There have been recent news articles regarding fraudulent activity on behalf of board members as well as property management companies. Today, I asked Claude to prepare a check list of activities the board of directors can consider in making sure that everything is fiscally sound for a condominium in Southeast Florida.

FRAUD PREVENTION & DETECTION CHECKLIST

For Condominium Boards of Directors — Southeast Florida

Screening the Property Management Company, Officers, and Directors  |  Fla. Stat. Ch. 718

How to use this checklist:  Review at each board meeting or quarterly, and immediately if an owner or director raises a concern. Assign one director (ideally not the treasurer or the person with check-signing authority) to walk through Sections 1–6 with bank statements, invoices, and the general ledger in hand. Any single “red flag” is not proof of wrongdoing, but multiple unexplained items — or resistance to answering these questions — warrant a closer look, and possibly a forensic accountant or association counsel. This checklist reflects Florida’s post-Surfside condominium reforms (Ch. 718, as amended through the 2023–2026 legislative sessions) and general fraud-examination practice; it is educational and does not constitute legal or accounting advice.

1. Board & Officer Governance Red Flags

Behaviors among directors and officers that weaken internal controls or signal possible self-dealing.

☐	One person can authorize, sign, and record a transaction with no second approval.  (No dual control/segregation of duties)
☐	Treasurer or a single officer has sole, unmonitored access to online banking credentials.
☐	A director or officer has an undisclosed felony conviction for theft, fraud, or embezzlement.  (§718.112 — may render a candidate ineligible)
☐	Directors have not disclosed personal, business, or family relationships with vendors, contractors, or the management company.  (§718.3027 conflict-of-interest disclosure)
☐	Same officer holds the treasurer/financial-control role for many consecutive years and resists rotation or term limits.  (§718.112 — 8-year/4-term limit, absent 2/3 vote)
☐	Board delays, waives, or refuses to obtain a fidelity bond or crime insurance, or lets coverage lapse or fall below required limits.  (§718.111(11)  reserves + 3 months’ assessments)
☐	Board resists engaging an independent CPA for the compilation, review, or audit required by the association’s revenue level.
☐	Owner requests to inspect official records or financial reports are delayed beyond the statutory deadline or met with excuses.
☐	The Board votes on financial matters outside a properly noticed open meeting, or minutes omit financial discussion/votes.
☐	Large contracts or expenditures are approved without competitive bids when bidding is required, with no written rationale on file.
☐	Directors or officers accept gifts, meals, trips, loans, or other things of value from vendors or the management company.  (Now a criminal offense under §718.111 anti-kickback provision)
☐	Special assessments or fee increases are proposed with vague, undocumented justification.

2. Property Management Company Red Flags

Warning signs specific to the managing agent/community association management (CAM) firm.

☐	The manager discourages or blocks the board from viewing bank statements, the general ledger, or online banking directly.
☐	The management company controls both bill payment and bank reconciliation with no independent director review.
☐	The manager or firm has undisclosed ownership or financial interest in a vendor used by the association.  (Kickback/self-dealing)
☐	Vendors or subcontractors share an address, phone number, principal, or family tie with the manager, undisclosed.
☐	Manager proposes “loans,” side agreements, or off-book payment arrangements with contractors.  (Cf. recent SE Florida kickback prosecutions)
☐	Reserve funds are commingled with operating funds rather than held in separate, association-titled accounts.
☐	Association debit cards are used for any association expense.  (Statewide prohibition, effective 2025)
☐	Bank statements go only to the management office, with no read-only board/treasurer access or duplicate mailing.
☐	Monthly bank reconciliations are missing, late, or not reviewed/initialed by a director.
☐	The community association manager’s license (CAM) cannot be verified as current with DBPR.
☐	Unusually high turnover of onsite staff, bookkeepers, or property managers coincides with unexplained financial gaps.
☐	Management contract lacks a right for the board to audit records or terminate for cause without excessive penalty.

3. Financial Statement & Transaction Red Flags

Clues to look for when reviewing bank records, invoices, and the general ledger.

☐	Checks or transfers made payable to “Cash,” to an individual rather than a business, or to the treasurer/manager personally.
☐	Invoices are missing, altered, backdated, photocopied, or lack itemized detail/backup documentation.
☐	A vendor cannot be found in Florida’s Sunbiz corporate registry, has no verifiable address, license, or insurance certificate.
☐	Round-dollar or just-under-bid-threshold payments to the same vendor, repeated to avoid competitive bidding rules.
☐	Bank reconciliations don’t tie to the general ledger; unexplained journal entries or “plug” adjustments appear.
☐	Reserve account balances decline with no board-approved withdrawal or corresponding capital project.
☐	Owner assessment ledgers don’t reconcile to the unit-ownership roll or total budgeted assessments.
☐	Petty cash disbursements lack receipts or an approval signature.
☐	Duplicate invoice numbers, duplicate payments, or the same invoice paid from two different accounts.
☐	New vendors added to the payment system without a signed contract, W-9, or certificate of insurance on file.
☐	Payroll or contractor payments continue for individuals no longer providing services (“ghost” vendors/employees).
☐	Association credit/debit card statements show personal-looking charges (restaurants, retail, travel, entertainment).
☐	Monthly financials arrive late, are incomplete, or use inconsistent formats/categories from month to month.
☐	No CPA compilation, review, or audit obtained despite revenue crossing the statutory threshold.  ($150,000 / $300,000 / $500,000 tiers under Ch. 718)

4. Vendor & Contract Fraud Clues

Patterns that suggest bid-rigging, steering, or kickbacks in the procurement process.

☐	Contract awarded without a Request for Proposal or competitive bid where the amount or governing documents require one.
☐	Change orders substantially inflate the price soon after a low bid won the contract.
☐	The same small group of vendors is used repeatedly despite lower competing bids, with no documented reason.
☐	A winning vendor has a personal or business relationship with a director, officer, or manager that was never disclosed.
☐	“Emergency” repairs are declared to bypass normal bidding, approval, or disclosure procedures.
☐	A vendor is selected shortly after a director, or manager received a gift, trip, meal, or personal payment.
☐	No license verification, insurance certificate, or lien waiver was obtained before work began or payment was made.
☐	Contractor’s license status, complaint history, or litigation history was never checked (DBPR / county licensing).

5. Behavioral & Interpersonal Warning Signs

How people act can be as telling as the numbers.

☐	Defensiveness, evasiveness, or hostility when a director or owner asks routine financial questions.
☐	Refusal to allow an independent audit committee, forensic accountant, or outside CPA to access original records.
☐	Original records are reported “lost,” unavailable, or were destroyed shortly after being requested.
☐	A long-tenured treasurer or manager strongly resists any change of bank, software, signers, or process.
☐	Board meetings rush through financial items, leaving little time for directors or owners to discuss.
☐	Pressure to switch banks or signers outside a documented board resolution and vote.
☐	Blank check stock, an association seal/stamp, or bank tokens are kept unsecured or in one person’s sole custody.
☐	A director’s or manager’s lifestyle appears inconsistent with their known income.

6. Florida Statutory Safeguards to Confirm Are in Place

Chapter 718 compliance items adopted in Florida’s post-Surfside reforms — verify each is actually being followed, not just written into policy.

☐	Fidelity bonding/insurance in force for every person who controls or disburses funds, at least equal to reserves plus three months’ assessments.  §718.111(11)
☐	No association debit cards are used for any expense.
☐	Written policy requires dual signatures or board pre-approval above a defined dollar threshold.
☐	All officers/directors have completed required board-member education/certification and disclosed disqualifying criminal history.
☐	Conflict-of-interest disclosures on file for any director/officer (or relative) doing business with the association.  §718.3027
☐	Structural Integrity Reserve Study (SIRS) completed, and reserve line items ≥$25,000 are fully funded (not waivable).  §718.112(2)(g)
☐	Milestone inspection completed on schedule (age 25 if within 3 miles of the coast, age 30 otherwise; every 10 years after) and summary distributed to owners within 45 days.  §553.899
☐	Association website compliant (buildings with 25+ units) with required financial reports, contracts, and bids posted within 30 days.  §718.111/.112 website mandate
☐	Annual report listing all financial institutions used has been filed with DBPR.  §718.111
☐	Owner requests for official records and financial reports are honored within statutory deadlines.
☐	Documented rationale on file whenever the board does not select the lowest responsive competitive bid.
☐	No officer, director, employee, or manager has solicited or accepted a kickback, gift, or thing of value from a vendor.  Criminal offense under §718.111

7. If Fraud Is Suspected — Board Response Protocol

A brief, methodical response protects the association, the evidence, and the board itself.

☐	Do not confront the suspected individual or tip them off before records are secured.
☐	Immediately secure and back up bank records, ledgers, contracts, invoices, and correspondence (paper and digital).
☐	Suspend the individual’s signing authority and system/banking access by documented board vote.
☐	Promptly notify the association’s CPA and the fidelity bond/crime insurance carrier (check policy notice deadlines).
☐	Consult association legal counsel before making any public statement or accusation.
☐	Report suspected criminal conduct to local law enforcement or the State Attorney’s Office; report a licensed CAM to DBPR.
☐	Consider engaging a forensic accountant for any materially suspected loss.
☐	Communicate with unit owners consistent with governing documents and statute, without compromising the investigation.
☐	File a claim under the fidelity bond within the policy’s notice-of-loss deadline.

Sign-off

Reviewed by (Director):  _______________________________________________       Date:  ____________________

Reviewed by (Director):  _______________________________________________       Date:  ____________________

Board President / Secretary:  __________________________________________          Date:  ____________________