Condominium associations and homeowners associations manage substantial collective assets. Monthly assessments, reserve contributions, special assessments, and insurance proceeds often total hundreds of thousands, if not millions, of dollars annually. These funds are held in trust for the benefit of all association members. When oversight is lacking, the opportunity for theft or embezzlement drastically increases. For people serving as directors and officers of condominium associations or homeowners associations, careful financial governance is not simply good practice; it is an important fiduciary obligation.
Real-World Examples of Embezzlement
Financial misconduct within condominium and homeowners associations is more common than many boards realize. In 2024, in Aventura, Florida, the president of the Turnberry on the Green condominium faced criminal allegations after he was accused of diverting approximately $1.5 million in association funds over several years. The case, reported by CBS News, illustrates how unchecked authority and limited financial segregation can allow misconduct to continue undetected for an extended period.
Similarly, in 2025, Miami-Dade County, a former manager of The Club at Brickell Bay Condominium was accused of operating a “ghost employee” scheme, allegedly siphoning more than $140,000 from association accounts. According to reporting, fabricated payroll entries and fraudulent payments went unnoticed until significant losses had accumulated. You can read more on The Office of State Attorney of Florida’s website.
In Georgia in 2026, a property manager was indicted by a grand jury in connection with alleged thefts from clients whose money was supposed to be held and distributed through the company.
In Michigan in 2022, after she pleaded no contest to a charge of embezzlement, the former treasurer of the Fayette Arms Condominiums was given a suspended jail sentence of 365 days and 36 months of probation. She was also ordered to pay $77,934 to the condominium association in restitution.
These cases are not anomalies. Across the country, association treasurers have written unauthorized checks to themselves, managers have inflated vendor invoices, and board members have used reserve funds for personal expenses. Many incidents come to light only after a change in leadership, a forensic audit, or a whistleblower complaint.
Why Condominium Associations and Homeowners Associations Are Vulnerable
The structure of Condominium and Homeowners association governance creates inherent risk factors:
- Concentration of authority.
In smaller associations especially, one individual may serve simultaneously as board president, treasurer, and de facto financial overseer. When that person also works closely with the property manager, internal controls can erode quickly. The absence of segregation of duties is one of the most significant red flags in fraud prevention.
- Volunteer leadership.
Board members are typically volunteers. While dedicated, they often lack formal training in accounting, internal controls, or fraud detection. Without financial literacy, irregularities may go unnoticed.
- Limited owner engagement.
Owners frequently rely on the board to “handle the finances.” When financial statements are distributed but not reviewed critically, transparency becomes performative rather than protective.
- Overreliance on management companies.
Professional property managers provide essential services, but boards sometimes delegate too much authority. Blind trust without verification undermines fiduciary oversight.
The Financial and Legal Consequences
The financial impact of embezzlement extends beyond the stolen funds themselves. Associations often face:
- Emergency special assessments to replenish reserves
- Increased insurance premiums or difficulty securing fidelity coverage
- Costly litigation and forensic accounting expenses
- Delayed capital projects and maintenance
- Reputational harm that affects property values
Board members also face potential exposure. While directors are generally protected under the business judgment rule when acting in good faith, a consistent failure to implement basic oversight mechanisms may raise questions regarding breach of fiduciary duty.
Best Practices to Mitigate Risk
Effective financial governance requires layered controls. No single safeguard is sufficient. Boards should implement the following measures as standard operating procedure:
- Segregation of duties.
No individual should control invoice approval, check preparation, and bank reconciliation simultaneously. If staffing is limited, require dual signatures on checks above a defined threshold and board approval for electronic transfers.
- Independent annual audits or reviews.
Engage a certified public accountant experienced in community association accounting. Even smaller associations should consider at minimum an annual financial review. Annual audits or reviews are required by the Michigan Condominium Act if the condominium association has annual revenues over $20,000.00, unless a majority of the association’s members vote to opt out of the requirement.
- Monthly financial reporting.
Boards should review income statements, balance sheets, aged receivables reports, and bank reconciliations at every meeting. These reviews should be done carefully, not hastily.
- Direct access to bank statements.
At least one board member independent of day-to-day bookkeeping should receive bank statements directly from the financial institution.
- Vendor verification protocols.
New vendors should undergo due diligence, including confirmation of corporate registration, tax identification numbers, and proof of insurance. Regular vendor audits help detect inflated or duplicate payments.
- Fidelity insurance coverage.
Adequate fidelity bond or crime coverage is essential. Boards should confirm that coverage extends to officers, directors, employees, and management companies.
- Transparent owner communication.
Providing accessible financial summaries and permitting reasonable record inspection reinforces accountability and builds trust. However, this transparency does not mean that a board should allow association members to dictate how each dollar is spent.
Governance Is a Fiduciary Duty
Financial vigilance is not a matter of suspicion; it is a matter of stewardship. Association boards act as fiduciaries, meaning they must exercise due care, loyalty, and good faith in managing association assets. Courts consistently recognize that while volunteer directors are not expected to be financial experts, they are expected to implement reasonable oversight procedures.
Fraud prevention operates on a simple principle: trust, but verify. When boards institutionalize transparency and internal controls, they reduce both opportunity and temptation. Conversely, when oversight is casual or deferred, the association becomes vulnerable to significant loss.
Condominium communities function on collective investment. Every owner contributes to the shared enterprise. Protecting those contributions through disciplined financial governance preserves not only assets but also confidence in the integrity of community leadership.
The Attorneys at Tilchin & Hall, P.C. have successfully litigated cases on behalf of association who were victims of financial misconduct. If you are an association member and there are financial misconduct concerns, please contact us by giving us a call at 248-349-6203, or by emailing us using the form below.
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