Fraud prevention tips for condo boards

March is Fraud Prevention Month and the Real Estate Council of Alberta is sharing the following tips for both professionally and self-managed corporations to help avoid falling victim to fraud.

Is the manager licensed with RECA?

At the present time, not all managers are required to be licensed in Alberta. However, this is allegedly coming down the pipe. In the meantime, a search of the Brokerage or the individual manager can be conducted on the Real Estate Council of Alberta website at https://reports.myreca.ca/publicsearch.aspx. Both brokerages and induvial with Licenses are held to higher standards. For example, brokerages have period Audits completed to ensure their practices maintain a high-level standard.

Proactive Board of Directors

Board members are encouraged to pay attention to accounting details. This should prevent most fraudsters from committing crimes; or at least limit the scale of fraudulent schemes.

Maintain cheques and balances of the financials: Always have more than one set of board member eyes look over the monthly financials. Ensure all financial packages have copies of the invoices to back up all expenses and watch to ensure that the purchase details match the financial reports. Does the vendor name match the name on the cheque? Do the amounts match? Do the payment dates align?

The monthly financial preparations should be completed in a consistent and timely fashion following the end of each month. If they are not, seek clear answers. Professional management companies typically require 2-3 weeks to prepare and circulate the packages to condo boards.

Keep the reserve account and the operating account strictly separated. Never co-mingle these funds with each other, nor with any individual’s funds.

Other financial items to watch for:

Balances exceeding budgeted amounts

Multiple payments to a vendor that was only supposed to be a one-time transaction

Delays in bank deposits

Duplicate payments

A petty cash fund that keeps disappearing

Accounts payable and accounts receivable are out of balance

Someone gets defensive when asked for a report from the accounting/bookkeeping software your association uses

Services paid for but not performed

Name accounts properly: Always keep bank accounts in the name of the association itself, never an individual’s name.

Require multiple signatures on cheques: It is a good idea to require two signatures on all cheques.

Keep bank records updated: Update signature cards on file at your bank every time there’s a staff or board member change. Do it within a day so there is no chance an ousted member can sneak some checks through before you get around to the change.

Switch Treasurers and/or Bookkeepers from time to time: Rotating responsibility prevents an embezzler from monopolizing control.

Investigate late vendor payments: If the association is going to be late with a payment, the board should know about it before it happens. Staff should never take the board by surprise.

Require accounting and bookkeeping staff to take occasional vacations: Banks often require employees to take one or two consecutive weeks off each year, because embezzlers need to maintain a constant presence to prevent detection.

Encourage Automatic Deposits: Encourage automatic payment of condo fees and other payments as much as possible. The fewer people walking into the property management office or Board office handing money orders to staff, the less opportunity there is for fraud or attempts to ‘float’ the incoming rent payments.

Annual Year-End Financials: Hire a third party (bookkeeper or accountant) to conduct the annual review or audit of the financials.

To learn more about the Real Estate Council of Alberta, you can visit their website at reca.ca