The Let Loft do it department offers Bank Reconciliation services.
One of the most daunting tasks when starting or running a relatively small brokerage is learning how to deal with the back office commission processing and subsequent accounting for those deals. Many brokerages are not sure how to manage the mechanics of reconciling their bank accounts to stay audit compliant.
Loft47 is here to take that uncertainty away for our small side brokerages. We have learned over the last 8 years that small brokerages struggle with real estate audits, and the regulations surrounding Trust / Escrow and Commission bank accounts.
General Requirements
Trust / Escrow and Commission bank accounts must be reconciled monthly and signed off by the Broker of Record, typically by the 10th of the following month.
Each month's bank reconciliation should consist of the following information (even months that have 0 transactions still require a full bank reconciliation to prove there were 0 transactions that month).
Reconciliation Report Contents (see the attached sample report package below)
Every month, a full reconciliation is required to pass an audit
- Summary
- Reconciled bank statement report
- Account transactions (0) for bank
- Account transactions (0) for liablity
- Loft47 subledger to show funds in trust
- Bank statement
Why Comply?
Complying with real estate trust / escrow and commission bank account audits is crucial for ensuring financial accuracy, maintaining ethical standards, and upholding public trust within the industry, as well as for avoiding potential penalties and legal issues. Here is a more detailed breakdown of the reasons to be ready for a real estate Trust / Escrow / Commission bank account audit.
1. Legal Compliance and Regulatory Requirements:
Protecting Consumers:
Audits help ensure that real estate brokerages and licensees are operating in accordance with the Real Estate Services Act (RESA), Real Estate Services Regulation, and Real Estate Services Rules, which are designed to protect real estate consumers.
Financial Integrity:
Real estate trust audits ensure that trust accounts are managed according to specific accounting rules, safeguarding client funds and maintaining financial integrity.
Tax Compliance:
The Canada Revenue Agency (CRA) and or State Regulators focus on tax compliance in the real estate sector, and audits help ensure that real estate professionals are accurately reporting income and paying taxes on real estate transactions.
Penalties for Non-Compliance:
Failure to comply with audit requirements can result in penalties, including fines and potential suspension or revocation of licenses.
2. Maintaining Ethical Standards and Public Trust:
Transparency and Accountability:
Audits promote transparency and accountability in the real estate industry, fostering public trust by demonstrating that real estate professionals are operating ethically and responsibly.
Protecting Client Interests:
Audits help identify and address potential conflicts of interest or unethical practices that could harm clients, ensuring that their interests are protected.
Building Confidence:
By demonstrating a commitment to compliance and ethical practices, real estate professionals can build confidence with clients and stakeholders.
3. Operational Efficiency and Risk Management:
Identifying Weaknesses:
Audits can help identify weaknesses in internal controls and operational procedures, allowing real estate professionals to implement improvements and reduce risks.
Ensuring Accuracy:
Audits ensure the accuracy and integrity of financial information, which is essential for sound decision-making and effective business management.