In part one of our two-part series on fraud prevention, we looked at what your association board could do to help protect your community from fraudulent activity. In part two, we share four key ways you can tell whether a management company has what it takes to protect your community.
The best of intentions won’t protect your community’s finances from fraud. Resources must be available to make those intentions a reality. For example, to successfully segregate financial duties, a management company will need to have employees available to staff separate payables, receivables and record-keeping departments.
Also, verify whether the company provides your association with a web-based platform where residents can make online payments (among other things) to reduce the risk of check fraud. Be sure the company’s in-house information technology (IT) department can provide robust security for that platform as well. Cyber attacks are a growing problem, even for small organizations like associations, so don’t underestimate the importance of cyber security in protecting 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. “It’s not unusual for board members to not understand financials,” says Ahrensdorf. “But if you don’t know what you’re looking at, you’re not likely to act on it.” 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.
The primary way that a company ensures accountability is by undergoing an annual financial audit by a third-party certified public accountant (CPA). Public companies must get audited every year and make their financial information available to the public.
Private or public, 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.