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Doing payroll is straightforward and easy right?  Not really.  Many communities and management companies get tripped up by payroll.  Don’t be ashamed I know a lot of accounting companies that outsource payroll to experts as well.  This post discusses how to reduce risk: outsource your HOA or condo community payroll.

Risk #1: Fraud

From studying dozens of HOA and Condo embezzlement cases we have found payroll as an area that can lead to fraud and theft.  Here is how it happens, the community probably is using payroll software to save a little money.  An employee, say an onsite bookkeeper or manager, manipulates their payroll.  The employee gives themselves unauthorized pay raises, extra bonuses, paid sick and vacation time, etc. without any oversight or board approval.  To learn more from a real life example read a case study here.

Risk #2: Costly Mistakes

States change their withholding tax percentages from time to time.  The State of Washington recently changed from 25% to 22%.  But what if it increased?  If you are not receiving emailed updates or visiting the state website you can easily miss the change.  If you are not withholding and paying the correct amount you open yourself up to the shortfall plus fines and hefty interest.

I was running a full service management company and we had an old client that I was unaware we were doing payroll for.  In 2007 the property accountant in charge of that community was distracted by having to deal with an ill spouse plus a growing workload.  The payroll withholding was not filed or sent to the state for several periods.  I received a notice from the community that due to the error our company owed them part of the back taxes, penalties and interest totaling over $7,500.  Ouch!

If your community has a volunteer board member handling payroll can these things happen to them?  As a volunteer board member do you want to assume the risk?    

Recommendation

For the reasons stated above we recommend outsourcing to a company that specializes in payroll.  Since we work with clients nationwide we’ve partnered with ADP, the national leader in payroll services, to provide accurate payroll to communities.

If you want to find out how much basic professional payroll costs for your community CLICK HERE to GET A QUOTE.