Co-ops and condo boards contend with fraud

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“Fraud is an ever present risk,” said attorney and certified fraud examiner Kenneth Citarella in this Habitat Magazine video. He and accountant Mindy Eisenberg Stark, also a certified fraud examiner, outlined ways that co-op and condominium boards can become victims of fraud and some measures they can take to protect themselves. There is vendor fraud, where workers are fictitious, Stark said, or bona fide workers may overstate expenses and submit vouchers for work they did not do, Citarella noted. There is also bidding fraud as well as accounting fraud. One thing a building should do to use a checks and balances system is have separate accountants for the management company and the board. Boards need to keep in mind that an audit is meant “to state whether financial documents are fairly stated,” Stark said, not find fraud, although an audit is done “with an eye toward whether fraud could exist in the environment.” When faced with signs of fraud, Citarella said, the board should consult the homeowners about whether to proceed. “It’s their money,” after all, he added.