Introduction This training covers the internal control policies and - - PowerPoint PPT Presentation

Policies & Procedures Training

CUSHMAN & WAKEFIELD

2017 INTERNAL CONTROLS TRAINING FOR PROPERTY MANAGEMENT

Introduction

This training covers the internal control policies and procedures that property managers must follow starting January 1, 2017. The internal control policies and procedures included in this training apply to all Asset Services Property Management personnel working on any assignment. The internal control policies and procedures contained in this training have been created using the Asset Services Policies & Procedures Manual. Please refer to this Manual for additional details for a specific topic. If you have questions, please contact your City Lead, TQC or Compliance.

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AGENDA

• Exceptions to Policy
• Cash Receipts & Accounts Receivable
• Lease Administration & Billing
• Accounts Payable & Disbursements
• Client Financial Reporting
• Purchasing & Bidding
• Payroll & Employee Timesheets

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EXCEPTIONS TO POLICY

Exceptions to the internal control policies and procedures contained herein are allowed in the following circumstances:

• Client-specific requirements in management agreement
• Written client policies and procedures that differ from the Manual
• Accounting system limitations (i.e. owner software)
• Distressed assets may have additional limitations due to the

nature of their legal status, ownership, or financial hardships ***Exceptions to policies and procedures should be documented in writing and maintained with client's files by either the Accountant or Property Manager***

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Cash Receipts & Accounts Receivable

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CASH RECEIPTS What’s Changing?

• Applying cash receipts to the tenant’s account must be performed “within a reasonable

amount of time,” which is generally defined as five business days. (LDTZ & LCW)

• Checks not received through a lock box must be deposited within 24 hours of receipt of the
• check. (LCW)
• Receipts entered by an Onsite Property Admin must be posted by an Accountant. (LCW)

Cash Receipts

• Cash receipts processed by an Onsite Property Admin should be entered / applied to the

tenant’s account in the accounting system within a reasonable amount of time, which is generally defined as within 5 business days of receipt. However, extenuating circumstances will be considered for cash applications outside of this timeframe.

• If the Property Management office receives a physical check, it should sent to the lockbox,

scanned for deposit, or sent to the Accountant within 24 hours of check receipt, as applicable.

• If cash receipts are entered into the accounting system by Onsite Property Admin, a copy of

deposit summary is sent to the Accountant, who will review and post cash receipts.

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ACCOUNTS RECEIVABLE AGING What’s Changing?

• No significant changes in 2017.

Accounts Receivable Aging

• Property Manager is responsible for monitoring of Accounts Receivable Aging Report

throughout the month.

• The Property Manager either generates the Accounts Receivable Aging Report or receives a

copy from the Accountant.

• Property Manager reviews and approves the Aging Report each month via signoff on the SOC

1 Checklist.

• Review consists of:

– Verify tenant receipts have been collected and posted in a timely manner and as expected. – Review for amounts considered uncollectible, including longstanding aged amounts or known uncollectible amounts.

Accounts Receivable Reconciliation

• On a monthly basis, Accountant reconciles the Accounts Receivable Aging Report to the

general ledger accounts receivable balance.

• Any differences are investigated with the Property Manager.

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BANK RECONCILIATIONS What’s Changing?

• Property Manager reviews and approves bank reconciliation on a monthly basis. (LCW)

Bank Reconciliation

• Bank accounts must be reconciled and approved monthly prior to the delivery of the

monthly reports to the client.

• Property Manager reviews and approves the bank reconciliation on a monthly basis and

documents approval via signoff on the SOC 1 Checklist: – Verify that the bank reconciliation and copy of the bank statement has been included with the monthly financial reporting package. – Bank balance and general ledger balance on the bank reconciliation agree to the related balance from the bank statement and general ledger, respectively. – Inquire with Accountant and resolve outstanding deposits over 30 days old. – Inquire with Accountant and resolve outstanding checks over 60 days old.

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Lease Administration & Billing

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LEASE ABSTRACTING What’s Changing?

• Transitions & Quality Control (TQC) abstracts and activates leases for new property assignments

in CT / CW Yardi. (LCW)

• Property Manager abstracts leases for existing assignments, and the Yardi PM Support Desk

activates leases for existing assignments. (LCW)

• Lease abstracting is not a SOC 1 control for 2017. (LCW)

New Assignments in CT / CW Yardi

• TQC coordinates with the Property Manager to obtain prior rent roll and available lease

documentation and abstracts lease information directly into applicable Yardi. – Property Manager may also abstract lease based on time constraints or at the direction of TQC.

• TQC also activates lease in applicable Yardi.

Existing Assignments in CT / CW Yardi

• Property Manager or designated Property Management staff abstracts lease directly into

applicable Yardi.

• Yardi PM Support Desk verifies the abstracted information in applicable Yardi and activates lease.

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LEASE ABSTRACTING CONTINUED Client Software

• Property Manager abstracts lease information directly into Client accounting software if he / she

has the necessary access rights.

• If Property Manager does not have appropriate access, he or she abstracts the lease and

provides a lease abstract report to the Accountant (or other designated individual with appropriate access).

• Accountant (or other designated individual with appropriate access) enters the lease information

into the Client accounting software.

• Lease is activated according to client policy.

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INITIAL RENT ROLL What’s Changing?

• For new leases or amendments, Property Manager must compare the initial rent roll to

lease information. (LDTZ & LCW)

• Property Manager documents this control on the monthly SOC 1 checklist. (LDTZ & LCW)

Initial Rent Roll

• Property Manager or designated Property Management staff compares the initial rent roll to

lease information for new leases or amendments.

• Acceptable lease documentation may include executed lease, lease abstract, prior

management company’s rent roll, draft copy of the lease, or other available documentation.

• Property Manager reviews the following when comparing lease information:

– Base rent and rent steps – Square footage – CAM / operating expense amounts (where applicable) – Start / stop dates of lease

• Property Manager must complete this review during the first month where C&W is

responsible for billing activities

• If designated Property Management staff compare the initial rent roll to the lease

information, designated staff must provide adequate supporting documentation of this review, and such supporting documentation must be maintained in the property’s file documentation.

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MONTHLY CHARGES What’s Changing?

• Property Manager approves the rent roll (rather than the Commercial Billing Report or

equivalent) on a monthly basis. (LCW)

• Accountant reconciles the approved rent roll to the Commercial Billing Report or equivalent
• n a monthly basis. (LCW)

Monthly Charges

• Prior to the monthly billing, Property Manager reviews / approves the monthly rent roll and

provides to Accountant and, if applicable, to the BPO.

• Accountant or BPO generates the monthly charges in the accounting system.
• Accountant reviews the rent roll and posts the monthly charges in the accounting system

and generates statements for each tenant.

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BILLING ADJUSTMENTS AND SUNDRY CHARGES What’s Changing?

• Property Manager approves and provides billing adjustment & sundry charges to the BPO,

if used, and Accountant. (LDTZ & LCW)

Billing Adjustments & Sundry Charges

• Property Manager approves all billing adjustments and sundry charges prior to posting.
• Property Manager must provide all relevant supporting documentation for billing

adjustments and sundry charges to the Accountant, Onsite Admin, or BPO.

• Accountant, Onsite Admin, or BPO enters the billing adjustment or sundry charge into the

accounting system.

• Accountant reviews the billing adjustment or sundry charge for proper supporting

documentation and posts in the accounting system.

• Property Manager, Onsite Admin, and BPO are prohibited from posting billing adjustments

and sundry charges in the accounting system.

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SECURITY DEPOSITS

What’s Changing?

• Property Manager, City Lead, and Client must approve security deposit adjustments or refunds.

(LCW)

• Security Deposit Adjustment / Refund Form must be used to document security deposit

adjustments and refunds. (LCW)

Security Deposits

• For security deposit refunds or adjustments, Property Manager reviews the lease to ensure

compliance with terms of lease.

• When a refund or adjustment is necessary, the Property manager completes a Security Deposit

Adjustment / Refund form, which must be approved by the following before entry into the accounting system: – Property Manager – City Lead – If over $5,000, client or designated asset manager

• Accountant enters / posts entries in the accounting system to adjust / clear the security deposit

and processes payment to the tenant or applies the deposit to the tenant’s accounts receivable balance.

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ACCOUNTS RECEIVABLE WRITE-OFFS What’s Changing?

• City Lead and Client must approve all Accounts Receivable Write-Offs (in addition to the

Property Manager). (LCW)

• Accounts Receivable Write-Off Form must be used to document write-offs. (LCW)

Accounts Receivable Write-Offs

• Property Manager determines accounts receivable is uncollectible; determination requires

review of all lease documentation, security deposit information, property management agreement, and client guidelines to ensure compliance with all terms related to uncollectible receivables.

• Property Manager completes the Accounts Receivable Write-Off Form then obtains and

documents on the form the following approvals: – Property Manager – City Lead – Client or designated asset manager

• Property Manager provides approved Accounts Receivable Write-Off Form and relevant

supporting documentation to Accountant.

• Accountant enters and posts the write-off in the accounting system and makes any

necessary adjustments per client write-off guidelines.

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RECOVERABLE EXPENSES / CAM – ESTIMATED BILLINGS What’s Changing?

• No significant changes to the estimated recoverable expense / CAM billings for 2017.

Estimated Billings

• Property Manager calculates recoverable expense estimates (CAM) for billing to tenants

each month.

• CAM estimates are based on one of the following:

– Approved budget – As stated in tenant’s lease – Prior year’s actual CAM expenses, which must be updated once the prior year reconciliation has been completed

• Property Manager approves CAM estimates on a monthly basis via monthly rent roll

approval process.

• Accountant enters and posts CAM charges in the accounting system.

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RECOVERABLE EXPENSE / CAM – YEAR-END TRUE UP

What’s Changing?

• Property Manager reconciles estimated / actual recoverable expenses (CAM Reconciliation)
• n an annual basis. (LCW)
• Property Manager, Accountant, and a Senior Approver complete the Annual CAM Checklist.

(LCW)

CAM Year-End True Up

• Property Manager completes the CAM Reconciliation by the due date in the lease or within 120

days of the property’s calendar or fiscal year-end.

• CAM Reconciliation is completed within the accounting system or using excel spreadsheet as

applicable. – Accountant or Accounting Manager may assist with the CAM Reconciliation if discussed / agreed to with Client Accounting management.

• Annual CAM Checklist is completed to document review/approval of the CAM reconciliation by:

– Property Manager (Note – Accountant sends paper Checklist to 3rd party Property Managers) – Senior Approver (Senior Property Manager or Accounting Manager or above) – Accountant

• Property Manager submits the CAM reconciliation to the Accountant.
• Accountant reviews CAM reconciliation for proper approvals and enters/posts the CAM charges in

the accounting system.

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Accounts Payable & Disbursements

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VENDOR ADDITIONS What’s Changing?

• No significant changes for 2017 – follow legacy firm process.

LDTZ Process

• New vendors are submitted by an individual from Property Management on a New Vendor

Request Form through SharePoint.

• Data Governance performs due diligence checks on all new vendors.
• Data Governance adds vendors to CT Yardi or forwards the vendor information to a

designated individual for client software.

LCW Process

• New vendor requests are submitted by individual from Property Management through

Vendor Entry System (VES).

• VES automatically routes request for approvals.
• Due diligence checks are performed for all new vendors.
• VES automatically adds vendors to CW Yardi or the vendor information is sent to a

designated individual to add for client software.

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INVOICE APPROVAL What’s Changing?

• No significant changes for 2017 – follow legacy firm process

LDTZ / Nexus Process

• Invoices and any supporting documentation are scanned into Nexus.
• Nexus automatically routes invoice for approval based on a pre-approved workflow.

– Assistant Property Manager can only approve invoices up to $500. – Property Manager can approve any invoice.

• Accountant reviews invoices and supporting documentation in Nexus and releases invoices

for payment.

• For properties not using Nexus for invoice approval, Property Manager shall send approved

invoices and support directly to the Accountant. Approval must be evidenced in the email or signed/initialed directly on the invoice.

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INVOICE APPROVAL LCW Process

• All invoices must be approved by a Property Manager prior to disbursement processing.
• Property Management staff (Property Manager, Assistant Property Manager, Onsite Admin,

Property Coordinator) scans invoices and related approval into Capture and also enters relevant invoice information into Capture.

• Accountant reviews invoice image and submitted information in Capture for accuracy,

including Property Manager approval.

• For Client software, a designated individual with the appropriate access manually enters

approved invoices into the accounting system to create the accounts payables batch.

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Client Financial Reporting

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FINANCIAL REPORTING PACKAGE What’s Changing?

• No significant changes for 2017 – Property Manager should prepare client reports as

normal.

Financial Reporting Package

• The financial reporting package sent to the client is defined based on the Management

Agreement.

• Variations are permitted based on the relationship and/or history with the client.
• Clients may also request customized or alternate formats of standard report as applicable.
• Financial reporting package should generally be reviewed and provided to the client by the due

date as stipulated in the management agreement or other client-approved due date. – Delays in meeting the due date should be communicated to the client.

• Standard reports may include:

– Balance Sheet – Income Statement – Trial Balance – General Ledger Detail Report – Budget Comparison Report – Variance Analysis – Rent Roll – Accounts Receivable Aging – Check Register – Expense Distribution Report – Accounts Payable Aging – Security Deposit Report – Bank Reconciliation – Client-Specific Reports

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FINANCIAL REPORTING PACKAGE REVIEW / APPROVAL What’s Changing?

• Property Manager must review the General Ledger Detail Report and Budget Comparison

Report (or equivalent reports) as part of the preliminary review of the monthly financial reports (LCW)

• Property Manager electronically completes monthly SOC 1 Checklists through SharePoint.

(LCW)

Financial Reporting Package Review / Approval

The following steps are performed in the financial reporting package review / approval process:

• Once all known entries and accruals are posted, Accountant prepares and reviews the preliminary

financial reporting package. – Preliminary financial reporting package includes the General Ledger Detail Report and the Budget Comparison Report.

• Property Manager reviews the preliminary financial reporting package and provides additional

monthly accruals or reclasses to the Accountant.

• Property Manager documents and explains budget variances in accordance with client tolerances.
• Accountant provides final financial reporting package to Property Manager for review / approval.
• Property Manager prepares client-specific reports (eg. executive summary)
• Property Manager reviews / approves the final reporting package, which is provided to the client

by Property Manager or Accountant as applicable.

• Property Manager completes monthly SOC 1 checklist in SharePoint.

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ANNUAL BUDGET What’s Changing?

• Property Manager prepares the annual budget. (LCW)

Annual Budget

• Property Manager prepares the annual operating and capital budget.
• The budget format and timing is generally dictated by the client.
• After all phases of the budget are completed, Property Manager approves the final budget

package and provides a copy to the Accountant.

• Client approval of the budget is obtained in accordance with the Management Agreement.

– Documentation of the client’s approval of the budget is maintained with the monthly close documentation.

• Property Manager or Accountant enters the budget into the appropriate accounting system.

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JOURNAL ENTRIES / GENERAL LEDGER DETAIL REPORT What’s Changing?

• Property Manager reviews journal entry information on a monthly basis by reviewing the

General Ledger Detail Report. (LCW)

Journal Entries / General Ledger Detail Report

• Property Managers must provide adequate supporting documentation to the Accountant for

any journal entries provided.

• Accountant provides a copy of the General Ledger Detail Report on a monthly basis to the

Property Manager for review and approval.

• Property Manager documents review / approval on the monthly SOC 1 Checklist. Property

Manager reviews for the following: – Transactions have been posted to the correct general ledger account. – All entries and accrual transactions have been posted. – Transactions that appear unusual or outside of expectations are communicated to the accountant for follow-up and resolution.

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MONTHLY OPERATING EXPENSE ACCRUALS What’s Changing?

• If applicable for the property, Accountant prepares Accrual Schedule on a monthly basis

and submits to Property Manager with the monthly reporting package. (LDTZ and LCW)

• Property Manager reviews the Accrual Schedule and documents review on the monthly

SOC 1 Checklist. (LCW)

Monthly Operating Expense Accruals

• Accountant enters and posts operating expense accruals in the accounting system.
• Accountant coordinates with the Property Manager to ensure that all accruals have been

posted for the month.

• As part of the monthly reporting process, Accountant prepares an Accrual Schedule of all

the operating expense accruals posted for the month.

• Accountant provides the Accrual Schedule to the Property Manager with the monthly

reporting package.

• Property Manager reviews the Accrual Schedule and documents the review on the monthly

SOC 1 Checklist.

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MONTHLY SOC 1 CHECKLIST What’s Changing?

• Monthly SOC 1 Checklists are delivered automatically via email through SharePoint.

(LCW)

• Property Manager electronically completes monthly SOC 1 Checklist. (LCW)

Monthly SOC 1 Checklist

• Property Manager SOC 1 Checklists are automatically delivered via email through

SharePoint.

• Property Manager completes the SOC 1 Checklist electronically each month.
• For property assignments with third-party Property Managers, Accountant provides a

manual copy of the SOC 1 Checklist to the Property Manager via email each month. – Property Manager submits the completed Checklist to the Accountant who reviews the manual Checklist for completeness and accuracy.

• By completing the SOC 1 Checklist, Property Manager is attesting and certifying that all

applicable tasks have been completed.

• The automated SOC 1 Checklist system provides automatic overdue notifications to

Property Managers who have not submitted their respective Checklists.

• City Leaders are notified on a bimonthly basis of incomplete checklists.

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STRAIGHT-LINE RENT What’s Changing?

• Assistant Accounting Manager or above must approve the straight-line rent calculation

each month. (LDTZ & LCW)

• Property Managers are not involved in reviewing and approving the straight-line rent
• calculation. (LDTZ & LCW)

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OWNER DISTRIBUTIONS Owner Distributions

• Accountant calculates owner distributions and obtains approval of the calculation from the

Property Manager or Accounting Manager or above.

• If approval is obtained from Property Manager, Accountant sends the calculation to the Property

Manager who approves via email or manual signature.

What’s Changing?

• Property Manager or Accounting Manager or above must approve owner distribution

calculations prior to payment. (LDTZ and LCW)

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MANAGEMENT FEES AND CALCULATION What’s Changing?

• Property Manager or Assistant Accounting Manager or above approve the management

fee or calculation on a monthly basis. (LDTZ and LCW)

Management Fee Calculation

• On a monthly basis, Accountant calculates management fee in accordance with the

management agreement or prepares a flat fee invoice template.

• Management fee or calculation must be reviewed and approved by the Property Manager or

an Assistant Accounting Manager or above.

• Property Manager should communicate any management agreement updates to Client

Accounting as needed for the calculation of the management fee.

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Purchasing & Bidding

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PURCHASE ORDERS What’s Changing?

• Purchase Orders are no longer required for operating expense purchases. (LCW)
• Purchase Order templates containing terms and conditions should not be used. (LCW)

Purchase Orders

• Purchase Orders may only be used:

– In conjunction with a current, fully executed contract when services are provided or a service provider is present on the property. – For the purchase of supplies (light bulbs, HVAC filters, tools, etc.)

• Purchase Orders may not be used as a stand-alone document when services are provided.
• Purchase Orders containing terms and conditions must not be used as they will conflict with

the service contract prepared by Cushman & Wakefield Legal.

• Purchase Orders should be used if specifically required by the management agreement.

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SERVICE CONTRACTS What’s Changing?

• Service Contracts must be executed prior to any vendor or service provider coming onto

the property to perform work. (LCW)

Service Contracts

• Property Manager must obtain service contracts prior to any vendor or service provider

performing work on a C&W managed property regardless of the frequency, scope, or cost associated with the service.

• Service Contracts are required for both one-time services and recurring services.
• Refer to the Service Contract Policy Manual for full details on Service Contract

requirements.

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COMPETITIVE BIDDING What’s Changing?

• Competitive Bidding compliance is not a tested SOC 1 control in 2017. (LCW)
• Former LCW Bidding requirements are no longer applicable for Asset Services. (LCW)

Competitive Bidding

• Property Manager should obtain competitive bids for the purchase of goods or services in

excess of $2,500 unless alternate bidding procedures are required by the management agreement.

• When obtaining competitive bids, the following principles apply:

– Competitive bidding should be performed every 3 years for a good or service. – A minimum of 2 competitive bids must be obtained, but 3 competitive bids are recommended. – Written bids are preferred over verbal bids, but both are acceptable; if verbal bids are

• btained, the verbal bid details for each vendor must be documented and maintained

with the Property Management files.

• Bidding is not required when:

– Client requests use of a specific vendor. – Only one vendor for a good or service is available. – Recent competitive bid not exceeding three years old has been obtained.

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Payroll and Employee Timesheets

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EMPLOYEE TIMESHEETS (LCW ONLY) What’s Changing?

• No significant changes in process for 2017 – follow legacy firm process.
• Not tested in 2017 for SOC 1 purposes. (LCW)

Employee Timesheets

• Hourly employees complete manual timesheets on a weekly basis and submit to Property

Manager or other designated supervisor.

• Property Manager or other designated supervisor reviews the employee hours and

completes a Payroll Transmittal Form with all hourly employees’ time for the pay period.

• Property Manager or other designated supervisor submits the Payroll Transmittal Form to

Corporate Payroll for processing.

• Submission of Payroll Transmittal Form to Corporate Payroll documents the Property

Manager’s / Supervisor’s approval of the time submitted by employees.

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PAYROLL REGISTERS (LCW ONLY) What’s Changing?

• No significant changes in process for 2017 – follow legacy firm process.
• Not tested in 2017 for SOC 1 purposes. (LCW)

Payroll Registers

• C&W Corporate Payroll provides copies of managed building payroll registers to the

Property Manager or other designated individuals as appropriate.

• Property Manager or designated individual reviews payroll register for the following:

– Hours paid agree to hours submitted to C&W Payroll – Employees listed are accurate and associated with the property – Reasonableness of the total dollar amount paid

• Review must be documented by sign off of payroll register, approval of payroll invoice that

details employee’s hours paid, or other evidence of review.