The Continued Evolution of RECA’s Audit Program

As in many self-regulating professional bodies, the Real Estate Council of Alberta (RECA) has a comprehensive Trust Assurance and Practice Review audit program. As part of this program, RECA auditors visit brokerages across the province and thoroughly review, among other things, trust accounts and brokerage accounting practices, licensing records, trade records, mortgage disclosure documents and agency disclosure forms.

Prior to 2004, RECA’s audit program had three primary objectives:

• promote compliance with the Real Estate Act and the Rules (the legislation);
• safeguard the integrity of the licensing system; and,
• reduce the number of claims against the Assurance Fund.

Under this regulatory framework, auditors were assertive and often referred matters for investigation. Of course, the predictable result from that were brokers who dreaded an auditor’s phone call. Many brokers told RECA they were very stressed from the time of the auditor’s first call until the conclusion of the audit.

In late 2004, RECA made the decision to add a fourth objective and to make this fourth objective the primary one for RECA’s audit program. This new objective was to be of service to brokers. Going forward, auditors were expected to work constructively with brokers to develop sound business and accounting practices that would promote compliance with the legislation.

Under this regulatory framework, RECA believes the audit program should provide positive and constructive assistance to brokers to identify and resolve potential problems, and develop effective record keeping and administrative procedures that foster and ensure compliance with the legislation.

To ensure that RECA’s audit program has been meeting this objective, RECA conducts surveys of all the brokers it audits shortly after the completion of the audit. Here are some highlights from the audit surveys conducted during the 2010-2011 fiscal year:

• 97.6% of brokers indicated that RECA auditors provided reasonable notice when scheduling an audit.
• 98.8% of brokers indicated that RECA auditors were flexible when scheduling the audit.
• 98.0% of brokers indicated that RECA’s audit guides and pre-audit publications were helpful to prepare for and understand the audit process.
• 77.4% of brokers did not find the audit disruptive to their brokerage operations. Of the 22.6% of brokers who found the audit disruptive to their brokerage operations, 80.9% acknowledged that the disruption caused by the audit could not be reduced or avoided.
• 97.3% of brokers reported the auditors provided clear and constructive explanations at the end of the audit.
• 94.6% of broker stated the auditors provided positive recommendations or strategies to prevent future problems.
• 91.0% of brokers stated the audit helped them identify and resolve potential problems.
• 85.5% of brokers stated the audit helped them develop more effective record keeping and administrative procedures.
• 95.9% of brokers indicated they received closing correspondence on a timely basis that summarized the results of the audit and future expectations for the brokerage.
• 97.2% of brokers found the closing correspondence was accurate.
• 99.6% of brokers stated RECA’s auditors were courteous
• 99.2% of brokers stated RECA’s auditors were professional
• 99.2% of brokers stated RECA’s auditors were approachable
• 97.6% found the overall audit process to be helpful.

While RECA is very pleased with the results of the audit program survey, it will continue to fine-tune and improve its processes, and would like to thank brokers for their insight and suggestions as to how RECA can improve its audit program.

When RECA does receive suggestions for improvement, it takes them to heart. One recently implemented suggestion was additional ability for brokers and their accountants to file web-based accounting reports using the RECA Online system.

Another suggestion in development right now is a “RECA Certified Technology Program.” Once this program is in effect, brokers will be able to quickly and easily determine whether proposed technologies meet legislative requirements.

As a result of Council’s strategic direction to promote effective self-regulation, RECA’s audit program is going to be re-branded and further expanded. Effective December 1, 2011, the audit program will be rebranded as the Trust Assurance and Practice Review Program, within the Professional Standards department. And, in the months and years ahead, RECA’s Trust Assurance and Practice Review program will also help brokers with:

• the development and maintenance of brokerage policies and procedures;
• the review and development of reasonable and effective supervisory processes;
• how to investigate and deal with potential misconduct within the brokerage;
• the development of proper broker delegation agreements and supervision of broker delegates; and,
• reviewing and discussing the various representational and agency models and processes for ensuring adherence to the brokerage’s chosen model or models.

RECA is also close to completing the development of a real estate appraiser audit program and training auditors to complete these audits.

Do you have any suggestions on how RECA’s Trust Assurance and Practice Review Program can be further improved?