EisnerAmper Digital Assessments for Real Estate, Hospitality, and Construction Companies

Fraud Risk Assessment

Purpose: To identify where your organization is most vulnerable to fraud.

Fraud Risk in Real Estate: The largest fraud risks associated with real estate are phantom tenants/guests (for hotels/hospitality), common area maintenance (“CAM”) and real estate tax escalations (“RE Esc”).

Management companies may report revenue from tenants that do not exist.  Conversely, there may be tenants who are occupying spaces who are paying property managers “under the table” to stay in spaces that should be leased out to actual tenants.  The same concept could apply for hospitality, where front desk managers receive cash to rent out rooms to guests that are not reserved through the hotel system.

CAM and RE Esc are operating expenses and real estate taxes of the property that are billed back to tenants for commercial buildings. The landlord could potentially bill back tenants excessively for expenses and real estate taxes by increasing the overall expenses, or not adhering to the correct percentage/apportionment stated in the leases, among other scenarios.

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FiR$T Look Assessment

Purpose: To provide you with a checklist of where your current IT gaps are, as well as identify areas of potential financial impact based on your current cybersecurity posture.

Cybersecurity in Real Estate: For hotels and rental property managers, protecting tenant information is paramount. The personally identifiable information, or PII, gathered from managing tenants and guests and the buying/selling of properties comes with its own set of privacy risks and concerns. Hackers are well aware of the “gold mine” of data kept by these individuals and organizations, and constantly scour for poorly safeguarded systems (like they did with Marriott in 2018). In response to this, numerous states have implemented laws requiring data security practices for PII as they know this information could be damaging if fallen in the wrong hands. Cyber-risk assessments and penetration tests help uncover gaps or issues with an organization’s IT structure and could prevent potential breaches.

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CFIUS Risk and Readiness Assessments

Purpose: The pre-transaction risk assessment looks into both the foreign real estate and hospitality investors and the target U.S. business to provide an assessment of potential national security risks. The purpose of this assessment is to assist management and counsel in determining if a filing with CFIUS is required, or if additional consideration on the transaction is needed.

CFIUS Assessments in Real Estate: CFIUS, the Committee of Foreign Investment in the United States, is the multi-agency government body tasked with reviewing business transactions involving a foreign entity that could pose a potential threat to the national security. In 2018, they received the ability to review real estate transactions that do not involve a U.S business. Prior to their expanded authority, CFIUS could only review real estate investments that involved foreign investment in a U.S. business. While their reviewing power is expanded, they can only call a transaction into question if the property is near sensitive U.S. locations like airports, military posts, etc. That said, CFIUS does have the authority to review transactions at any time, even if consummated, and unwind them.

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Digital Assessments and Process Automation Workshop

Purpose: The Digital Assessment and Process Automation Workshop identifies the systems or processes that cause headaches in your industry and require an unnecessary amount of manual labor. After uncovering those pain points, our team offers suggestions for what processes can be accelerated through automation or improved by leveraging technology solutions.

Digital Assessments and Process Automation Workshop in Real Estate: Streamlining processes and manual work helps free up your team’s time for higher value projects. Real estate companies can rely on automation to process proposals and deal signings, enhance marketing, put real time data analysis and deal information into your team’s hands, manage projects more efficiently, create sophisticated automated reporting for investors, and more.

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Expense Detect

Purpose: To review, clean up and aggregate the data surrounding transactions, and to identify what is not in line with company policy, what can be aggregated and receive better rates through buying power, and what is outright fraud.

Expense Detect in Real Estate: Many real estate management companies engage third-party vendors that service the property operations, such as snow and garbage removal, plumbing, property repairs, exterminating, etc. 

Though the vendors are supposed to be included on a pre-approved list of vendors, this does not often occur.  There is a risk that certain vendors are related parties or will generate inflated or fictitious invoices. Further, there is a risk of the property manager receiving a kick-back for using certain vendors.

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Financial Close Optimization Assessment

Purpose: To help organizations facing the common challenges of the financial close process, such as process bottlenecks, issues in enterprise resource planning, inability to scale, underutilized technology, and repetitive and manual procedures.

Financial Close Optimization Assessment in Real Estate: Real estate companies are to close their books monthly and within a couple of weeks after month-end.

As a best practice, a checklist of closing procedures for each monthly close should be utilized for the accounting staff; for example, some steps may include completed bank reconciliations that agree/reconcile to bank statements, sub-ledgers (accounts receivable, accounts payable, etc.) should agree to the general ledger and aging schedules, and rent rolls should be current and accurate to reflect current tenants, the square footage, rental amounts, etc.

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Disbursements Assessment

Purpose: To enhance the controls of your cash management while also streamlining your processes.

Disbursements Assessment in Real Estate: Invoices are typically managed through an external third-party payables management company (i.e., “payor system”). Upon the receipt of an invoice, the system will post the invoice to the management system for the respective property/entity workflow that it pertains to and the invoice will be coded accordingly based on a pre-established coding scheme provided by the property management company. In other instances, the vendor will submit an invoice directly to the management company, whose accounts payable representative will scan in the invoice for processing.

Information contained in the posting includes invoice date, invoice number, amount, a copy of the invoice and any other requisite attachments. The invoice is then subject to a series of approvals, based on the workflow category within the payables management system and the corresponding designated approvers. Approvals and signoffs must be evidenced prior to the payment of all invoices received. 

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ERM (Enterprise Risk Management) Health Check/Assessment

Purpose: To help real estate, hospitality, and/or construction companies evaluate and/or enhance their ERM framework to identify, manage, and control risks that span across the entire company.

ERM Assessment in Real Estate: You should consider this assessment if you have not performed a company-wide risk assessment or if there have been significant changes to the risks facing the company’s strategic goals or its internal control environment.

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