This is perhaps an unfair question to ask
given that this type of crime is committed without your
knowledge. However, there may be some of you reading this
article that have already been stung by superintendent
fraud and have vowed to never let it happen again. For
those of you that are now wondering if some of your apartments
are being rented without your knowledge and/or you are
paying for fictitious expenses, there are steps to reduce
the risk and cost of superintendent fraud. However, taking
those steps really depends on you.
The first step is to acknowledge that fraud
is an intentional crime and does not occur by random chance.
Given this, you do have a degree of control in reducing
and/or preventing fraud. This control arises only after
you have identified the parts of your business that may
be susceptible to fraud and then taking action. After
all, the successful dishonest superintendents will misuse
his/her’s authority to exploit the weaknesses in
your business.
Realizing that prospective superintendents will not include
criminal activities on their resumes, it is not easy to
be sure that the person you have hired will commit fraud
or not. However, at the time you are considering someone
to work for you, it may be a valuable investment of your
time and money to carefully check the background of the
individual. Certainly obtaining reference checks from
past employers is a good start but you may also want to
consider obtaining criminal and credit reports to get
a fuller understanding of the individual’s background
and potentially save you from the future grief of fraud.
Once you have hired someone to be your superintendent,
the next step is to recognize some of the common motivations
behind employee fraud and how it might be concealed. While
there are variety reasons why an employee will commit
fraud, there are three common ones that may motivate your
superintendent: (1) supporting an affluent lifestyle,
(2) supporting an addiction (drugs, alcohol, gambling)
and (3) relief from significant financial debt. Behind
each of these reasons, it may not very hard to identify
some the visible behaviours that a superintendent may
exhibit, such as driving expensive cars, constantly talking
about his/her’s high stakes betting, and receiving
calls from angry creditors at work.
Should you become aware of similar situations, you might
ask yourself two questions: Is the superintendent able
to afford the lifestyle, addiction or debt given his/her’s
salary or wages? Does the superintendent have access/control
to the employer’s assets? If the answers are ‘yes’
to both questions, you may want to consider reviewing
the superintendent’s work activities to identify
any questionable discrepancies.
Concealing fraud from you usually requires a certain degree
of effort on the part of the superintendent. To ensure
that others do not discover the theft a dishonest superintendent
may not take his/her annual vacation, may routinely ‘misplace’
important paperwork, or may provide you with a pattern
innocent excuses for not doing a specific job responsibility
that is further backed up with false promises to improve.
Property owners should exercise a degree of caution by
investigating all of the facts first and not leap to any
conclusions. Just because your superintendent’s
action or behaviour is raising a ‘red flag’
to you, it does not necessarily mean that fraud was committed.
It is quite possible that the superintendent may be able
to afford these activities through alternative and legitimate
means, such as family wealth or a recent inheritance.
While assessing the individual important, you also should
focus your attention on your business and how it operates.
Specifically, you may want to consider identifying the
areas of your business that are most vulnerable. For example,
a building owner that operates on a cash basis with little
or no record keeping may be more susceptible to superintendent
fraud than another building owner having rigorous reporting
requirements for cash transactions.
To identify the areas of opportunity, a property owner
may find it useful to evaluate its business from the perspective
of a potential dishonest superintendent. Some questions
that a dishonest superintendent may or may not consciously
ask himself/herself are: If I (the superintendent) am
responsible and in control for managing a building, what
money or assets can be taken? How, when, and where can
the money or assets be taken? How can the theft be concealed?
are: If I (the superintendent) am responsible and in control
for managing a building, what money or assets can be taken?
How, when, and where can the money or assets be taken?
How can the theft be concealed?
Once you have identified the vulnerable aspects of your
business, you can then take steps to reduce or eliminate
the opportunity to commit fraud. For example, you may
randomly, yet regularly, visit your buildings to confirm
that vacant apartments are in fact vacant and have not
been secretly rented out by the superintendent. Another
example is that you could require that all of your business
cheques must be signed by two people instead one, thus
a single person is not in sole control of making payments.
The risk of superintendent fraud can certainly be reduced,
however, it is difficult to eliminate. Whether it is a
single large theft or small numerous thefts over time,
a strongly motivated superintendent may try to exploit
what little opportunity is available. To offset these
potential losses, property owners can purchase insurance,
called employee dishonesty coverage, and is available
from many Canadian insurance companies. In 2002 and 2001,
insured organizations received approximately $44 million
and $47 million respectively under their employee dishonesty
coverage.
To inquiry or obtain employee dishonesty coverage and
risk management strategies, I recommend that you contact
your insurance broker for more information and assistance.
Steve Muxlow
Aviva Insurance Company of Canada
