CAI-NJ March 2017

FRAUD... from page 30.

has the fiduciary duty to act in the best interest of the association. “Bidding Your Money Adieu“ Situation: The association did not have a set bidding policy, and as a result, for a significant HVAC improve- ment, the in-house property manager had no responsibility to acquire mul- tiple bids for such a large scope of

work. As a result, the manager gave the work to a HVAC Company that he knew quite well for a cost well in excess of the anticipated replacement cost from the association’s replacement study. After the work was complete, the association paid out the vendor in line with their contract. Upon receiving the payment from the association, the HVAC vendor provided a substantial gift to the property manager. How the Fraud was Perpetrated: Lack of a proper bidding policy allowed the property manager to uni- laterally assign a major contract to a vendor without board approval. Clue: When we, as auditors, began to conduct our fieldwork, we noted a major expense which did not appear to have any type of recognition at a board meeting, or other board approv- al before the project took place. Detection Method: As part of the audit procedures we review all the available board minutes and contract related to major projects to ensure that a proper bidding process was followed. Once we noted that the board did not obtain multiple bids for the work, we brought that to the attention of the board. It was not until sometime later that the kickback to the property manager came to light. Recommendation: A system of checks and balances should be in place so one person does not have unilateral control of any aspect of the financial process. In this case, someone else should have been reconciling the account monthly and reviewing any anomalies. Additionally, the entire board should have had access to the reconciliations since the entire board

HML-4337 CAI Dec 2013_1/2 pg vertical 11/22/13 10:48 AM Page 1 control of any aspect of the financial process. In this case, someone else should have been reconciling the account monthly and reviewing any anomalies. Additionally, the entire board should have had access to the reconciliations since the entire board

Keep your Association sharp – in all seasons.

Value–Experience–Quality Being prepared and responsive is what distinguishes our firm. We strive to solve the problem–resolve the issue and make life easier for our Associations and their property managers. Hueston McNulty, P.C. Association General Counsel and Experienced Trial Attorneys Samuel J. McNulty, Esq. smcnulty@huestonmcnulty.com /www.huestonmcnulty.com

Tel: 973-377-0200 / Fax: 973-377-6328 Offices: Florham Park, NJ; Toms River, NJ; Blue Bell, PA; and New York, NY

32

M A R C H , 2 0 1 7