Escrow funds and operating accounts are separately maintained.
The Company maintains 3 escrow accounts:
1) Real Estate Escrow Account- for real estate purchases and sales, mortgage loan transactions and FIRPTA funds. This account has an ACH Block on it to prevent fraud.
2) Lease Escrow Account- Advanced Rent- for holding escrowed funds related to a lease transaction where advance rent is placed in escrow pending lease finalization. This account has an ACH Block on it to prevent fraud.
3) Lease Escrow Account- Security Deposits- for holding escrowed funds related to a lease transaction where advance rent is placed in escrow pending lease finalization. This account has an ACH Block on it to prevent fraud.
The Company maintains under all escrow accounts and the funds entrust to it in a fiduciary capacity. As such, these funds are not commingled with The Company’s operating funds or an employee or manager’s personal account.
Escrow/Trust Accounts Trial Balance Reports.
A trial balance report depicting the balance of a particular customer’s funds can be produced for each escrow/trust account at any time. This report depicts all individual customer file balances that do not have a zero balance.
On a monthly basis, the SoftPro reconciliation services reconciles the trial balance report to the bank balance and reconciled book balance,
creating a “three way” reconciliation.
Trial balance reports are produced for each escrow/trust account maintained by The Company, including recording accounts and underwriter premium accounts.
Escrow/Trust Account Reconciliations
It is the responsibility of the Accounting Assistant to review the reconciliations of the escrow/trust accounts. Account receipts and disbursements activity are reconciled daily (two-way). Monthly, a three-way reconciliation between the bank records, book records, and trial balance is performed. This reconciliation is completed within four business days of receipt of bank statement.
A listing is kept of all escrow/trust accounts. This listing includes underwriter premiums accounts, recording accounts and dormant accounts.
Escrow/trust account reconciliations are performed by the Accounting Assistant who does not have check signing authority or the capability/authority to approve wire transfer transactions.
Each month escrow/trust account reconciliations are reviewed by Company management and evidence of the review is documented. The escrow/trust account reconciliations are available to the title insurance underwriter at any time requested.
Escrow/trust account reconciling items are clearly noted on the reconciliations. These reconciling items are followed up and addressed by the Accounting Manager within 4 business days of completion of the Reconciliation so as to not carry over on the reconciliations from month to month.
The President & CEO reviews and signs off on all 3-way reconciliations within four business days.
Escrow/Trust Accounts are properly labeled and maintained in insured institutions.
Escrow/trust bank accounts are appropriately designated as “escrow” accounts. This designation is noted in the original banking agreements as well as on our check stock, deposit slips, and bank statements. Unless mandated by state regulation or directed by a customer with a signed agreement, escrow/trust accounts are maintained with insured financial institutions.
Dormant file balances.
Customer files that continue to hold funds after the settlement date are reviewed periodically to determine if any disbursements have been made.
Stale checks are reviewed every month and any check that is over 7-months from issue date is marked “void” in our Positive Pay system so that if it is presented it will become an exception on the daily report capable of declining payment to avoid a duplicate check deposit. Payees are contacted and requested to deposit it. If they have lost or misplaced it, a new check is issued and the original check is voided in SoftPro so that it no longer appears as a stale check.
The President & CEO’s approval is required for any disbursement from an inactive escrow. An inactive escrow is defined as any escrow which
has had no activity for the past six months. This approval is documented and maintained.
Banking Transactions conducted by authorized employees.
Via agreements with financial institutions, The Company’s management authorizes employees for escrow bank account transactions. Wire transfer initiation and approval levels are set by The Company and reviewed for changes in staff routinely. Former employees are immediately deleted as signatories and authorized wire transfer individuals. A list of authorized individuals is maintained in the Escrow Account Information Report (see attached example). The individual(s) designated as the ‘wire transfer administrator’ to set-up and change online banking permissions has been authorized by management.
Authorized check signers and wire individuals do not maintain the escrow accounting records or perform the escrow account reconciliations.
Every authorized party has a limit on how much can be wired in any wire and how much each day can be wired out.
Two-Step Verification Process
All wires are loaded electronically into the system City National Bank of Florida e-partner system. Prior to being accepted, a code is sent by text to the party who loaded the wire. The code must be entered within 15 minutes or the transaction is voided.
The party that loaded the wire cannot approve it. A different person must log into the e-partner system to approve the wire, once again with a two-step verification process. Only a licensed attorney can approve an outgoing wire transfer. Prior to approval the attorney must be provided a) the signed Closing Disclosure or HUD, 2) a signed Disbursement Authorization; 3) A signed wire transfer instruction showing the accounts and bank; and 4) proof that all funds in the escrow for this transaction have been collected. Once confirmed, the wire is approved. If there are any discrepancies, the wire is rejected and the person that loaded it is notified. This segregation of duties limits the risk of fraud or mistake.
Positive pay, ACH Blocks, and international wire blocks are used.
The “Positive Pay” feature offered by our financial institutions is used on escrow accounts. The Accounting Assistant reviews the positive pay exception report daily. All positive pay reports are maintained and any exceptions are documented and explained.
ACH blocks and international wire blocks are placed on all escrow/trust accounts to prevent unauthorized users from withdrawing funds from the escrow/trust account.
Before an individual is hired, a background check (criminal and credit) is performed by Insperity, Inc. Every year a background check (including criminal and credit) is performed on existing employees who have access to escrow account funds.
Escrow/trust account training.
The Company provides escrow account training as needed to individuals handling customer funds and conducting escrow/trust account reconciliations. This training is conducted by the outside independent certified public accountants. All training and continuing education is tracked and maintained by the Administrative Assistant.