Fund / Syndication Checks and Balances

[Dani Beit-Or]

I'm looking to partner with a builder to raise funds for a syndication holding long-term rentals. We've worked through most of the financial aspects, built in buffers, and taken a cautious approach.

One key priority is setting up checks and balances to reduce the risk of fraud, especially when it comes to handling funds. I want to make sure there are multiple layers of oversight to prevent issues caused by a bad actor or rogue employee.

Here are some ideas I have so far, but I’m looking for more:

1. Two signatures required for checks over $1,000 – Does the bank actually enforce this? And what happens with electronic payments (Zelle, wire, ACH, etc.)?
2. I hold the account in my name and grant them access – Would this create any liability for me?
3. Legal agreements – Of course, I’ll have an attorney draft and review them, but I want to come prepared with ideas to strengthen protections.

What other safeguards or ideas do you suggest?

[Chris Seveney]

Quote from @Dani Beit-Or:

I'm looking to partner with a builder to raise funds for a syndication holding long-term rentals. We've worked through most of the financial aspects, built in buffers, and taken a cautious approach.

One key priority is setting up checks and balances to reduce the risk of fraud, especially when it comes to handling funds. I want to make sure there are multiple layers of oversight to prevent issues caused by a bad actor or rogue employee.

Here are some ideas I have so far, but I’m looking for more:

1. Two signatures required for checks over $1,000 – Does the bank actually enforce this? And what happens with electronic payments (Zelle, wire, ACH, etc.)?
2. I hold the account in my name and grant them access – Would this create any liability for me?
3. Legal agreements – Of course, I’ll have an attorney draft and review them, but I want to come prepared with ideas to strengthen protections.

What other safeguards or ideas do you suggest?

 I think you are looking at this wrong. What systems you should put in place are a two approver system. I am not sure who is still writing checks today, but most companies are paying online. I would set up a system like what we have with chase which our auditors audit - we have one individual who puts in the invoice for approval and another person who approves it. We also have locks in place to stop journal entries from occurring as well as monthly financial reviews.

The biggest area of fraud is typically in overbilling - for example the contractor charges you $20k for a job that could be done for $10k

We recently looked to partner with a contractor on some projects and we got 3 quotes on a project one quote at 71k, one at 74k and there quote at $105k...