Ca Trust Fund Reconciliation

Trust Fund Reconciliation — California Broker Requirements ## Overview California brokers who maintain trust accounts must perform a formal three-way reconciliation each month. This reconciliation process is one of the most tested broker-specific topics on the CA DRE broker exam and is also heavily audited during DRE compliance inspections. --- ## The Three-Way Reconciliation The monthly reconciliation compares three records that must all agree: 1. Bank Statement Balance — the balance shown on the trust account bank statement as of a specific date. 2. Broker's Trust Account Ledger (Accounting Record) — the running total maintained by the broker tracking all deposits and disbursements. 3. Beneficiary Ledger Totals — the sum of all individual client/transaction ledger balances (one per principal or transaction). All three must reconcile to the same figure. Any discrepancy must be investigated and resolved immediately — a discrepancy is a red flag for commingling or conversion. --- ## Reconciliation Timing - Must be performed at least monthly. - Must be completed within 25 calendar days of the end of each month (DRE standard for examination purposes). - A written reconciliation report must be prepared and retained. --- ## Common Reconciliation Errors (Exam Traps) | Error Type | Description | |---|---| | Outstanding checks | Checks issued but not yet cleared the bank — reduce bank balance in reconciliation | | Deposits in transit | Funds deposited but not yet shown on bank statement — add to bank balance | | Bank charges | Monthly service fees posted by the bank — must be reflected in broker ledger | | Unearned commissions | Broker commission not yet earned that was incorrectly deposited to operating account | Outstanding checks…