Boards Need Vigilant Accounting More Than Ever in Wake of Saparn Realty
May 13, 2014 — With the condo and co-op world reeling from revelations of the Saparn Realty scandal, in which a top executive in the management firm allegedly stole more than $2 million from dozens of buildings, boards need to wake up. With co-op and condominium expenses and revenues alike higher than ever, the ever-growing amount of money flowing through New York City apartment buildings means temptation is higher than ever as well. Boards have never needed to be more vigilant and aware.
"People think, 'Oh, the managing agent is responsible for everything,'" says Richard Montanye, a certified public accountant (CPA) with Marin & Montanye, "and the reverse is actually true. The board has to stay on top of things." But how?
While the CPA who does your annual audit keeps an eye out for irregularities, says Michael A. Esposito, a partner with Kleiman & Weinshank, it is primarily the board's responsibility to act as the so-called "internal control," preferably every month.
The Big Three
How? By monitoring your money in three different places: the monthly bank statement; your managing agent's monthly management report; and the annual financial report. This means looking at disbursements, receipts and a bank reconciliation to ensure the balance reflected in the manager's report matches the balance reflected in the bank reconciliation.
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If your board feels it needs guidance on a monthly or periodic basis, you can turn to your accountant. For example, if the monthly maintenance amounts are not where they usually are, the board might go to its accountant to get help in rooting out the cause. "It could be a bounced check; it could be that money got deposited in the wrong account," notes Stephen Beer, a CPA with the firm Czarnowski & Beer.
Esposito puts it like this: the auditor gets a bill for a paint job on the ninth-floor hallway — the amount seems legitimate, the bill has the appropriate approvals, and the company is one the building has used before. "It looks good to me, but the board says, 'Wait, we didn't paint the ninth floor.' Think of it this way: If you hired someone to write your personal checkbook, wouldn't you be checking it, too?"
Adapted from "Taking Charge of the Numbers" by Jennifer V. Hughes (Habitat, May 2014)
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Photo by Jacques Beauchamp