Trust Accounting, Records, and Professional Conduct
Trust Fund Basics
Client money held by a manager is trust money. A candidate must understand the requirement for a separate trust bank account, the prohibition on commingling trust funds with the manager's operating funds, and the rule that trust funds may not be used for the manager's benefit. Traps include paying the management fee directly from the trust account without an authorized debit, or using one owner's funds to cover another owner's expense.
Records and Reconciliation
Know the records a manager must keep: rent rolls, tenant ledgers, owner statements, bank reconciliations, and receipts. Understand the monthly three-way reconciliation among the bank balance, the book balance, and the sum of individual client ledgers. A common trap is a reconciliation that balances to the bank but not to the client ledgers; the ledgers must reconcile individually.
Reporting and Disbursement
Owner statements should show rents collected, expenses, fees, and the ending balance. Disbursements require documented authority. Understand the audit trail: every deposit and withdrawal should be traceable to a source document.
Professional Conduct
Conduct rules include honesty, confidentiality, competence, avoiding conflicts of interest, and handling complaints fairly. A trap is a manager buying a property they manage without disclosure and consent.
Worked Example
Bank balance $50,000; book balance $50,000; client ledgers total $49,700. The $300 difference is an unresolved item and must be investigated, not written off.