Back in July, we began our series detailing ALTA’s Best Practices. After a hiatus, we are picking up where we left off with a brief examination of ALTA Pillar #2
Pillar #2 relates to Escrow Accounting. All of us with Escrow Accounts (yours truly included) must adopt and maintain appropriate written procedures, checklists and controls for their Escrow Accounts allowing for electronic verification and reconciliation. Escrow Accounts must be balanced periodically. While the State Bar requires a minimum of quarterly reconciliations, the best practice, per ALTA, is a monthly reconciliation. Most software programs allow for daily reconciliations, which would be the very best standard to adhere to. Reconciling the Bank Statement with your trial balance is not sufficient. You must perform a three-way reconciliation at least monthly. This additional step relates to files with open balances. Files with open balances should be taken care of as quickly as possible.
Security is tantamount. Utilizing Bank Security Programs such as Positive Pay is highly recommended. Pillar #2 indicates that there should be some segregation of duties enabling for a check and balance system to prevent theft from the account. Background checks on any employees with access to entrusted funds must be performed every three years.