Commission staff randomly performs spot inspections of trust accounts belonging to Brokers-in-Charge/firms. The purpose of the random spot inspection program is to reduce the incidence of misappropriation and mishandling of trust funds by monitoring compliance with the procedures and record keeping requirements established by the Commission. The focus is on record keeping and, when needed, education of brokers in the proper management of trust monies and trust accounts. Although the program often uncovers gross improprieties such as commingling, deficit spending, and conversion, it is also successful in raising the overall level of compliance with and understanding of the rules governing broker trust accounts.

The Commission has instituted a waiver program for random audits of broker trust accounts. Brokers-in-Charge/Firms may seek an exemption from the random audit program by having a CPA perform an examination of the trust accounts pursuant to Agreed-Upon Procedures and submission of the CPA’s report to the Commission. The exemption is valid for 1 year. The report includes representations signed by the Broker-in-Charge, a copy of the CPA engagement letter, a list of Agreed- Upon Procedures, and the CPA’s report pursuant to the Agreed-Upon Procedures, all of which must be submitted to the Commission within 90 days of the examination. The waiver does not apply if a complaint is received that warrants an audit.

Steps to obtain a waiver:

1. Bank Directive on NSF Trust Checks – This form is required to be eligible for the spot inspection waiver program. A Broker-in-Charge/Firm seeking exemption would have to complete this form and give it to the bank where trust accounts are maintained. A copy would be provided to the Commission. The form directs the bank to notify the Real Estate Commission when any item drawn on any trust account is presented for payment against insufficient funds. In the event the Commission receives notification of an NSF issue with a trust account, the Commission would proceed with an audit regardless of the fact that the exemption might have been obtained by the Broker-in-Charge/firm.
2. Broker-in-Charge’s Representation Form – This form is required for the Broker-in-Charge to make certifications to the Commission as to compliance with the requirements for the waiver program.
3. CPA Engagement Letter - A Broker-in-Charge is required to receive this engagement letter from any CPA selected to perform the review required for the waiver program. Attached to the letter is the Agreed-Upon Procedures, which are the procedures the CPA must comply with when performing the review. A copy of the letter and attachment must be provided to the Commission for any Broker-in- Charge/firm seeking the waiver.
4. Report Pursuant to Agreed-Upon Procedures for CPA Examination of Broker-in- Charge’s Trust Accounts – This report must be supplied to the Commission by the CPA.

After all items have been submitted, the Broker-in-Charge will be notified if the waiver is granted.