Five Critical Fraud Weak Points in Property Management (Part Two)

Wednesday, December 06, 2023

In part one we looked at where departments are vulnerable when it comes to employee fraud.

What are some red flags to watch out for?

There are some signs to be aware of that could indicate the occurrence of fraudulent activity or allow the chance of employee fraud to occur. These signs do not mean that fraud is occurring, but simply that you must be aware and investigate any areas of concern (some tips taken from ‘My Business’ magazine- June 2010- Page 22).

•The employee seems to be living beyond their means and spending ‘big’ on purchases that might otherwise be outside of their financial reach.
• Employee not taking annual leave or keep putting it off.
• They work long hours when there is no need for this to occur (Be aware that most property managers work long hours anyway so this might apply to admin staff).
• They are the sole signatory on the trust account cheques, and also responsible for trust account reconciliations and paying off creditors, receipting etc.
• They might have personal issues such as gambling or have significant debt issues that you (or others) are aware of.
• One person manages all cash/cheque payments and is solely responsible for the banking of cash and cheques.

 Accountability is the key! – Your trusted staff members need accountability and to have checked in place. Where there is mutual and cross-accountability, your staff members will not think that you are suddenly mistrusting them or accusing them of untrustworthy practices.

Creditor Approval and Accountability –
All creditors should be pre-approved by another experienced person in the office (i.e. an office manager or trust account manager, or even the principal), and only approved creditors will be paid. Have a separate person paying creditors and not the person submitting creditor tax invoices for payment.

Interim Receipt Books –
The solution is to have a strict policy in place for just one office interim receipt book and that is only to be used when you cannot directly receipt into the system! The interim receipts are then cross-checked against the computer receipt system to ensure that all interim receipts are accounted for. Strict policies need to be in place as to what interim receipt book is allowed to be used, and even where cash is allowed to be receipted.

No Cash Policy –
Having a ‘No Cash Policy’ means that cash payments to the office are completely discouraged. This means that at the application stage and when a tenant has been approved before they sign up we enforce a no-cash policy.

Cease Rent Payments in Office –
Why not get all payments out of the office altogether and urge EFT or direct credit, or direct debit for payment? It is easy to set up and much simpler for the tenant at the end of the day too so it should not be a ‘hard sell’.

Trust Accounting –
Have more than one person responsible to balance trust monies and do end of monthly checks. This includes having more than one signatory required on trust cheques. The problem comes when just one person oversees several of these processes increased the chance of fraud.

Employee fraud happens when the environment allows for it. Taking some interest, focus on your department and trust account, and putting into place accountability procedures and policies all ensure that you can either substantially reduce your chance of employee fraud from occurring, or even avoid it altogether.

What can you do about employee fraud and reduce the risk of it occurring in your workplace from the suggestions provided?

All the best!

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