1. Chapter 11 Records and Controls

2. I. Trust Fund Accounting Property management involves the receipt of funds such as rents, security deposits and money received for a particular service or disbursement. Document all revenue and expenses clearly for landlord’s files and information

3. I. Trust Fund Accounting (cont.) A. FUNDS RECEIVED BY PROPERTY MANAGER B. CHECKS HELD NOT CASHED C. FUNDS RECEIVED BY EMPLOYEES/AGENTS D. THE TRUST ACCOUNT In most states, the property manager’s trust account must be a non-interest bearing demand account (checking account)

4. I. Trust Fund Accounting (cont.) E. INTEREST BEARING TRUST ACCOUNTS F. DISBURSEMENTS FROM TRUST ACCOUNT G. COMMINGLING TRUST FUNDS H. PROPERTY MANAGER/BROKER FUNDS IN TRUST ACCOUNT Property managers/brokers can keep a small amount of personal funds (according to state law) in the trust account.

5. I. Trust Fund Accounting (cont.) I. RETURN OF TRUST FUNDS J. CONFLICTING CLAIMS ON TRUST FUNDS Should both owner and tenant make a claim to funds held by the property manager, the property manager should NOT turn the disputed funds over to either party. An “interpleader action” forces the parties to plead their case in court which can be an expensive process for both parties.

6. I. Trust Fund Accounting (cont.) K. OFFSET OF TRUST FUNDS Trust money held by a property manager CANNOT be used to offset claims that the property manager may have against the party depositing the funds or the property manager’s principal. L. TRUST FUND RECORDS M. RECONCILIATION OF TRUST ACCOUNT

10. I. Trust Fund Accounting (cont.) N. RETENTION OF TRUST RECORDS The retention period shall run from the date of closing of the transaction. O. DRE AUDITS

11. II. Owner Reports A. MONTHLY STATEMENT B. ANNUAL STATEMENTS 1. Multiple Owner Properties 2. Comparative Operating Statement 3. Occupancy Factor 4. Average Rents 5. Balance in Account Everything but the “notes” on an annual report can be computer generated. 6. Addendums The annual statement is an excellent communication tool if used properly.

12. III. Management Records and Controls A. LEASE FILES B. PERCENTAGE LEASE VERIFICATION C. INSURANCE REGISTER Some firms do an insurance review at the time the annual statement is prepared. D. MORTGAGE FILE E. RENT ROLLS F. EVICTION REGISTER

13. III. Management Records and Controls (cont.) G. MOVE-OUTS WHO OWE You have a duty to your owner to make a reasonable effort to collect all rents and damages due the owner. H. INVENTORY FILE I. VENDOR FILES J. UTILITY FILES

14. III. Management Records and Controls (cont.) K. PAYROLL RECORDS Payroll records must be sufficient for preparation of annual W-2 forms for employees showing income and deductions. L. PURCHASE ORDERS FILES M. INACTIVE FILES

15. IV. Your Own Records and Controls A. OPERATION COSTS AND EXPENSES By using a spread sheet format showing prior years, significant changes become readily apparent. B. MANAGEMENT OFFICE INSURANCE FILE Do NOT rely on others to make certain that you are covered. Use your computer to track coverage. C. AD REGISTER

16. IV. Your Own Records and Controls (cont.) D. TELEPHONE AND WALK-IN RECORDS E. EMPLOYEE FILE You should keep an employee file that would include employees’ employment applications (if any), and any pre- employment check that was performed. F. AUDIT

17. V. Computer Management Software There are a number of computer management software programs available to aid in maintaining your property management records A. REALTY AUTOMATION, INC. B. AMT DIRECT C. PROMAS PROPERTY MANAGEMENT SOFTWARE D. RESORT MANAGEMENT SYSTEMS

18. Chapter Summary Trust Fund Accounting Owner Reports Management Records and Controls Your Own Records and Controls Computer Management Software