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Estate authority, or co-mingle funds across properties. Without independent oversight, such as periodic reconciliations, surprise audits, and transparent vendor bidding, these activities can continue undetected for years, quietly eroding the financial health of a property.
Building strong defenses
While no organization can eliminate fraud risk entirely, a thoughtful and layered control environment greatly reduces the likelihood of problems. One of the most important practices is separating financial duties so no single person controls the entire chain of fundraising, accounting, and payments. Checks and balances are essential, even for firms with modest staff sizes.
Oversight should also extend to governance. Developers who raise outside capital should consider creating independent boards or advisory committees with financial expertise, along with regular reporting and audits. Due diligence is equally critical when working with vendors and subcontractors. Thorough background checks, reference verification, and careful monitoring for red flags, such as frequent switching of subcontractors or unexplained markups, should be part of the onboarding process. Requiring lien waivers, proof of insurance, and bonding provides added protection.
Modern accounting platforms also make it easier to monitor expenses through data analytics. Trends, variances, and anomalies can be flagged quickly, allowing organizations to investigate unusual activity before it spirals. Surprise audits and reconciliations are another powerful deterrent. Random reviews of petty cash, bank accounts, invoice approvals, or warehouse inventories send a clear message that no one is exempt from oversight.
Equally important is creating a culture of integrity. Employees and subcontractors often notice irregularities before outsiders do. When they feel safe to report concerns, whether through anonymous hotlines or direct communication, they become an invaluable early-warning system. Building a culture where transparency and accountability are non-negotiable makes fraud much
harder to conceal.
Why vigilance matters
The cost of inaction is steep. A failed project can lead to far more than financial loss. It damages stakeholder trust, tarnishes reputations, invites regulatory scrutiny, and can jeopardize future financing. Even small residential projects are not immune. Oversight gaps and layers of subcontracting can provide ample opportunity for misconduct if controls are not in place.
The strongest builders and developers are those who prepare for the possibility of fraud rather than assuming it could never happen to them. Designing organizations where fraud has no place to hide is an investment in the long-term success of every project. Vigilance does not mean paranoia; it means building with accountability, clarity, and trust as firmly as you lay foundations. ■
Tim Ball and Nancy Cox www. bonadio. com
Tim Ball is Partner at The Bonadio Group and Nancy Cox is Industry Leader, Construction & Real Estate. The Bonadio Group is a nationally ranked IPA Top 40 CPA firm providing assurance, tax, and advisory and consulting services to clients both within and outside of the US. The firm maintains several offices across the country, with team members operating globally. Its expert team of industry-leading professionals serve as trusted advisors to clients of all sizes, helping businesses and organizations reach their short- and long-term goals.
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