Segregation of duties is one of the most effective fraud prevention mechanisms in any financial environment. In strata management, it is essential for protecting trust funds and maintaining operational integrity.
Legislation outlines the role of a strata manager, but it does not prescribe the internal controls an agency must implement. That responsibility sits with the business. A strong governance framework ensures that no single person can manipulate an entire financial process and that every step is independently reviewed.
This resource outlines the essential controls every strata management agency should implement to safeguard trust funds and strengthen accountability.
Segregation of Duties Matters
Fraud does not succeed because someone is sophisticated. It succeeds because systems are weak, controls are not enforced, and oversight becomes passive instead of active.
Segregation of duties ensures that:
- No one person can initiate, approve, and process a transaction
- High risk functions are separated
- Independent checks occur at every stage
- Errors and anomalies are detected early
When responsibilities are clearly separated, the opportunity for misuse of authority is significantly reduced.
The Risks When Duties Are Not Separated
Weak internal controls create an environment where fraud can thrive. Common vulnerabilities include:
- One person controlling too many steps
- Passive or symbolic oversight
- Rushed approvals due to workload pressure
- Unverified supplier details or vague invoices
- Lack of written audit trails
- Committees relying on trust instead of verification
These weaknesses are preventable when responsibilities are deliberately structured and consistently enforced.
A Model Governance Framework for Strata Agencies
A strong governance framework assigns responsibilities with intention. Each role has a defined scope, and no role has end to end control over financial transactions.
Administration Team
- Load invoices into the system.
- Maintain a clear trail of invoice origin.
- Verify supplier details when required.
- Create new suppliers but cannot update bank details.
- Ensure all new suppliers have a valid ABN.
- Escalate suppliers without an ABN to a Committee Member or Head of Department.
Strata Manager
- Ensure non routine invoices are supported by a work order.
- Review all invoices thoroughly before approval. Rushed approvals increased the risk of errors and missed red flags.
- Verify correct scheme, supplier, and bank details.
- Conduct timely invoice reviews to avoid rushed approvals.
- Validate owner reimbursement claims with receipts and tax invoices.
- Escalate high value reimbursements to a Committee Member.
- Query vague or unclear invoices directly with suppliers.
- Maintain all communication in writing to preserve audit trails.
Trust Accountant
- Upload payment files into the bank but does not authorize payments.
- Update supplier bank details.
- Verify high value transactions by phoning suppliers.
- Conduct regular internal checks to ensure data integrity.
- Remain independent from operational decision making.
Head of Department
- Authorize payments after the Trust Accountant uploads the file.
- Co approve changes to supplier bank details.
- Approve suppliers without ABNs.
- Conduct spot checks on high value transactions.
- Provide an additional layer of oversight for significant payments.
Strata Company (Optional but Recommended)
- Set a high value threshold requiring Committee approval
- Review and approve significant invoices or reimbursements
- Provide independent oversight for major expenditures
This structure ensures that no single person can create a supplier, approve an invoice, update bank details, and process a payment. Each step requires a different set of eyes, which is how fraud is prevented.
Controls That Strengthen Financial Integrity
Strong governance is built on consistent, enforceable controls. Key measures include:
- Mandatory written communication for all approvals and queries
- Independent verification of supplier details
- High value thresholds requiring additional approval
- Strict control over bank detail changes
- Regular internal audits and spot checks
- Monthly financial reporting to committees
- Clear documentation and supporting evidence for every transaction
These controls reduce risk, increase transparency, and ensure accountability across the organization.
What Good Governance Looks Like
Good governance is not paperwork. It is behavior, culture, and discipline. A well governed strata agency demonstrates:
- Segregation of duties across all financial processes
- Mandatory supporting documentation for every transaction
- Active committee oversight rather than passive review
- Regular internal audits to detect issues early
- Transparent communication with owners and committees
- Clear internal policies and trained staff who understand their responsibilities
When these elements are in place, trust funds are protected, risks are reduced, and the agency operates with confidence and integrity.
Conclusion
Segregation of duties is not optional. It is the foundation of financial governance in strata management. Agencies that implement strong internal controls protect their clients, their reputation, and their business.
This resource provides a practical framework for designing and enforcing those controls. When every role is clearly defined and every step is independently reviewed, fraud becomes significantly harder and trust becomes significantly stronger.
