Office Management, Supervision, and Brokerage Operations
Office management tests the designated broker's accountability for everything the brokerage does. Items focus on supervision systems, trust-account mechanics, records, and how the people working under the license are classified.
Supervision and responsibility
The broker is answerable under license law for acts of licensees and unlicensed staff within the brokerage's scope, even without direct knowledge. Effective systems include a written policy manual, review of contracts and advertising before use, transaction checklists with deadlines, onboarding and continuing education, and documented corrective action. Independent-contractor status turns on control and a written agreement, and license law may impose requirements that differ from tax tests.
Trust accounts
- Hold client funds in a dedicated trust account and never commingle them with operating funds.
- Deposit within the statutory window and disburse only with proper authorization.
- Reconcile monthly: bank balance minus outstanding checks and unrecorded charges equals the ledger balance; investigate any variance before disbursing.
- Maintain three-way reconciliation across the bank statement, the book balance and individual client ledgers.
Records and risk
Retain transaction files, disclosures, advertising approvals and reconciliation reports for the required period. Carry errors-and-omissions coverage, document complaints and resolutions, and run a compliance calendar for renewals, audits and training.
Worked example
Escrow bank balance is 212,400; outstanding checks total 8,900; an unrecorded bank fee of 50 appeared. The ledger shows 203,550. Reasoning: 212,400 minus 8,900 minus 50 equals 203,450, which is 100 short of the ledger. That variance may be a deposit in transit, an unrecorded check or a ledger error, and the broker must locate and correct it before any disbursement. A shortage caused by a licensee is a reportable event.
Traps
- Relying on agents to self-report and calling that supervision.
- Running commissions and escrow through one account.
- Reconciling only when an audit is announced.
- Letting unlicensed staff negotiate price or terms.
- Assuming a team name creates a separate brokerage.