Fraud: Make Sure the Board Is Drinking Their Morning Coffee

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Jane woke up early on a Sunday morning and decided she was going to get as many errands done as possible to prepare for the upcoming vacation. She decides to look for the forms to renew her passport. She starts her coffee brewing and sleepily googles “passport renewal” and clicks on the first link. It looks like a government website (It has the mini Canadian flag in the corner and appears professional) and it indicates that she can apply online. She types her personal information into the form. It asks for banking information so they can charge her directly from the website. Submit. 

Fraud 3Jane goes to the kitchen and drinks her first cup of coffee. She gets a weird feeling that something was not quite right about her passport renewal experience. She revisits the website later that day and discovers that it was a scam. The rest of her Sunday, and the days following, were occupied with calls to visa, calls to the credit bureau and filling out fraud reports. 

Jane was caught without her morning coffee. 

Condominium owners and boards can similarly “be caught without their morning coffee”. The consequences can be time consuming and financially costly.  A condominium is unlikely to recover all their losses and it will, ultimately, be the unit owners who pay, through special assessments or increased monthly fees, as the corporation needs to continue to function. 

There are many controls and procedures that can be put into place to help prevent your condominium from being a victim of fraud. Fraud 2(1)

1. Take the board election process seriously. If possible, attend meetings to elect members of the board rather than signing proxy forms. Ask yourself, “would I hire this person to manage my money?” Current board members should ensure that future candidates satisfy bylaw, Condominium Authority of Ontario, and Condominium Act of Ontario requirements. https://www.condoauthorityontario.ca/en-US/condominium-living/governance/

2. Each candidate applying to the board should provide a synopsis of why they want to be a board member and what skills they will contribute to the board. 

3. When the board has been elected, they should, ideally, meet monthly to review financial statements, bank reconciliations, expense registers (comparing actual expenditures and questioning why they may vary from the budget), accounts receivable, and accounts payable listings.

4. For major expenditures and contracts, the board should review 2 to 3 quotes and approve the quote that best serves the interest of the condominium owners. If there is a conflict of interest, between a board member (or a property manager) and a vendor, this should be disclosed, and the individual should not be included in the approval process. 

5. The board members should be reviewing invoices regularly to ensure that they have approved the work to be done and that the invoice has the correct condominium name, date and amount. The board should only sign cheques after reviewing the invoices. They should never sign a blank cheque. https://www.youtube.com/watch?v=qvNMpFdnAwY 

6. Eliminate or minimize the receipt of cash. If there is no way to avoid accepting cash (for example laundry income), then separate cash handling duties by including an impartial third party. 

7. Segregate duties between the cheque preparer and the one who signs the cheques. There should be two signatures on each cheque with at least one being from a member of the board.

8. Employ a reputable condominium management company who is registered with the Condominium Management Authority of Ontario (CMRAO) and has received ACMO 2000 certification.

9. Review the corporation’s insurance coverage. The condominium may want to investigate purchasing theft insurance which may help to minimize loss in the event of fraud. https://tocondonews.com/archives/how-not-to-lose-400000/

10. Unit owners should be encouraged to ask the auditor and board questions if there are items or procedures that do not seem right. https://tocondonews.com/archives/condo-fraud-red-flags/

According to the Canadian Anti-Fraud Centre (https://antifraudcentre-centreantifraude.ca/index-eng.htm), there were 13,032 victims of fraud in Canada from January 1, 2020 to June 30, 2020 with a cost of $51 million.

When provided with the following three circumstances even reasonable individuals can rationalize fraud: opportunity, justification and need. Strong, consistent controls and careful oversight from the board can help to minimize the opportunity for fraud or errors. 

The unit owners are responsible for electing appropriate board members. Board members in turn are responsible for governing the financial well-being of the condominium. They need to remain alert and vigilant, putting procedures in place, and ensuring they are followed, to protect their community from susceptibility to fraud. 



At RLB, People and Condos Count!

Jennie Buerkle, CPA, CGA

Senior Accountant




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