"Property Management Audit Packet" - Arizona

Property Management Audit Packet is a legal document that was released by the Arizona Department of Real Estate - a government authority operating within Arizona.

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  • Released on January 13, 2015;
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PROPERTY MANAGEMENT
AUDIT PACKET
PROPERTY MANAGEMENT
AUDIT PACKET
Arizona Department of Real Estate {ADRE)
DOUGLAS A. DUCEY
GOVERNOR
Auditing and Investigation Division
www.azre.gov
JUDY LOWE
100 North 15th Avenue, Suite 201, Phoenix, Arizona 85007
COMMISSIONER
AUDIT CHECKLIST
A licensed real estate broker has received notification from the Department regarding the performance
of a Broker Audit - either an onsite audit or an EBAR (Electronic Broker Audit Review).
What is the purpose of a Broker Audit conducted by the Department's Auditing staff? To confirm
regulatory compliance with the Arizona Revised Statutes and Commissioner's Rules.
Audit procedures may vary depending on the type of real estate activities performed, as well as the
individual business operations, procedures and processes utilized by the Broker and Entity. When
applicable, the Broker Audit will include both the main and branch office(s).
In general, the Auditing staff will review but are not limited to reviewing:
Signage and license display
A.R.S. §32-2126.B
A.R.S. § 32-2127.B
A.R.S. § 32-2128
Employee files
A.R.S. § 32-2151.01
Broker's operating and/or commission account
A.R.S. §32.2155
A.R.S. § 32-2163.A & B
Broker's Policy and Procedure Manual
R4-28-1103.A
Delegations of Authority for Broker duties and Broker Temporary
A.R.S. § 32-2151.01.G
Absences
A.R.S. § 32-2127.D
R4-28-304.B
Sales, Leasing and/or Property Management Logs
A.R.S. § 32-2151.01.E
A.R.S. § 32-2175.E
Sales files for completeness and timely documented broker review
A.R.S. § 32-2151.01
R4-28-1101.E
Transactions in which licensees acted as a principal
Property Management Agreements
A.R.S. § 32-2173
A.R.S. § 32-2151
Broker Trust bank accounts, including bank statements and monthly
trust account reconciliations
Client and Tenant Ledgers, Liability Balances and Monthly Reports
A.R.S. § 32-2175.C
Checkbook register (receipts and disbursement journal)
A.R.S. § 32-2151.A.2
Trust Account signature cards
A.R.S. §32-2174
Electronic Broker Audit Review (EBAR)
Following is a List of Items Requested for EBAR (Electronic Broker Audit Review). Documentation is
requested covering a specific time period.
1. Completed Number of Properties by Type Form (Types and number of properties under
management by the broker.)
2. Copies of ten (10) actual property management agreements currently in effect.
3. Copy of ten (10) current tenant leases.
4. Copy of the Property Management and/or Leasing Log.
5. List of current owners and tenants under contract, including full names and rental property
addresses.
6. Copies of individual monthly trust account bank statements for the audit period including .9.ti
pages, as well as imaged checks if included with bank statement.
7. Copy of each Broker Trust Account signature card(s).
Copies of the monthly trust account reconciliations demonstrating the adjusted trust account bank
8.
balance has been reconciled to the client ledgers. The reconciliations, including detail, should be
provided for each month (not a consolidated report) within the audit period.
(See enclosed
instructions and sample.)
9. A consolidated report for each individual month within the audit period showing the ending
balances for each owner.
10. A copy of each monthly owner's statement for the last month of the audit period.
11. A Report showing total security deposits (tenant ledger) held in Broker's Trust Account for each
month in the audit period.
12. Receipts and Disbursement Journal (checkbook register) covering period of the audit.
13. Copies of any additional ledgers of accounts containing monies held on behalf of clients/tenants
during the audit period, i.e., prepaid rent, tax liability, pet deposits, certificates of deposit, etc.
14. A Balance Sheet for each month of the audit period.
The Broker may submit the requested documentation on a CD, a thumb drive or in paper form.
Arizona Department of Real Estate (ADRE)
DOUGLAS A. DUCEY
GOVERNOR
Auditing and Investigation Division
www.azre.gov
JUDY LOWE
100 North 15th Avenue, Suite 201, Phoenix, Arizona 85007
COMMISSIONER
Reconciling Broker Trust Account(s)
Managing trust account(s) is a very serious obligation. The broker is responsible to ensure that
reconciliations are performed monthly and account balances are sufficient to satisfy all obligations to
the beneficiaries, owners and tenants.
These monthly reconciliations are required by ARS §32-2151(8)(2) and will confirm that the amount of
funds on deposit in the trust bank account(s) is sufficient to pay the amounts the broker holds in trust
for tenants and owners {beneficiaries). The funds the broker holds in trust includes, for tenants: security
deposits, other refundable deposits and pre-paid rents; for owners: reserves and undistributed income.
If a broker is holding non-refundable deposits or fees in the trust account, they must be included in the
total.
Trust account reconciliation is a three step process:
1. Reconcile the trust bank account(s) records {check register or journal) with the monthly bank
1
statement.'
l This will determine the amount of funds available in the account (adjusted
balance) and disclose any errors by the broker or the bank. If the broker has more than one trust
bank account, all must be reconciled.
2. Determine the amount of trust funds held for beneficiaries (as of the date of the bank
statement). These should be readily available and up-to-date in the broker's tenant and owner
ledgers. For tenants include security deposits, other refundable deposits, and pre-paid rents.
For owners include reserves held and undistributed payments due the owners. When
determining amount due owners, use only positive balances. (Negative account balances should
not be used to offset the broker's liabilities.)
3. Reconcile the bank account record (adjusted balance) with the trust account records. The
adjusted bank account balance should equal or exceed {by not more than $3,000.00) the total of
the trust account records. If the broker maintains one trust bank account and one ledger for
tenant and owner funds, the broker will only perform one bank to trust account reconciliation. If
the broker maintains separate accounts for tenant and client funds, the broker will perform two
reconciliations. Any errors should be corrected immediately upon discovery.
A sample reconciliation worksheet appears on the reverse.
(ll Many tutorials on how to reconcile or balance a checking account are available on the internet.
Bank Account Reconciliation
Bank Statement Balance
a
Less: Outstanding checks/ withdrawals
b
Plus: Outstanding deposits c
Adjusted Balance (d=a-b+c)
d
Check Book Balance
e
Difference (f=d-e)
f
Trust Account Reconciliation
Client/Tenant Liabilities
Owner's Funds g
Tenant's Funds h
Other trust funds i
Total Client/Tenant Liabilities (j=g+h+i)
j
Bank Account Balance (adjusted) (d from above)
Total Client/Tenant Liabilities (j from above)
k
Variance Dollars (k=d-j)