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Fraudulent activity from employees can occur in a number of ways and have severe financial implications for multifamily owners and managers. To stay ahead of the game, you must analyze your policies and procedures, have more than one person watching the books and keep your eyes open for any red flags such as dramatic changes in behavior by employees. Unfortunately, even under careful watch, things can still go awry.

Ascent was contacted recently by a property owner who suspected one of his managers of theft. When the manager was away from the property, two assistant managers discovered a number of inconsistencies in the resident payment records including excessive “Loss to Lease” numbers. Knowing that “Loss to Lease” numbers should always fall between the average market rent and the amount which the apartments were leasing, these entries caught their attention. They informed the property manager of their suspicion.

He confronted the employee upon her return and she did admit to pocketing $1,800 of company funds. Not convinced that this was the full extent of her activity, he contacted Ascent Multifamily Accounting to inquire about an official financial examination of the property’s accounts. We were happy to help. Our services include:

• Identifying, Analyzing and Interpreting relevant data
• Evolving procedures as the engagement process progresses to fit each unique case
• Providing recommendations to guide staff on how to prevent similar issues in the future
• Presenting our findings in an objective and unbiased manner

The owner hired Ascent to conduct a complete financial examination and we sent one of our consultants who has a long history of investigating employee fraud to assess the situation. Her previous experience led her to develop tools to help her catch fraud quickly.  Just prior to this assignment, she acquired a property and found fraudulent activity with the use of money orders and prepaid balances within just two months.

When arriving at the office in question, she tracked each individual user and their activity on the property’s sophisticated software, “One-Site Leasing and Rents by Real Page.” It was discovered that the employee in question had been adjusting and transferring funds in the system in a number of ways including:

• Accepting money orders as a form of payment and noting concessions in the system, thus pocketing the difference.
• Changing rent charges to a lesser amount than billed by One-Site at the beginning of the month
• Reversing rent charges completely
• Using “administrative write-offs” of rent and other charges
• Applying security deposits to ledgers for rent payments
• Covering missing resident payments by applying “pre-paid rent”

In fact, the employee had been stealing in increasing increments for the past three years. In the first year $6,185 was taken, the second year, $13,757, the third, $33,810 and one month into the fourth year $3,937 had already been stolen before Ascent began the investigation.

With more than $57,000 in losses, he owner decided to press criminal charges against the now former employee. Our Ascent consultant created a thorough presentation showcasing the undeniable evidence of theft by the employee which was used for prosecution. Consequently, the employee pleaded guilty and was court-ordered to repay the restitution in full and will serve a combination of jail time and parole.

As a result of Ascent’s thorough investigation, the property owner identified glitches within their policies that were enabling employees to participate in fraudulent behavior.

Our client was thrilled with the results of the financial examination and told us that he was certain the success of the prosecution was due to the “beautiful and professional” presentation put together by Ascent’s representative. He stated that he appreciated our help at such a hard time.

Quick Tips for Catching Fraudulent Activity:

• Always review concession reports and ensure they match move-in specials.
• Review “Loss to Lease” numbers and be sure the number isn’t increasing and increasing.
• Check for waived fees to see if they have been collected, but not posted.
• Assess any rent charges that have been changed to a lesser amount than billed at the beginning of the month.
• Be on the lookout for any reversed rent charges noted in your system.
• Encourage your employees to tell you.  Employees are the number one source to catch the cheats.  Many times they are on the fence whether they should say something.  A little encouragement might get them to inform you.

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