You may already know that the American Land Title Association (ALTA) publishes recommended best practices for all independent title agencies to follow in everyday operations. But did you know they also publish guidelines for assessment procedures and recommendations on when an agency should pass or fail an escrow audit?
Based on the ALTA Assessment Procedures, we’ve put together the following guidelines – a good start to help ensure your agency is prepared for its escrow audit. Refer to ALTA’s Best Practices website for a range of additional resources, including webinars, workbooks, checklists and more.
- Reconcile every bank account (escrow and non-escrow, active and inactive). If an account is inactive and you do not plan on using it in the future, it is best to close it.
- Make sure that all authorized signers, wire initiators and account approvers are still active employees. When an employee leaves your agency, be sure to remove them as an authorized user on all accounts.
- Be sure that only authorized signers have access to signatory stamps, if your company uses them. Store any stamps in a locked drawer, and only allow authorized users to have the key.
- Conduct a five-year background check before hiring an employee. Keep the results of the background check stored in each individual’s personnel file. Keep these records secure and available only to those employees who have the “need to know.”
- Train your employees on the management of escrow fund and escrow trust accounts.
- Perform a three-way reconciliation on all escrow trust accounts and have documentation readily available for your auditor. Include the following as of the reconciliation date:
- Bank statement
- Reconciliation sheet/summary page with book balance
- Outstanding deposits list/deposits-in-transit
- Open escrow file listing or trial balance
- Outstanding disbursements list
- Files with negative balances
- Deposits in transit over three days old
- Outstanding wires over three days old
- Outstanding payoff, tax and insurance checks over 10 days old
- Banked-not-booked items
For more information about ALTA Best Practices, assessment procedures or escrow accounting in general, contact Dina Taaffe at email@example.com or (713) 625-8101.