Every month large sums of money moves through your books.  Rents come in as income, and then there are expenses – utilities, maintenance, staff, supplies, insurance, taxes, advertising, legal fees, tenant damage, etc.  Do you have safeguards in place to deter sticky fingers?

Do you have one person write checks and another person sign them?  Who reconciles the bank statement each month?  Direct theft is one form of employee dishonesty. 

Another form would be when an employee uses tenant information – credit card numbers, social security numbers, birthdates, etc. to make fraudulent purchases for personal gain.  This form of theft is more difficult to identify.  And yet, you could be named as a party in the lawsuit.

All forms of theft are damaging – not only to the Apartment owner but to the reputation of the property and the ability to keep maximum occupancy. So, what’s the remedy?  Aside from the obvious of doing everything yourself, which assumes you’re an honest person, is to have certain policies in place.

1.  Bond your employees.   Fidelity bonds protect you (the policyholder) for losses incurred as a result of theft or dishonesty by the bonded employee.

2.  If your business is a corporation, LLC, etc. you should have Directors and Officers (D&O) liability insurance in place.  This coverage will protect the organization from legal/litigation costs resulting from mistakes (yes, that’s a broad term) for which they are liable.

3.  Is it a standard part of your application process for prospective tenants to provide proof of tenant/renter’s insurance?  What about the maintenance person or exterminator who likes bright shiny objects?  Proof of tenant/renter’s insurance should be standard for all approved applications.

When you protect your business, you’re protecting others from losses that can and will occur.  Legal fees and shattered reputations can ruin a business.  Be proactive and have policies (employer and insurance) in place to deter dishonesty and prevent holes in your office.