Legislative Requirements for Trust Accounts
Condominium corporations are required to maintain trust accounts to manage funds.
WHAT YOU'LL LEARN
Legislative Requirements for Trust Accounts
Preparing for a RECA Audit
Establishing Trust Accounts
Condominium corporations are required to maintain trust accounts to manage funds such as:
Reserve fund contributions.
Operating funds.
Special assessment payments.
Key Requirements:
Separate Accounts for Each Condominium Corporation:
A brokerage that holds money in trust for more than one client must maintain separate trust accounts for each client.
Banking Requirements:
Trust accounts must be maintained at a bank, credit union, loan corporation, or treasury branch in Alberta.
Signatory Rules:
All withdrawals from a trust account must be signed by a broker or someone authorized by the broker.
Monthly Reconciliation
Requirements for Reconciliation:
Trust accounts must be reconciled monthly.
A brokerage must reconcile its trust accounts no later than one month following the end of the month being reconciled.
Reconciliation reports must include:
Bank statements.
A list of outstanding deposits and withdrawals.
A comparison of the actual trust account balance to the ledger balance.
Purpose of Reconciliation:
Ensure accuracy in financial records.
Identify and resolve discrepancies promptly.
Record-Keeping Requirements
To comply with RECA audits, brokers and condominium managers must maintain accurate and complete records for all trust accounts.
Key Documentation to Retain:
Transaction Records:
A brokerage must keep a detailed record of all trust money transactions, including the dates, amounts, and parties involved.
Receipts and Invoices:
Documentation of payments into and out of trust accounts.
Contracts and Agreements:
Copies of service agreements or contracts with condominium corporations.
Annual Financial Statements:
Statements summarizing income, expenses, and trust account activity for the year.
Audit Trails:
A clear and accessible record of all adjustments or corrections to the trust accounts.
Preparing for a RECA Audit
Step 1: Organize Trust Account Records
Compile Monthly Reconciliation Reports:
Ensure all reconciliation reports are complete and accurate.
Include supporting documents like bank statements and ledgers.
Verify Supporting Documents:
Match all deposits and withdrawals to corresponding receipts, invoices, or contracts.
Review Historical Records:
Ensure that records are maintained for at least 3 years, as required by:
A brokerage must retain all trust account records for a minimum of three years.
Step 2: Conduct a Pre-Audit Review
Cross-Check Balances:
Confirm that the trust account balance matches the amount recorded in the trust ledger.
Identify and Address Discrepancies:
Investigate any discrepancies in the reconciliation reports and document the resolution process.
Confirm Compliance with Authorized Use of Funds:
Ensure that trust monies are used only for authorized purposes.
Trust funds must not be used for purposes other than those specified by the client.
Step 3: Prepare Documentation for the Auditor
Organize Documents by Category:
Bank statements, reconciliation reports, contracts, and transaction records should be sorted and easily accessible.
Create a Summary Report:
Prepare a summary that outlines:
The number of trust accounts managed.
Monthly reconciliation status.
Any discrepancies resolved during the year.
Assign a Point of Contact:
Designate a staff member to answer auditor questions and provide additional documentation as needed.
Interactive Activity
Preparing for an Audit
Scenario:
A condominium corporation’s trust account is scheduled for a RECA audit. The auditor requests the following documents:
The most recent three months of reconciliation reports.
A transaction ledger for all deposits and withdrawals.
Supporting documentation for a $15,000 withdrawal used for a roof repair.
Task:
Identify the steps you would take to gather and organize the required documentation.
Propose a checklist to ensure compliance with RECA’s requirements.
