Trust Accounting Errors Are Existential
For property managers, trust-accounting errors are not just inconvenient — in most states they are a license-revocation event. The good news is that consistent month-end discipline catches 95% of the issues before a regulator ever asks a question. The list below is the same one used by firms that have made it through California DRE, Florida DBPR, Texas TREC, and Arizona ADRE audits without findings.
Daily Discipline
- Deposit owner and tenant funds within the statutory window (usually 3-5 business days).
- Never combine company operating funds with trust funds, even temporarily.
- Log every transfer in or out of trust accounts with a written purpose and supporting document.
Weekly Discipline
- Reconcile the trust bank account against the sub-ledger for every active property.
- Confirm that the bank balance equals the sum of property-level liabilities. If the difference is more than rounding, stop and find it before it grows.
- Review aged-AR per property and flag any owner whose balance is negative — that is your firm covering their bill, which is a violation in most states.
Month-End Three-Way Reconciliation
The non-negotiable monthly task is a three-way reconciliation across:
- Bank statement balance (after all in-transit items clear).
- Trust ledger control balance (the sum of all property sub-ledgers).
- Per-property sub-ledger detail (each owner's balance).
All three numbers must match to the penny. If they do not, the reconciliation is not done. Document the reconciliation with the date, the staff member who ran it, the bank balance, the trust ledger total, and a signed PDF stored in your audit binder.
Year-End and Audit Prep
- Pull 1099 totals for every owner who received more than $600 in distributions.
- Reconcile cumulative deposits and disbursements per property against your annual statements.
- Confirm that every property has an executed management agreement on file with the correct compensation schedule.
- Spot-check 10% of vendor invoices to confirm they tie to actual work orders and approvals.
The Audit Mindset
The firms that do well in audits are not the ones that scramble when the letter arrives. They are the ones that treat every month-end as if the auditor is reviewing it next week. Build the checklist into your operations now, and you will never need to fear that envelope.