Legislative Requirements for Disclosure
Condominium managers have a legal duty to disclose any potential influence they may have in financial transactions. This ensures transparency, prevents conflicts of interest, and protects the condominium corporation from financial mismanagement.
The Real Estate Act Rules states an industry member must not engage in conduct that undermines public confidence in the industry, harms the integrity of the industry, or brings the industry into disrepute. This means that condominium managers must fully disclose any personal or financial interests in transactions and ensure that their actions do not compromise the trust of the condominium corporation.
Best Practices for Notifying the Board of Potential Conflicts
When Should Disclosure Occur?
A condominium manager should disclose potential influence when:
Recommending a vendor, service provider, or contractor with whom they have a personal or financial relationship.
Overseeing financial transactions where they have decision-making authority.
Receiving gifts, commissions, or incentives from suppliers or contractors.
How Should Disclosure Occur?
Written Disclosure: Provide a written statement outlining the nature of the relationship or interest.
Verbal Notification: Inform the board during a meeting before any decisions are made.
Board Acknowledgment: Obtain written confirmation from the board that the disclosure was received and reviewed.
Documenting Disclosures in Board Minutes and Financial Reports
Proper documentation ensures accountability and compliance with Alberta’s Real Estate Act Rules.
How to Document a Disclosure in Board Minutes
Clearly state the nature of the potential influence.
Include a statement from the condominium manager outlining the disclosure.
Record the board’s decision on whether to proceed with the transaction.
Note any steps taken to ensure transparency, such as obtaining multiple bids or seeking independent advice.
How to Document a Disclosure in Financial Reports
Clearly indicate transactions where the manager has disclosed a relationship with the vendor.
Include a separate section for disclosed conflicts of interest.
Ensure financial statements reflect board-approved transactions.
Implementing an Internal Compliance Process to Manage Transparency
To maintain transparency and prevent ethical violations, condominium corporations should establish a compliance process for managing financial disclosures.
Compliance Checklist for Condominium Managers
1. Pre-Transaction Review
Identify any potential conflicts of interest before engaging in a transaction.
Notify the board in writing if any conflict exists.
Ensure all vendor selection processes are competitive and unbiased.
2. Board Disclosure and Documentation
Provide full written disclosure to the board.
Ensure the disclosure is recorded in board minutes.
Seek approval from the board before proceeding with the transaction.
3. Financial Reporting and Oversight
Include a section in financial reports detailing any disclosed transactions.
Ensure that financial statements and expense records are auditable and transparent.
Conduct internal audits to verify compliance with disclosure requirements.
4. Ongoing Compliance Monitoring
Train condominium managers on ethical financial practices.
Establish a policy for disclosing conflicts of interest.
Regularly review RECA guidelines and legal requirements.
