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Wednesday July 24 2024

Avoid cash and Interac transfers to limit the risk of condominium fraud

Although cash is an effective method of payment, it carries a higher risk of misappropriation than other payment methods. This is particularly true when cash is received to pay for items over which control is limited (e.g.: chips, access cards, moving expenses, etc.).

In fact, there is a real risk that the persons receiving the payment will keep it for themselves, rather than recording the income transaction for the condominium corporation and collecting the money in return for this sale. It’s quite possible that this is done “sight unseen”, discreetly.

It’s a minor offence, but when it is carried out repeatedly, it can represent substantial sums of money that are diverted from a syndicate if the scheme is not prevented.

It’s much the same principle that applies to Interac transfers, since the person (e-mail) who receives the payment is the one who determines which bank account to cash it into. Someone could just as easily cash it in their personal account if they wanted to.

Collection in small syndicates

Of course, if you are a member of a small syndicate and you are in charge of collecting the proceeds of sales yourself, there may not be much at stake.

However, in the majority of cases, condominium administrators are volunteers, which means that this task is entrusted to people with little knowledge of their personal morality or financial problems. These factors could potentially lead them to embezzle funds from the syndicate.

Nevertheless, the number of transactions is relatively limited, so the risk of high stakes is also more limited.

Vigilance in large buildings

In larger buildings, a management firm or direct employees of the syndicate will often take on the task of collecting revenues. In this case, vigilance is crucial, as the volume of transactions is higher. As a result, the risk of fraud (intentional misappropriation of the syndicate’s assets) could be greater.

Anyone who realizes how easy it would be to appropriate sums without anyone noticing may be tempted to do so when difficult personal situations arise, such as financial issues following divorce, death, illness in the family, etc., even if the person has “technically” never defrauded in the past.

Limiting the risk of fraud

The best way to avoid fraud is to limit the opportunity.

That’s why it’s a good idea to prohibit cash payments and Interac transfers, and to communicate this policy clearly to your building’s co-owners and residents (click here or on the image below to download the poster “Prohibition of cash payments”).

Today, it is easy to offer many secured payment methods with integrated accounting systems like UpperBee. It is therefore possible to be accommodating to residents, while being cautious to limit the risk of fraud. UpperBee offers pre-authorized payment, bank payment and credit card payment, among others.

A similar process can be set up for move-ins and move-outs.

Implement validation controls

Even if your policy is to prohibit cash and Interac transfers, it’s not impossible for your employees to ignore your policy and accept them anyway. That’s why it’s important to periodically perform a number of validation checks:

Validate the recording of all sales by confirming the inventory change of chips and garage door openers.
Validate the recording of all revenues by comparing them with the number of moves in and out actually took place.

Additional controls

A simple control that can be set up, especially if you live in a large building:

Restrict access to inventory by giving the front desk clerk who does the programming only the inventory he needs for the week, and that he justifies (sheet with allocation) what he has sold before obtaining a number of additional items.
Validate that revenues for the period in question are in line with the number of items technically sold before giving more items to the clerk.
Communicate this article and the poster to all stakeholders to prevent people from being tempted to circumvent the established rules.

By adopting a clear policy on payment methods and implementing adequate validation controls, you can minimize the risk of fraud and protect your condominium’s finances.

» Read: Simplify and secure your co-ownership payments

Elise Beauchesne, CPA, CA, Adm.A
Associate-founder
514-935-6999
[email protected]