Transcript Heart Choices, not Hard Choices

Barbara (Babbie) Jaco, CPM
Vice President
Boyd Management, Inc.
P O Box 23589
Columbia, SC 29224
“Success is the result of actions,
policies and procedures that
create a culture of doing
business the right way.”
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Busted
pipe
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Drinks at
lunch with
coworkers
Garbage
dumpster
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Background
Checks
Family/Friends
working for
company
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This is a business where you will be
inundated with offers from vendors
to do free things for you.
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Carpet vendor giving bonus checks
to managers
Insurance adjustor offering
chartered fishing trips
Free pest control, lawn care, etc.
Where do I draw the line?
Let’s get a framework to work from:
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Ethics- Realtors and CPM’s have a
code of ethics that is supposed to
lead us through this myriad of
issues. We have a fiduciary
responsibility to many involved in
every deal. I’ve got with me the
IREM/AMO Code of Ethics.
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If I owned this property
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If this was my money
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If this was my home
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In accordance with the management agreement, an
AMO® Firm shall make, or cause to be made, regular
physical inspections of the clients’ properties and shall
keep its client informed as to the condition of the
properties. An AMO® Firm shall competently manage
the properties of its clients with due regard for the
rights, responsibilities and benefits of the tenants,
residents and others lawfully on the property. An
AMO® Firm shall not engage in any conduct that is in
conscious disregard for the safety and health of those
persons lawfully on the premises of the client’s
property.
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Physical inspections
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Keep client informed
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Manage properties with
due regard for rights,
responsibilities and
benefits of tenants and
others lawfully on
premises
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“Shannon Gradick, the apartments’
manager, was arrested Jan. 25 and is
believed to have taken bribes to let
criminals, including convicted felons, move
into Westgate despite federal regulations
prohibiting them from living there. Cpl.
Kurtis Purtee is investigating the case and
said Gradick also took money to send
prospective tenants to the top of the
waiting list for units and cashed checks the
federal government sent to tenants to
cover utility costs.”
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Evicted tenant
arrested for arson
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Damage to property and loss of
reputation
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Site employees
were not
supervised.
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Who checked
the tenant
files?
Who was checking the checker?
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Tenant A moves into property, receives R/A
and only pays $25 monthly rent. Tenant A
moves out, and Tenant B moves into same unit.
Site Manager leaves Cert from Tenant A in the
system, but tells Tenant B they owe $300 in
cash per month for rent. The Site Manager takes
the difference of $275 per month and pockets
this money.
Internal Controls- District Manager should inspect
the property with the rent roll in hand, verifying
actual identity of tenant and how much each tenant
pays in rent.
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Utility Allowance Checks- If tenants move out
or do not pick up their utility allowance checks,
manager will deposit into property’s bank
account and use these funds to aid in kiting to
cover cash that may have been pocketed.
Internal Controls- Accountants must review copies
of deposits; no utility checks should ever be deposited
into the property bank account.
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Falsifying Tenant Certs- manager will falsify the
income on a Tenant Cert, but will not notify
the Tenant. This will cause an overpayment of
rent from Housing Authority for a certain unit,
which will allow the amount of funds available
to be moved around and cover funds that were
pocketed.
Internal Controls- Accountants must review
copies of deposits, including checks from
Housing Authorities covering multiple
tenants.
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Brokering dependents for residents.
Internal Controls- We need a procedure for monitoring
households that report little or no income.
Missing Freon and/or supplies
Internal Controls- Set policies for puchase, storage
and use of equipment. (Freon is $370/jug). Be aware
of other businesses staff could be involved in after
hours.
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Paint Contractor splitting money with staff.
Internal Controls-inspect all work closely. Know the
personal lives of employees.
Inflating bids and taking kickbacks.
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Blank Money Orders- Manager will make
tenant’s blank money orders out to
themselves (or accept cash from tenant) and
use a kiting method to allocate other
tenant’s rent payments to wrong accounts so
as to keep Accounts Receivable balances low
and not raise a red flag.
Internal Controls- Accountants must review copies of
deposits with tenants’ checks to ensure that each tenant’s
check is correctly applied. Be cognizant that managers
will alter the copies of the checks, so if suspicions arise,
request the actual copies of the deposits from the bank.
Check Scanning can help because when a personal check is
used, it is automatically paired with the correct tenant
after the first time, whereas money orders can be applied
to multiple accounts.
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Vacant units- moving new tenants into
vacant units, making them pay cash and
pocketing the money.
Internal Controls- District Manager should have
surprise visits with a current rent roll in hand
and walk vacant units to ensure that they are
indeed vacant.
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Tenant next in line to receive R/A will not get it
because Site Manager doesn’t like him/her. R/A will
be assigned to somebody Site Manager likes, even if
they are not next on the list for R/A.
Internal Controls- Use a software system that aids in the
process of assigning R/A. Assignment of R/A needs to
be monitored by Compliance Department. Especially
look for new move-ins that are quickly assigned R/A.
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Regional Managers must
perform inspections and be
held accountable by upper
management.
Additionally, management
could establish a policy
whereby files were randomly
audited by their home office
such as an auditor in the
Compliance Department.
Desk auditors, per se (not to
be completed by the
Regional Manager).
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Monitor complaints- don’t
dismiss them.
When a property changes
personality, something is
wrong.
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An AMO® Firm shall perform its contractual
duties and maintain company, property, and
client records in accordance with all applicable
regulatory guidelines, contractual obligations,
client objectives and company policies. It shall
not act beyond its contractual scope of
authority as an agent without documented
client approval.
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Maintain company,
property and client records
in accordance with
regulatory guidelines, client
objectives and company
policies.
Do not act beyond
contractual scope of
authority without client
approval.
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RD, USDA, HUD, Home,
Tax Credit, 504, 236,
221D4….
It is our responsibility to
know everything about
these programs.
The owner has his trust
in our hands.
If owner is out of
compliance:
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Investors lose credits
Loss of reputation
Developers blocked from
future development
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Manager moves a tenant in, and quickly discovers
that he/she has made a mistake in qualifying the
tenant; and the tenant is actually ineligible to live in
the apartment. Rather than bringing the mistake
forward to the company, the manager decides to use
White-Out on the paperwork to make the tenant
appear eligible because he/she is afraid to tell the
company about the mistake.
Credits were disallowed and owner was out of compliance
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Internal Controls- Put policies into place
so that employees feel comfortable
bringing mistakes forward rather than
covering them up. Should have a
complete honesty policy.
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What are your training
and compliance policies?
Do you have adequate
staff in your Compliance
Department?
Do we terminate
employees if we lose faith
or trust in their efforts to
maintain compliance?
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What standard are you
holding all employees
to regarding eligibility?
Do you have a no
tolerance policy for
dishonesty?
Open door policy
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An AMO® Firm shall establish and adhere to
sound internal financial controls for
handling all company funds and client funds.
It shall maintain, and update as needed, an
accounting system that complies with
accepted accounting procedures, client
directives and obligations, applicable laws and
regulations and supports company
operations.
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Firm shall establish and
adhere to sound internal
financial controls for
handling all company
funds and client funds.
Do you have methods in
place to prevent theft,
monitor all activities,
keep records, etc.?
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Is a qualified person in
charge of your
accounting
department?
There are many
creative ways to steal…
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Accounting Department
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Writing manual checks
that bypass the computer
software.
Adding the employee’s
name to the payee line
after being approved by
authorized signer.
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Accountant then
booked the fraudulent
check to vacancy loss in
the prior month to hide
from financial
statement reviewer.
The timing of booking
this was after the
reviewer had checked
off on the statement.
Internal Controls- Restrict accountant’s access to manual checks,
request copies of checks to be included in bank statements.
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Payroll
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Who is balancing the
payroll account?
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Can the payroll
manager prepare payroll
checks, manual checks
and balance records?
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Payroll manager can
alter the routing
number of a terminated
employee and route an
additional payroll check
to payroll manager’s
personal account.
The confusion of being
paid in current can work
to payroll manager’s
advantage in such cases.
Internal Controls- Independent accountant performs bank
reconciliations and reviews checks being written. Signer of checks to pay
special attention to voided or manual payroll checks.
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Employees setting up false vendors in A/P
system.
Internal Controls- Executives should vet all
vendors and supervisors should meet all
laborers.
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Relationships between employees can lead to
financial schemes.
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Hiring a sub to do work.
Collecting money when staff did work on the
time clock.
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Pursuant to the terms of the
management agreement, an AMO®
Firm shall use reasonable efforts to
provide accurate, auditable financial
and business records and
documentation concerning each asset
managed for the client, which records
shall be available for inspection by the
client at all reasonable times. An
AMO® Firm shall furnish to the client,
at mutually agreed upon intervals,
regular reports concerning the client’s
assets under management. An AMO®
Firm shall not exaggerate,
misrepresent, or conceal material facts
concerning the client’s assets or any
related transactions.
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Firms shall use reasonable
efforts to provide
accurate, auditable
financial and business
records.
Firm shall not exaggerate,
misrepresent or conceal
material facts concerning
a client’s assets or any
related transactions.
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Keeping our clients
informed of material
facts that can or may
effect his/her assets.
Banking decisions, clear
record keeping, etc.
Cannot intermingle
funds.
These decisions are made
at the top level of the
corporation.
Internal Controls- Owners need to be involved in and ask
questions of their management agent.
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An AMO® Firm shall at all times serve as a
fiduciary for the client and shall not commingle
personal or company funds with the funds of a
client or use one client’s funds for the benefit of
another client, but shall keep the client’s funds
in a fiduciary account in an insured financial
institution or as otherwise directed in writing by
the client. An AMO® Firm shall at all times
exert due diligence for the maintenance and
protection of the client’s funds against all
reasonably foreseeable contingencies and losses.
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Shall not commingle
personal or company
funds with the funds of
a client or use one
client’s funds for the
benefit of another.
Protect the client’s
funds against all
reasonably foreseeable
contingencies and
losses.
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Head of non-profit, head
of many civic
organizations, leader in
the community, well
liked, family man.
First, he audited her work
and then became
comfortable.
 Two years later,
$500,000 is missing and
Had friendly relationship with there is only insurance
coverage for $30,000
accountant.
worth of funds.
 He committed suicide.
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Internal Controls- Auditing. Auditing even your most trusted
employee. Everyone needs accountability. Avoid working
relationships where possible. Review your insurance policies and be
sure you have appropriate risk levels insured.
As Ronald Reagan said, “Trust but verify.”
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An AMO® Firm shall not make, authorize or
otherwise encourage any false or misleading
comments concerning the practices of Members of
the Institute of Real Estate Management and other
real estate management professionals. An AMO®
Firm shall truthfully represent material facts in their
professional activities. An AMO® Firm shall not
exaggerate or misrepresent the services offered as
compared with the services offered by other real estate
management companies. Nothing in this Code,
however, shall restrict legal and reasonable business
competition by and among real estate management
companies.
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Firm shall not make,
authorize, or otherwise
encourage any false or
misleading comments
concerning the practices
of members of IREM.
IS IT THE TRUTH?
IS IT FAIR TO ALL
CONCERNED?
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Do not misrepresent or
exaggerate facts.
You can steal from
your company by
stealing their
reputation.
Complaints should go
upstream only.
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An AMO® Firm shall not represent personal
or business interests divergent from or
conflicting with those of the client and shall
not accept, directly or indirectly, any
material rebates, gifts, fees, commissions,
discounts, or other benefits, monetary or
otherwise, which could reasonably be seen as
a conflict with the interests of the client,
employer, or firm, and which are not
disclosed to the client.
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Giving family/friends
contracts and not fairly
putting out to bid.
Receiving kick backs
from vendors, free work
at your home, bonuses
from vendors for
purchases.
Our industry is blasted
with this from vendors
and you have to take a
strong stand.
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Do not accept anything free.
Don’t go to
lunch, dinner,
or on trips with
vendors.
Its hard to have a
disagreement and/or
fire a vendor when
you’ve been on a
hunting trip with
them.
Internal Controls- Establish company policies preventing such
behavior and making it a terminating offense. Contracts
should be awarded by an executive of the firm that has vetted
the vendors and works to constantly expand the company’s
vendor base.
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An AMO® Firm shall not disclose to a third
party any confidential or proprietary
information without the client’s prior
written consent except when disclosure is
required or compelled by applicable laws and
regulations.
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Firm shall not
disclose to a third
party any
confidential or
proprietary
information
without the client’s
prior written
consent.
In other words,
you keep your
mouth closed.
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Many of us are located
in small communities
and our business is on
the street.
Don’t let you be the
one to talk.
Remind your
employees of this
often.
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An AMO® Firm shall be established in
compliance with all applicable laws and
regulations. An AMO® Firm and its
employees shall at all times conduct business
activities with knowledge of and in
compliance with all applicable laws and
regulations.
Shall be
established in
compliance with
all applicable
regulations.
This business is
ever changing and
evolving.
We used to move
a tenant into a
unit with a check
stub.
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Now, most of us
have a file of 30
documents to
complete prior to
determining
eligibility.
Keep up with continuing
education and invest in your
employees through training
and constant education.
Internal Controls- Agency reviews, self evaluation.
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An AMO® Firm shall not deny equal employment
opportunity or equal professional services to any
person for reasons of race, color, religion, sex,
familial status, national origin, age, sexual
orientation, or handicap and shall comply with all
applicable laws and regulations regarding equal
opportunity.
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Shall not deny equal
employment
opportunity or
professional services to
any person for reasons
of any of the protected
classes.
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Teach fair housing over
and over again.
Discrimination
happens, whether an
employee means to do
it or not.
Internal Controls- Mystery shopping reports. Know your
employees; know their attitudes.
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The interpretation of compliance with this Code is the
responsibility of the ethics boards of the Institute of Real
Estate Management. Any violation by an AMO® Firm of
the obligations of this Code and any disciplinary action or
violation of any portion of this Code shall be determined
and carried out in accordance with and pursuant to the
terms of the Bylaws and Statement of Policies of the
Institute of Real Estate Management. The result of such
disciplinary actions shall be final and binding upon the
affected AMO® Firm and without recourse to the Institute,
its officers, Governing Councilors, Members, employees, or
agents.
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Hire firms with an excellent reputation and a
license that is in good standing.
“Success is the result of actions,
policies and procedures that
create a culture of doing
business the right way.”