Article Courtesy of The Sun Sentinel
By Daniel Vasquez
Published December 17, 2010
As a property manager, Grace Cushman Cromwell had the power to write checks from bank accounts of two South Florida condominium communities. And police say she wrote herself dozens of checks, allegedly stealing more than $2 million from the condos.
Cromwell was arrested last week by local police after working for a decade as a property manager at the Melbourne House Condominium and The Park Place Condominium, both in Palm Beach. Between 2006 and this year, according to police reports, Cromwell deposited association funds into personal accounts and used the money to pay for clothing, children's clothing, veterinarian visits and medical bills.
Cromwell and her attorney could not be reached for comment despite several attempts by phone.
Cromwell was charged with grand theft over $100,000, organized scheme to defraud, aggravated white collar crime and making false entries in books of corporations, police records show.
Experts say the case offers a frightening example of what could go wrong when a condo association or HOA hires the wrong property manager or outside property management company. It also highlights how careful condo and homeowners associations must be when it comes to allowing access to bank accounts.
Don't count on Florida law alone. The help it offers is limited.
For instance, state law requires a community association manager license of anyone paid to manage a condo of 10 or more units or with an annual budget of $100,000. Police say Cromwell's CAM licensed expired in September 2002. The law also requires annual audits from condo associations with revenue of $400,000 or more.
"My first piece of advice to any board, regardless of condo and HOA statutes, is get an annual audit by a CPA or other independent professional," said Bill Worrall, vice president at The Continental Group, the state's largest property management company with offices in Orlando, Fort Lauderdale and Boca Raton.
"The risk is always there that someone could siphon or embezzle money from your association, and you mitigate that risk by having your financial records reviewed each year by an independent professional," Worrall said. "Instead of catching a problem that lasts years and costs your association millions of dollars, you catch it sooner."
Whether your association manages its own books via volunteer board members or hires someone, recommendations include:
Check your insurance. Make sure your property management company is properly insured against theft claims. Worrall suggests insuring for the amount equal to the annual revenue amount plus cash receipts in the bank. So a community with an annual budget of $400,000 with $100,000 in reserves should make sure the management company is insured for at least $500,000. Self-managed communities should consider insurance that would cover theft or embezzlement by a board member.
Look over bank accounts. No single person should have the power to write a check, Worrall says. At least two signatures should be required for a system of checks and balances. Board members should also check bank account signatory cards each year to make sure the proper board members are listed. In some cases, board membership changes and owners who are no longer serving still possess check signing powers.
Daniel Vasquez can be reached at condocolumn@sunsentinel.com or 954-356-4219 or 561-243-6686. His condo column runs Wednesdays in Your Money and at sunsentinel.com/condos. Check out Daniel's Condos & HOAs blog for news, information and tips related to life in community associations at www.sunsentinel.com/condoblog. You can also read his consumer column Mondays in Your Money and at www.sunsentinel.com/vasquez.
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