HOA Nut House

As reported by Burke Connection March 15-21, 2007

Money Missing
Embezzlement reported by company managing hundreds of homeowners associations.
By Ken Moore
March 15, 2007

A company that manages the finances of more than 300 community homeowners associations in Northern Virginia is operating under court order after some associations discovered that thousands of dollars were missing.
More than $800,000 is involved overall, according to Fairfax County Circuit Court documents.

"KOGER MANAGEMENT experienced some accounting irregularities that were identified by association auditors," wrote president Robert Koger to clients on Jan. 5, 2007, in a document in the court file. "Expect to hear from us, as we work with our independent auditors and with your employed auditors, to determine if you have suffered a loss. Not all associations have had accounting irregularities."
Homeowners associations pay management fees to Koger Management Group, located on Rust Road in Fairfax, to collect assessments from homeowners, maintain individual accounts for associations, and contract services to take care of association common areas.
On Jan. 3, 2007, Koger reported to City of Fairfax Police that embezzlement of company funds occurred between January 2005 and September 2006, and an investigation is ongoing.
Large sums were moved from homeowner association accounts by means of electronic transfer, according to Fairfax City Det. Edward Vaughan.
Later in January, Koger told investigators from Virginia Department of Professional and Occupational Regulation that he had discovered discrepancies in the accounting section of his company, which was controlled by his son, Jeff Koger. Those investigators found that at least $800,000 of community association funds managed by Koger was "unaccounted for and likely were embezzled by a member of KMG’s staff. Moreover, KMG has itself acknowledged that at least this amount, and likely more, will probably be shown to have been misallocated," according to the documents.
Among examples of discrepancies cited by investigators in court documents:
* Pinewood Meadows Condominiums in Chantilly missing $100,000;
* Ashburn Farm Association in Loudoun County with more than $60,000 in discrepancies;
* Pallisades Park Owners Association in Arlington discovered more than $3,500 missing.

KOGER CAME to an agreement with the Virginia Real Estate Board and the Department of Professional and Occupational Regulation that was incorporated into a court order on Feb. 26, 2007.
Koger is required to hire a forensic accountant and an attorney to monitor the investigation, and will cooperate fully, according to the court order. Koger agreed to "pay any and all verified claims arising from misdirected funds," on an ongoing basis.
One part of the agreement stated that the Office of the Attorney General would not issue a press release about the matter.
Koger provides services to 336 community associations with 70,000 members in Virginia, including Arlington, Fairfax, and Loudoun counties, and the City of Alexandria, City of Fairfax and more. A large association can have hundreds of thousands of dollars of assets and funds to manage.
Homeowner and condominium associations deliver services otherwise often provided by local government, including trash pickup, street paving and lighting, snow removal and security, according to the Community Associations Institute, based in Alexandria, in addition to recreational facilities, maintaining common property, and providing a sense of community.
Community Associations nationwide have total operating revenue of more than $41 billion, with investment accounts of more than $35 billion.