What to Do When You Cannot Trust Your Property Manager
Francisco Gomez became board president of Doral Gardens HOA in Doral, Florida in 2022. What he inherited was not a community in good shape. The property manager had stolen $168,000. A special assessment had to be issued just to recapitalize the association. Two replacement managers were brought in after the fraud was discovered. Neither was able to get the accounting right either. Francisco eventually fired all of them and managed the 138-unit community himself for nine months before finding a setup that worked.
His story is more common than most boards want to believe.
How Property Manager Fraud Happens
The pattern behind most HOA property manager fraud is consistent. One person has access to the funds and control over the records at the same time. When the person authorizing payments is also the one keeping the books, there is no independent check on what they are doing. According to JS Morlu LLC, limited board oversight of a management company can lead to unchecked authority over HOA funds, and the Association of Certified Fraud Examiners estimates that small organizations including HOAs lose an average of 5% of their annual revenue to fraud.
The warning signs are often visible in hindsight. According to Blake Files Forensic Solutions, repeated delays in financial reports, unresolved differences between bank statements and accounting records, and resistance to providing supporting documentation for payments are among the most consistent indicators that something is wrong. The problem is that boards often do not know what to look for until the damage is already done.
What to Do When Trust Is Gone
When a board reaches the point where it no longer trusts its property manager, the first instinct is often to find a replacement. Francisco did that twice. Two new managers, same result. The accounting was still not right, the financials were still unreliable, and the board still did not have a clear picture of what was happening with the community’s money.
The problem was not the individual managers. It was the structure. A property management company that handles both the physical operations and the accounting has one person or one team controlling both sides of the financial picture. That is the same structural vulnerability that allowed the fraud to happen in the first place.
The Solution Francisco Found
After nine months of managing the community himself, Francisco arrived at a setup that works: use a property manager for local physical issues, and use a dedicated accounting firm for everything financial. The two functions are completely separate. The property manager at Doral Gardens is not allowed to access the accounting at all.
“He’s not allowed to get into accounting. Nothing. I don’t allow him to do that,” Francisco says.
Community Financials now handles approximately 70% of what the prior property manager was handling, covering all of the financial and accounting functions while the physical management stays with a local property manager who handles what local property managers are actually good at: CCRs, architectural requests, vendor coordination, and on-site issues.
The Controls That Should Be in Place
Regardless of who is handling the accounting, certain controls should be non-negotiable. According to McGowan Program Administrators, all checks should require two board member signatures, property managers should not be able to sign checks on behalf of the association, and at least two board members should review all financial documents every month, not just the treasurer.
According to HOAExplore, the separation of duties is critical. The person who can authorize payments should not also be the one reconciling bank accounts. When one person controls both sides of a transaction, fraud becomes much easier to conceal and much harder to detect.
The specific controls every board should have in place include:
- Two-person approval for every payment before it is processed
- Monthly bank reconciliation reports included in the financial packet
- Board access to actual bank statements and check images, not just summary reports
- At least two board members reviewing financials every month
- Clear separation between the person handling accounting and anyone with signing authority on accounts
What Francisco’s Experience Teaches
Francisco is a retired CPA and former Fortune 500 CFO. If a community led by someone with his financial background can be defrauded of $168,000 and then struggle through two more failed management relationships, it can happen anywhere. The issue was never Francisco’s financial expertise. It was the structure he inherited, one where too much control sat with too few people and the accounting was never truly independent.
The fix is not finding a better property manager. It is changing the structure so that no single person or company controls both the money and the records. That is what Francisco did, and it is what the communities that avoid these situations have in common.
If your board is not sure whether the right controls are in place or whether your accounting setup gives you the independence it should, that is worth examining before something goes wrong.
Schedule a consultation or call 833-CONDO-HOA.
Important Disclaimer: This post is for educational purposes only and does not constitute legal, tax, or financial advice. Always consult a qualified attorney and CPA for guidance specific to your community.
