Avoiding Fraud in Condominium and Homeowners Associations

Last week an Indiana newspaper published an article titled "Homeowners association supervisor faces 21 counts of forgery." (Click here to read article) The article states:

A McCordsville woman is charged with 20 counts of forgery and one count of theft of at least $100,000 in Marion County.

Marcy M. Smitley, 39, the owner of MCS Management Group Inc., was hired to supervise the Winslow Crossing apartment and condo complex on the southeast side of Indianapolis.

Court documents state Smitley repeatedly wrote and cashed checks without the permission or knowledge of Winslow Crossing Homeowners Association, pocketing more than $120,000 during the course of four years.

Fraud and embezzlement can occur in any condominium or homeowners association.  Here are some steps to help minimize your risk:

1. Purchase fidelity insurance to protect your association from theft of funds.  Your fidelity policy limits should match the amount of funds in your accounts.

2. Require two signers for all checks.

3. Have an independent CPA perform an annual financial review or audit.

4. Require monthly bank account reconciliation.

5. Keep blank checks in a secure location.

6. Consider background checks for any employee or contractor who may have access to association funds.

Oregon HOA Annual Review Checklist

As the year comes to an end, take a few minutes and assess the health of your association.  Use the flowchart below to help you get off to a good start at the new year. Some things to Consider:


  • Oregon law requires the board to review its insurance policies and coverage annually.  ORS 100.417(3) & ORS 94.640(3).


  • ORS 100.175(3)(a) & ORS 94.595(3)(a) require that: "The board of directors of the association annually shall conduct a reserve study or review and update an existing study to determine the reserve account requirements."


  • ORS 100.417(4) & ORS 94.640(4) require an association to file annual tax returns if necessary.