As we reported several times in these pages, reports and investigations have found that Miami-Dade has recorded the highest number of complaints of irregularities and fraud in the administration of condos of any county in Florida.

Now, in response to a grand jury report that concluded, “The Florida state agency that regulates condominium associations does not work to protect the tens of thousands who live in condos, resulting in extensive fraud, mismanagement and conflicts of interest, among the boards and management companies that govern them,” it seems that the Florida legislature is finally taking action.

In an effort that has drawn unanimous bi-partisan support, the House and the Senate recently passed a bill that would criminalize, “unethical behavior” by condo boards. The legislation was also designed to provide more transparency by giving condo owners more access to financial records. The Bill now goes to Gov. Rick Scott for his signature. If approved, it would go into effect July 1st. Speaking to the Miami Herald, Hialeah Republican Sen. René Garca, said, “This is very important for Miami-Dade because it’s something that condo owners have been waiting for nearly a decade.” Garca co-sponsored the bill with Miami Democrat José Javier Rodríguez. He added while the bill was largely in response to the rampant condo fraud and abuse in Miami-Dade, “the reforms will help all Florida residents with similar problems.”

Under the new law, “fraud in the election of condo association directors, the falsification of signatures on ballots, the manipulation of condo records and/or the theft or disappearance of ballots” will be considered criminal violations that could result in prison terms.

While most condo boards do their best to conduct themselves ethically and honorably, those who have abused their positions, and run their associations like “mini-dictatorships,” are put on notice to beware the new law!

How to Avoid Fraud and Condo Board Misconduct

With so many complaints of fraud, and at the same time, so many new condos being built, it is incumbent on all condominium owners to take action to protect themselves, and ensure “best practices” by their boards.

Every association should have a written policy for when and how to have a periodic assessment and/or review of all internal controls. Other examples of “best practices” would be to:

  • Establish proper purchase authorization procedures.
  • Create and maintain an “approved vendor” list.
  • Insist on competitive bidding for all projects and major purchases.
  • Require two check signers, with guidelines for all purchases.
  • Require bank lock boxes for maintenance payments.
  • Provide detailed procedures for all payroll approvals.
  • Implement a detailed “conflict of interest policy,” as well as an “anti-kickback policy,” to be signed by all Board members.
  • Insist upon monthly or quarterly accounting reports, which should include balance sheets, statement of revenues and expenses, and a cash basis statement of receipts and expenditures, and all bank reconciliations.

How MBAF Can Help

At MBAF, we have conducted many audits of condo associations regarding their practices and procedures. We can help you to implement and maintain the anti-fraud and misconduct policies as outlined above so you do not inadvertently run afoul of the new law.

Audits and Accounting of Condominium Associations and their practices are a highly specialized segment of the industry and should not be performed by a firm without the proper experience. If you would like to benefit from our expertise in these areas, or if you have further questions on this Advisory, do not hesitate to contact our Condominium and Associations Specialists, or call us at 1-800-239-1474.