It’s likely that the trustees outsource the management of the scheme to a managing agent, which means that other parties have access to the body corporate’s bank accounts. Every now and again, stories appear in the media of a managing agent who has made off with body corporate funds – sometimes hundreds of thousands or millions of rands.
Theft and fraud cannot be prevented, but, if the trustees did a proper due diligence before they contracted with a managing agent, there is no reason why the owners should have to suffer loss. If you’re buying into a scheme that has a managing agent, how do you know your money will be safe?
A managing agent that collects and/or receives levies is deemed to be an estate agent, and as such, must be a member of the Estate Agency Affairs Board (EAAB). In fact, it is unlawful for someone who is not an EAAB member to collect a scheme’s money. EAAB membership means that the body corporate’s funds that are held in a trust account will be protected by the EAAB fidelity fund. The disadvantage of the EAAB fidelity fund is that a claim can proceed only once the people who stole the money have been sequestrated – and it could take as long as seven years for a claim to be finalised. Therefore, you should make sure that the managing agent has taken out its own fidelity insurance that covers every employee who handles scheme money. Better still, a managing agent that has confirmed it has professional indemnity and fidelity cover is a lower risk for a body corporate.
You should also check whether the managing agency operates a “bucket account”. Under such a system, the funds of all the schemes the agency manages are in one account, instead of each body corporate having a separate bank account in its own name. A dedicated account makes it much easier for the trustees to keep a check on inflows and outflows. With a bucket account, the trustees depend on reports from the managing agent as to the body corporate’s financial affairs.
The bucket account system is quite common. You should find out what measures the trustees have put in place to exercise control and supervision of the body corporate’s money.
Trustees and employees of the body corporate can filch scheme money, too. Most sectional title insurance policies include cover against fraud and theft by trustees and scheme employees, but the limit is usually quite low (about R50 000). The trustees should put indemnity insurance on the agenda of the AGM; but it is the responsibility of the body corporate to decide whether or not to take out such insurance and, if it does, the extent of that cover.
Source – https://www.iol.co.za/personal-finance/sectional-title-all-the-ins-and-outs-1858044