Audit Declaration Form

BROKER SUPERVISION & CONTROL AUDIT DECLARATION

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Broker_Supervision_Control_Audit_Form rev 10.04.2013

The Designated Broker shall complete this Audit Declaration and return it to the Department of Real Estate concurrent with Broker’s license renewal to:

Arizona Department of Real Estate (ADRE)
2910 N. 44th Street, Suite 100
Phoenix, Arizona 85018

Pursuant to A.R.S. § 32-2153(A)(17) and A.A.C. R4-28-303(A)(2)(f), this Audit Declaration is required as part of the Designated/Self Employed Broker’s Renewal Application or as determined appropriate by the Department’s Audit Division. This Audit Declaration does not preclude an onsite or field audit of the books and records of the brokerage pursuant to A.R.S. §§ 32-2108(A), 32-2151.01(A) and 32-2175(H). The Department will use the information in the completed Audit Declaration when conducting any future field audit.

The Audit Declaration is an important report that will become a public record and be kept by the Department for at least five years. Please complete, sign and return the Audit Declaration to the Department with the License Renewal forms and fees. ALL NO answers require further explanation on Page 8. If you have questions relating to how to respond to any item, you may submit your question to the Department’s auditing staff through the Department Message Center. Statutes and rules are summarized, refer to the quoted source when answering the questions.

ADMINISTRATIVE-PRINT CLEARLY

Designated Broker’s Name/Business Phone Number: License Number:

Brokerage Business Name/DBA: License Number:

Is this a home office? Yes No

Business Street Address:

City/County/State/ZIP Code:

Number of salespersons and associate brokers licensed to the brokerage (do not include the Designated Broker):

Number of unlicensed employees at the brokerage (part-time and full-time):

Average number of Sales and Lease transactions handled per year:

The brokerage conducts (check all that apply):

Residential Real Estate Commercial Property Management

Commercial Sales and Leasing New Home Subdivision

Business Brokerage Other Subdivision/Unsubdivided Land

Farm and Ranch Timeshare

Residential Property Management

Other (list):

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GENERAL RECORDS COMPLIANCE

Yes No N/A Signage is properly affixed at the main entrance to the brokerage office and each branch office and is in clearly visible lettering. A.R.S. §§ 32-2126(B), 32-2127(B) and A.A.C. R4-28-502(E)

Yes No N/A The employing broker (if applicable) and the designated broker license certificates are prominently displayed. A.R.S. § 32-2128

Yes No N/A Salesperson and associate broker license certificates are readily available. A.R.S. § 32-2128

Yes No N/A All salesperson’s and associate broker’s licenses are current. A.R.S. § 32-2128

Yes No N/A If records are stored off-site, the Department has been notified in writing of their location in Arizona. A.R.S. §§ 32-2151(B)(2), 32-2151.01(A), 32-2175(A) and 32-2194.06(B)

Yes No N/A Transaction records are kept for 5 years after termination of transaction. A.R.S. §§ 32-2151.01(A) and 32-2153(A)(18)

Yes No N/A All employee records are kept for 5 years after termination. A.R.S. § 32-2151.01(A)

BROKER REVIEW

Yes No N/A The designated broker reviews, dates and initials all employment agreements, sales contracts, leases (as applicable) and similar documents within 10 business days of execution. A.R.S. § 32-2151.01(G)

Yes No N/A The designated broker supervises all advertising. A.A.C. R4-28-502(F)

EMPLOYMENT AND COMPENSATION

Yes No N/A The broker has paid compensation only to actively and properly licensed salespersons, associate brokers and brokerages. A.R.S. § 32-2155(A) and (B)

Yes No N/A The broker has not paid compensation to an agent’s corporation, LLC or general partnership, other than a properly licensed professional corporation (PC) or professional limited corporation (PLC). A.R.S. §§ 32-2125(B) and 32-2155(A)

Yes No N/A All salespersons and associate brokers are licensed and receive compensation only as natural licensees, PCs or PLCs. A.R.S. §§ 32-2125(B) and 32-2155(A)

Yes No N/A Brokerage and licensees are not paid for negotiating loans, unless they meet all of the regulatory requirements. A.R.S. §§ 32-2101(47)(k) and 32-2155(C)

Yes No N/A All legal real estate related rebates, compensation sharing or profit participation are paid through the brokerage. A.R.S. §§ 32-2153(A)(7) and 32-2155(A)

Yes No N/A The agents of the brokerage work exclusively for this brokerage and, absent an agreement between the brokerages, do not represent another brokerage, either through substituting for a vacationing agent of another brokerage, the use of another brokerage’s transaction coordinator or continuing the service of a transaction after leaving a former brokerage, or similar activity. A.R.S. § 32-2153(A)(8)

Yes No N/A Unlicensed personal assistants and other unlicensed employees receive compensation based on their work, unrelated to the success of a transaction. A.R.S. § 32-2121(A)(6) and (9)

Yes No N/A If unlicensed telemarketers are used, they are in the employ of the brokerage. A.R.S. §§ 32-2121(A)(10) and 32-2197.17(H)

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DISCLOSURES

Yes No N/A The broker or the broker’s agents have disclosed their status as licensees in their ads and signage. A.A.C. R4-28-502(B)

Yes No N/A The broker or the broker’s agents have not acted directly or indirectly without informing the other parties of any prospective interest or conflict in the transaction. A.A.C. R4-28-1101(E)

Yes No N/A The broker or the broker’s agents have obtained written permission from owners before profiting from the transfer or assignment of listings or property management agreements to another brokerage. A.R.S. § 32-2173(A)(1)(j), 32-2151.02(B) and A.A.C. R4-28-1101(G)

Yes No N/A The broker or broker’s agents disclose in writing any information they possess that materially and adversely affects the consideration to be paid. A.A.C. R4-28-1101(B)

Yes No N/A The broker or broker’s agents obtain informed consent of the parties before representing more than one party to a transaction or receiving compensation from more than one party. A.R.S. § 32-2153(A)(2), A.A.C. R4-28-1101(F)

Yes No N/A The broker or broker’s agents obtain written permission prior to acting outside of their area of expertise. A.A.C. R4-28-1101(H)

Yes No N/A The broker or broker’s agents fulfill their duties to clients, including (but not limited to) protecting and promoting client’s interests; expeditiously performing all acts resulting from an agreement; not allowing a controversy with another licensee to jeopardize the transaction; and other duties. A.A.C. R4-28-1101(A) through (K)

SALES/LEASE TRANSACTION RECORDS

Yes No N/A The broker maintains legible copies of transaction documents required by law to be kept for 5 years after termination (close) of a transaction. A.R.S. §§ 32-2151.01(A) and 32-2153(A)(18)

Yes No N/A A copy of all documentation handled by the brokerage or its agents is available to the Department on request for 5 years after every terminated transaction. A.R.S. §§ 32-2108(A), 32-2151.01(A) and 32-2175(H)

Yes No N/A Nonresidential leases are kept for 5 years from termination. A.R.S. § 32-2151.01(A)

Yes No N/A Rejected offers are kept for 1 year, or 5 years if a binding contract ultimately results. A.R.S. § 32-2151.01(I)

Yes No N/A Broker transaction files are kept chronologically or by other systematic means. A.R.S. § 32-2151.01(E)

EARNEST DEPOSITS

Yes No N/A Agents of the brokerage promptly place all cash, checks, or other items received as payment in connection with a real estate transaction, in the care of the designated broker. A.R.S. § 32-2151.01(D)

Yes No N/A The broker immediately places all funds entrusted to the broker in a neutral escrow or trust account. A.R.S. §32-2151(A)

GENERAL/SALES/EARNEST TRUST ACCOUNT

Yes No The broker maintains one or more general trust accounts. If you answered YES, please identify them on Page 9. If you answered NO, skip to the “Delegation of Authority” section.

[NOTE: BANK ACCOUNT INFORMATION IS REQUESTED SEPARATELY ON PAGE 9. THE DEPARTMENT TREATS THIS INFORMATION AS CONFIDENTIAL AND DOES NOT INCLUDE IT IN A PUBLIC RECORDS INSPECTION REQUEST.]

Yes No N/A The broker maintains a descriptive receipt showing the disposition of all trust account funds handled on behalf of a principal, identifying or showing the transaction, date, amount and parties. A.R.S. § 32-2151(B)(1)

Yes No N/A Trust account records include a properly descriptive Receipts and Disbursements Journal and Client Ledger for each transaction. A.R.S. § 32-2151(B)(2)

Yes No N/A Trust account journals and client ledgers are in balance with each other and are reconciled monthly with bank statements. A.R.S. § 32-2151(B)(2)

Yes No N/A The broker removes interest earnings in a trust account at least every 12 months. A.R.S. § 32-2151(B)(2)

Yes No N/A The broker removes any amount in excess of $3,000 of the broker’s money in a trust account immediately. A.R.S. § 32-2151(B)(2)

Yes No N/A Authorized signers on trust accounts are limited to licensees in the employ of the broker. A.R.S. § 32-2151.01(B)

DELEGATION OF AUTHORITY

If applicable, there is a current and properly detailed delegation letter in the broker’s files for each appropriate person, acting on behalf of the Broker, to:

Yes No N/A Review, date and initial employment agreements, contracts and similar documents. A.R.S. § 32-2151.01(G)

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Yes No N/A Act as the branch manager for a licensed branch office. A.A.C. R4-28-304(B)

Yes No N/A Be a signer on a trust account. A.R.S. §§ 32-2151.01(B) and 32-2174(C)

Yes No N/A Act on behalf of the Designated Broker when the broker is unable to act within 24 hours. A.R.S. § 32-2127(D)

Yes No N/A Be a signer on the general account or other account of the brokerage for payment of commissions. A.A.C. R4-28-304(B)(1)(d)

BROKER SUPERVISION & CONTROL

Yes No Broker has a Written Supervision Policy. A.A.C. R4-28-1103

If no, provide an explanation on Page 8; if necessary, include a timeframe for completion within the next 21 days.

The written Broker Supervision Policy addresses:

Yes No N/A Transactions requiring a salesperson’s or broker’s license.

Yes No N/A Use of disclosure forms, contracts, and employment agreements and documents affecting the rights or obligations of parties.

Yes No N/A Filing, storage and maintaining documentation.

Yes No N/A Handling of trust funds.

Yes No N/A Use of unlicensed assistants by a salesperson or broker.

Yes No N/A The delegation of authority to others to act in the Broker’s behalf.

Yes No N/A How the Broker familiarizes the agents with the requirements of state, federal and local laws relating to the practice of real estate.

Yes No N/A Advertising and marketing of the brokerage and its agents and others.

Yes No N/A Establishing a system for monitoring compliance with the broker’s policies, rules, procedures and systems contained in the Broker Supervision Policy.

PROPERTY MANAGEMENT

Yes No The brokerage conducts property management

If you answered NO, skip to the “Additional Explanation” section on Page 8. If you answered YES, continue with this section and list the number and type(s) of properties managed.

Residential:

Number of Single Family Homes:

Number of Multi Family Units:

Number of Other:

Commercial:

Number of Shopping Centers:

Number of Commercial/Industrial Buildings:

Number of Other:

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PROPERTY MANAGEMENT AGREEMENTS

Each property management agreement entered into by the brokerage:

Yes No N/A Is drafted in clear and unambiguous language. A.R.S. § 32-2173(A)

Yes No N/A Specifies a beginning and ending date. A.R.S. § 32-2173(A)(1)(c)

Yes No N/A Is executed by the appropriate parties. A.R.S. § 32-2173(A)(1)(b)

Yes No N/A States all material terms and conditions of the property management firm’s services, obligations, duties and responsibilities to the property owner. A.R.S. § 32-2173(A)(1)(a)

Yes No N/A Contains mutually agreeable cancellation terms. A.R.S. § 32-2173(A)(1)(d)

Yes No N/A Provides for the manner of disposition of all owner’s monies collected by the broker. A.R.S. § 32-2173(A)(1)(e)

Yes No N/A States the terms and conditions of broker compensation. A.R.S. § 32-2173(A)(1)(a) and (i)

Yes No N/A Specifies the type and frequency of reports to the owner. A.R.S. § 32-2173(A)(1)(f)

Yes No N/A States the amount and purposes of monies held by the broker as an operating reserve for emergency and other purposes. A.R.S. § 32-2173(A)(1)(g)

ARS 32-2173(A)(2) provides that the following MAY be included in the agreement. (If part of the property management agreement answer Yes or No, if not, answer N/A.)

Yes No N/A Includes an automatic renewal with at least 30 days advance written notice. A.R.S. § 32-2173(A)(2)(a)

Yes No N/A Provides for reasonable liquidated damages for early termination of the agreement. A.R.S. § 32-2173(A)(2)(b)

Yes No N/A Identifies the licensees and unlicensed persons in the broker’s direct employ who are authorized signers on the property management trust account. A.R.S. § 32-2173(A)(2)(c)

Yes No N/A Requires more than one signature on the property management trust account. A.R.S. § 32-2173(A)(2)(d)

PROPERTY MANAGEMENT RECORDS

Yes No N/A All financial records are kept for 3 years from their date. A.R.S. § 32-2175(C)

Yes No N/A Property management agreements are kept for 5 years from their termination. A.R.S. § 32-2151.01(A)

Yes No N/A Residential leases are kept for the earlier of 1 year from termination of the lease, or until turned over to the owner or owner’s broker at termination of the property management agreement. A.R.S. § 32-2175(A)

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Yes No N/A Nonresidential leases are in individual folders filed chronologically or by other systematic manner. A.R.S. § 32-2175(F)

Yes No N/A Property management agreements are filed using an orderly system easily accessible to the Department. A.R.S. § 32-2175(F)

Yes No N/A Records of finder fees paid are kept for 3 years from their date. A.R.S. § 32-2175(B)

PROPERTY MANAGEMENT TRUST ACCOUNT

Yes No The broker maintains one or more property management trust accounts. If you answered YES, please identify them on Page 9. If you answered NO, skip to the “Additional Explanation” section on Page 8.

[NOTE: BANK ACCOUNT INFORMATION IS REQUESTED SEPARATELY ON PAGE 9. THE DEPARTMENT TREATS THIS INFORMATION AS CONFIDENTIAL AND DOES NOT INCLUDE IT IN A PUBLIC RECORDS INSPECTION REQUEST.]

Yes No N/A A descriptive receipt is maintained showing the disposition of all funds handled on behalf of a principal, identifying or showing the transaction, date, amount and parties. A.R.S. § 32-2151(B)(1)

Yes No N/A Trust account records include a properly descriptive Receipts and Disbursements Journal and Client Ledger for each transaction. A.R.S. § 32-2151(B)(2)

Yes No N/A Trust account Journals and Client Ledgers are in balance with each other and are reconciled monthly with bank statements. A.R.S. § 32-2151(B)(2)

Yes No N/A The broker removes interest earnings in trust accounts at least every 12 months. A.R.S. § 32-2151(B)(2)

Yes No N/A The broker immediately removes any amount in excess of $3,000 of the broker’s money in a trust account. A.R.S. §32-2151(B)(2)

Yes No N/A Authorized signers on trust accounts are limited to licensees and unlicensed persons in the direct employ of the broker. A.R.S. § 32-2174(C)

Yes No N/A Broker deposits owner’s monies into the property management trust account or directly into the owner’s account within 3 banking days. A.R.S. §§ 32-2151(C), 32-2153(A)(9) and 32-2174(B) & (D)

Yes No N/A All trust accounts are descriptively designated as trust accounts. A.R.S. § 32-2174(A)

Yes No N/A A final accounting of a terminated property management agreement is provided to the owner. A.R.S. § 32-2173(C)

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ADDITIONAL EXPLANATION

Please provide further explanation below for any NO answers, or for any answer above for which inadequate space was provided. If you require additional space to answer a question, please include a further written response as part of this submission.

AUDIT DECLARATION AFFIRMATION

As the Designated Broker, I have personally completed or personally overseen the completion of this Audit Declaration and have personally reviewed and verified the responses in the Audit Declaration. I understand the importance of the broker’s duty to exercise reasonable supervision and control in assuring broker compliance with the law and have made diligent efforts to comply in every respect.

I hereby declare and affirm all responses are true, full, complete and accurate to the best of my knowledge. I further understand that any false, misleading or incomplete answers to this Audit Declaration may be construed as a violation of A.R.S. §32-2153 (A)(3), (A)(17), (A)(21), (A)(22) and/or (B)(8).

Printed Name:

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TRUST ACCOUNT INFORMATION - CONFIDENTIAL -

NOTE: THIS PAGE IS REQUIRED WHETHER OR NOT YOU HAVE TRUST ACCOUNTS.

GENERAL/SALES/EARNEST TRUST ACCOUNT

Yes No Broker maintains one or more general trust accounts. If YES, please identify:

Trust Account Title Name and Location of Financial Institution Account Number

1.

2.

3.

PROPERTY MANAGEMENT TRUST ACCOUNT

Yes No Broker maintains one or more property management trust accounts. If YES, please identify:

Trust Account Title Name and Location of Financial Institution Account Number

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

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