Condo Q&A: How can our board of directors protect our building’s funds from fraud?
Q I am under the assumption that any business can be subject to fraud, and condominiums are no exception. Being a brand new condo corporation, the board would like to ensure that we are prepared. How can we prevent fraud in our condo corporation and what action can we take if we do suspect any wrongdoing?
A Although such incidents seem isolated, all corporations should take measures to protect themselves. The act of fraud requires both motivation and opportunity. Board members must implement sound accounting principles to help eliminate opportunity. This would include thoroughly reviewing monthly financial statements, comparing chequebook reconciliations to bank statements, confirming all cheques are signed by at least two board members, refusing to sign blank cheques, monitoring the petty cash fund, and not accepting hand-written receipts for reimbursements. The system of internal control is what either keeps the fraud from taking place or allows it to happen.
Any account should be under the name of the condo corporation. Otherwise, the corporation does not control it — someone else does and can abuse it. One of the key players protecting owners is the condo auditor. He or she will audit the corporation’s financial statements yearly. Unit owners appoint the auditor through a voting process at the annual general meeting.
These are just a few tips to help prevent theft. If anyone suspects mismanagement or fraud, the first step is to obtain the necessary proof. Any condominium unit owner (or his or her agent appointed in writing) is entitled to review the condominium records. If rock-solid evidence of fraud is discovered, the board should contact the police.
Marilyn Lincoln is a condo owner, director