This is an installment in an on-going monthly series featuring DRE regulations of current import.

DRE Regulation # 2846.5: Report of annual trust fund accounts

A broker who becomes the servicing agent for notes or interests secured directly by parcels of real estate must submit an annual trust fund financial statement review report to the DRE when the payments due on the notes or interests during any three month period exceed $125,000 or more than 120 people are entitled to the payments.

The broker’s review report is to be prepared by an independent public accountant, and must confirm the broker’s compliance with code regarding:

  • the broker’s record of all trust funds received;
  • broker trust fund accounts;
  • maintenance of the trust fund balance sheet, and the statement of trust fund receipts and disbursements; and
  • all trust fund financing statements. [See first tuesday Form 536; first tuesday forms currently in development: Forms 537 and 537-1]

The accountant’s review report may state that:

  • all info included in the financial statements are representations of the broker or his responsible officers; and
  • the accountant’s review consisted primarily of inquiries of company personnel and analysis of financial data. The review does not include any opinion about the financial statements taken as a whole. [See first tuesday Forms 548 and 548-1]

A broker may also fill the requirement for an accountant’s review of trust fund statements by submitting a report, by a California independent public accountant, of an audit of the broker’s trust fund financial statements. This report must express the accountant’s unqualified opinion that the financial statements fairly present the broker’s position at the end of the year.

DRE Regulation # 2846.7: Trust fund financial statement review report deadlines

A real estate broker whose fiscal year ends between the last day of November and the last day of February has until the following May 31 to file his annual trust fund financial statement review report with the DRE, as prepared by his public accountant. Brokers whose fiscal years end between March 1 and November 29 are to file their reports within 90 days of the end of the fiscal year unless the broker has written authorization from the DRE to file at a later time. [See first tuesday Forms 548 and 548-1]

DRE Regulation # 2846.8: DRE to issue trust fund status report form

The Department of Real Estate (DRE) publishes a non-exclusive official form for brokers to prepare and file their yearly trust fund status reports. [See first tuesday Form 544]