The FREPR Audit Checklist For Brokers

Regulatory audits are conducted by organizations operating within industries requiring compliance with specific regulations. Internal audit teams are tasked with assessing and verifying that these requirements are being fulfilled within their organization.

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Review Office Policy Manual
A brokerage policy manual serves as a user-friendly reference guide that details how a broker plans to conduct business and answers to questions that may arise during its implementation. It should cover general standards and expectations within the company as well as professional ethics generally and professional association rules as applicable.

Policies should be shared with all involved with the brokerage, including licensed associates. Once distributed, staff should sign an acknowledgment form certifying they have read and comprehended all materials presented by the company.

Dependent upon regulatory requirements, brokers should establish accounting procedures for their trust accounts that are reviewed on a regular basis. Property management accounts require additional checking that records reconcile properly. In addition, brokers should establish clear Associate relationship policies and office cooperation plans which comply with RESPA law; an Associate Agreement should also be written.

Review Property Management Agreements
An effective property management agreement outlines the responsibilities and expectations between an owner of real estate property and a property management company or manager. A clearly written document can prevent miscommunications or potential legal conflicts in the future.

Contract agreements typically contain a section discussing insurance requirements. This might include details regarding which type of policy must be carried as well as its deductible amount and which types of coverage options exist. It might also address how often inspections or other duties must take place on-site by property management companies.

Property management agreements often contain clauses requiring companies to advance money for building costs and expenses, with associated fees discussed as well as timelines outlining when they must return these funds back to the owner. Furthermore, this contract area often outlines any necessary documentation from owners to provide to management companies.

Review Escrow Accounts
Brokers need to keep monthly reconciliation statements for every trust/escrow account they own, such as journals, ledgers, reconciled bank statements and copies of canceled checks – such that an audit by the Department of Business and Professional Regulation (DBPR) investigator doesn’t take too much time or produce them promptly.

If the inspector discovers a problem with an escrow account, they may recommend calling in a title company to investigate and resolve any disputes between parties involved. If they can’t come to an agreement over instructions for their handling, the title company could deposit funds with the local clerk of courts (interplead them) so either party may pursue legal action for these deposits.

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Review Loan Documents
As part of an audit for a brokerage, it is vital to thoroughly examine all loan documents and associated documentation, in addition to updating your audit checklist so all findings and mitigating actions can be accurately reflected.

Brokers should also keep legal copies of required business records outside their office in case DBPR visits or exams. Electronic versions can also be stored provided they can be made available when requested by DBPR.

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