Combating Condo Fraud

September 2014 (Revised March 2017)

Condo directors are responsible for the healthy management of their corporations.

Condo corporations can manage millions of dollars per year plus substantial reserve fund balances. These balances are enticing targets for swindlers attempting to obtain some portion of these funds. Should the funds be compromised through fraud or misuse, all condo owners suffer.

Financial management, possibly the most important duty that directors owe to the owners of a condominium, requires a level of expertise that may not exist with a volunteer condo board. Fortunately, condo boards can obtain assistance by working with capable service providers.

“Condo corporation clients at times do not understand the risks involved with large condo corporation accounts and the security procedures recommended to them. For convenience, some condo corporations prefer to circumvent security features thereby increasing their financial risk.”

Carlos Soeiro

There are ways to combat condo fraud. Implementation of procedures and controls to ensure that condo funds are not disbursed without sufficient due diligence is important. This aspect of management is frequently neglected by those who lack experience in this area.

Assistance with financial controls may be available through the financial institution that provides banking services. The banks are good at protecting financial assets and have developed procedures to protect their clients.

Toronto Condo News spoke with Carlos Soeiro, Branch Manager of Scotiabank in the Yonge North Corridor, about how to protect against condo fraud. Mr. Soeiro provides the following suggestions:

Require documentation before money is distributed. Vendors should submit invoices for payment. Invoices should be reviewed for accuracy before submission for approval and payment. Require that monies in all forms be documented before distribution.

Document petty cash disbursements. Cash is often necessary for smaller and/or immediate purchases. It may be practical to maintain a small amount of cash on hand, perhaps $100. Petty cash disbursements should be documented when disbursed. Invoices for purchases should be retained.

Require a minimum of two signatures per cheque. When payment is made by cheque, require that at least two directors be signatories. Prior to signing, each director should match the cheque amount and payee to a submitted invoice. Requiring two signatures on a cheque makes it harder to perpetuate a fraud.

Utilize purchase orders. Purchase orders are used to manage purchases of products and services from suppliers. Properly used, purchase orders protect against payment of invoices for work which has not been approved including overpayment.

Provide Controlled Account Access. Not every director or employee in the management office requires access to bank accounts or funds. This access should be tightly controlled with fewer being better. Scotiabank offers a Delegate Card that provides highly controlled access to funds and accounts. Each authorized individual on a condo corporation account is issued a card which must be used when accessing the account for any purpose. The card contains identifying information for the individual and their level of access. Some individuals may have authority to withdraw funds. Others may only be able to make deposits or check account balances. Any Delegate Card which does not match the cardholder is treated as a security breach.

For information on Scotiabank’s accounts for condominium corporations, contact Prajwal Joshy at (416) 590-7328 or Zahra Rafiq at (416) 590-0721.