Fraud can strike just about any community association – even one that is professionally managed – regardless of how small or large the community may be. A good property management company will have the proper checks and balances and other security measures in place to help reduce the risk of fraudulent activity.
How do you know if a management firm has taken those precautions? Here are ways to tell whether a company has what it takes to protect your community.
1. The company has strong internal controls. Internal controls consist of systems and processes that a management company implements to protect your association’s money, prevent or deter fraud and quickly uncover fraudulent activity if it should happen.
2. The company has the necessary resources. Resources must be available to protect your community’s finances from fraud. Verify whether the company provides your association with a web-based platform where residents can make online payments to reduce the risk of check fraud. Be sure the company’s in-house IT Department can provide robust security to protect financial and personal data.
A company with substantial resources will also be able to offer much-needed financial training to its associates and to your community board members. Taking advantage of training courses offered by your management company will help your board become more financially savvy so your association is less vulnerable to fraud.
3. The company demonstrates a desire to be accountable, transparent and secure. The primary way that a company ensures accountability is by undergoing an annual financial audit by a third-party CPA. Make sure that the management company you work with is willing to disclose a range of financial activities. It should periodically conduct its own audits (in addition to the annual audit by a CPA) to ensure that it is complying with local laws and appropriately protecting the data and assets of each community it manages.
4. The company maintains insurance to protect you from employee fraud. What would happen if a management company employee stole some money from your association? No community wants to think about how it would cope in such a situation.
If your management company is really looking out for your best interest, internal controls will be set in place to ensure you never have to worry if such an event were to occur. It will have enough insurance coverage to reimburse your community for any losses you may have incurred at the hands of one of its employees.
“You may not be able to prevent fraud 100 percent of the time”, said Bill Worrall, vice president, FirstService Residential.” “However, you can certainly reduce your risks by working with a professional management company that is vigilant about protecting your community and has the knowledge and resources to make it happen.”
For more information on mitigating fraud in your community, contact Bill Worrall at bill.worrall@fsresidential.com.
