RECA > Licensees & Learners > Industry 101 > Trust Assurance and Practice Review

Trust Assurance and Practice Review

A trust assurance and practice review is a review and examination of records and activities to ensure compliance with statutory obligations. Sometimes it results in recommendations for changes in control, policy, and procedures.

Simply put, it’s an audit of a brokerage’s accounting and record keeping, record completeness, and trust account practices.

Download the guides on trust assurance and practice review for more information:

See sample: Trust Assurance and Practice Review Forms

Objectives of Trust Assurance and Practice Reviews
  1. to provide service to industry members.
    • TAPR Officers work constructively with brokers to develop sound accounting practices and procedures that comply with the Real Estate Act and the Rules.
  2. to reduce the number of claims against the Assurance Fund.
    • All industry members share the cost of claims made against the Assurance Fund. Identifying potential problems before they develop reduces the number of claims against the fund, which benefits everyone.
  3. to promote compliance with the Real Estate Act and the Rules.
    • A small percentage of real estate practitioners may work outside the laws and standards that govern the industry—this can adversely affect the public’s view of the industry as a whole. RECA audits reduce the occurrence of activities that violate the Real Estate Act or the Rules.
  4. to safeguard the integrity of the licensing system.
    • TAPR Officers check to make sure industry members follow the policies associated with the use of myRECA.
Trust Assurance and Practice Review Officer Responsibilities

RECA recognizes that undergoing a trust assurance and practice review can be a stressful experience and has adopted the following policies to make the process as positive as possible.

TAPR Officers will:

  • conduct themselves in a courteous, professional and approachable manner
  • explain results in a constructive way
  • keep results confidential (unless there is a finding of misconduct)

RECA surveys brokers after the completion of a review. Results indicate the TAPR program has been meeting these objectives.

 

 

The Trust Assurance and Practice Review Process

TAPR selects brokerages according to any of the following criteria:

  1. brokers in their first year of operation
  2. period of time since last audit
  3. deficiencies in annual accountant’s report
  4. previous audit findings
  5. amount of trust monies held
  6. size of the brokerage
  7. information received form a third party (e.g. a solicitor who received an NSF trust cheque)
  8. fiscal year end
  9. location

RECA will also conduct courtesy reviews for new brokers. This review is an educational resource to help ensure new brokers are aware of the provisions of the Real Estate Act as it applies to brokerage accounting. A TAPR Officer will review your books and records and, if necessary, assist you in making changes to ensure compliance with the Act. Contact the TAPR unit to schedule your courtesy review for the next time a TAPR Officer is in your region.

RECA will normally contact the broker in advance and will be flexible in scheduling. In remote locations, there may be less flexibility in scheduling.

We will make reasonable efforts to allow brokers to continue with normal business activities while we complete the TAPR.

We complete most reviews in one day; however, this may vary depending upon the complexity of the brokerage’s operations and the quality of record keeping. Property management reviews often take longer than one day when there are a large number of accounts to review.

We will make an effort to not conduct a review during the year-end report process.

Your TAPR Officer will provide a list of documents they require. If your brokerage keeps your records at the brokerage office, little or no preparation should be required.

The person who maintains the accounting records must attend the review. We do not require the presence of the broker, but many brokers find the process educational when they attend.

The TAPR Officer briefly discuss brokerage’s activities, policies, and procedures with the broker prior to beginning a review.

Documents

The review may involve any or all of the following:

  1. books and records for a selected period of time
  2. myRECA or RECA online forms
  3. the brokerage policies and procedures
  4. trust account details, including bank statements, cheques, deposit books, trust ledger and reconciliations
  5. other bank accounts (to ensure that trust transactions have not been made through them
  6. a sample of both open transaction files
  7. a sample of closed transaction files
  8. the TAPR Officer may also reconcile the trust account at the date of  the audit to ensure it is fully funded

In property management reviews, in addition to the above the TAPR Officer will select a sample of properties for detailed testing, including a review of management agreements, leases, and invoices paid on behalf of the properties.

In mortgage broker reviews, in addition to the above—where applicable—the TAPR Officer will select a sample of administered mortgages for detailed testing, including a review of the administration agreements and investor and borrower files. Where investors’ funds are received, the TAPR Officer may review investor, borrower, and loan files, including cost of credit disclosure schedules and lender/investment disclosure statements.

Time period

TAPR officers can only review records for the past three years, however, the review will usually cover the period from the last accountant’s report (for a new brokerage, from the start of business) to the present date.

Brokerages Without Trust Funds

All brokerages must maintain adequate books and records and comply with all areas of the legislation, whether trust funds are held or not. For these brokerages, the TAPR Officer may still review:

  1. the general quality of books and records
  2. RECA online forms
  3. brokerage policies and procedures
  4. open and closed transaction files
  5. bank accounts (to ensure commissions are paid properly, no trust transactions occur through general accounts)
  6. and—for property management—to ensure owners’ accounts are controlled by the owner or exempt under the legislation
  1. Review: The TAPR Officer will review results with the broker and any relevant administrative staff in a constructive question-and-answer style session.
  2. Recommend: The TAPR Review will provide alternatives and possible strategies to prevent future problems and may interpret relevant sections of the Real Estate Act and the Rules.
  3. Written summary. The TAPR Officer will send the broker a written summary of the findings.
  4. Ongoing support. The broker may contact the TAPR Officer should they require support after the review.
  5. Professional Conduct Review (if necessary). Occasionally, the TAPR Officer must refer serious concerns to RECA’s Professional Conduct Review unit. Discipline may follow if there is a finding of misconduct.

TIP: TAPR Officers find minor breaches of the Real Estate Act or the Rules in nearly all reviews, but seldom refer the matter to the Professional Conduct Review unit. This referral happens for serious cases only. For minor breaches, the TAPR Officer will make suggestions on how to change policy or procedure to come into compliance.

The TAPR Officer will use the following criteria to determine if they should send files to the professional conduct review unit:

  1. Do findings indicate intent or recklessness on the part of the broker?
  2. Has the TAPR unit brought similar concerns to the broker’s attention in the past?
  3. Could there be serious consequences to the public (e.g. a trust shortage)?