Are investigators entitled to conduct a review at any time?

As RIBO Reg.S.17 (3) states, “the Manager, Council or a committee thereof or their representative is entitled to inspect the books and records required to be kept under this section at any time”.

How are brokers selected for a spot check?

RIBO investigators decide which area they will visit in a given week. They select a list of brokerages from the chosen area that have not been spot checked in the past three to four years and randomly draw the brokerages to be visited.

Should accounting records be retained for a specified period of time?

Accounting records must be retained for a minimum of six years prior to the most current fiscal year end.

What are the most common problems addressed when RIBO does a spot check?

The most common problems are as follows:

  • trust deficits, insufficient books and records.
  • books and records not kept up to date preventing the calculation of a trust position.
  • aged accounts receivable listings not being produced on a regular basis.
  • accounting records not being retained for the six years prior to the most current fiscal year end.

What is to be reported as bank balances?

Some brokers report the account balance shown on the bank statement without adjustment for outstanding cheques issued but not cashed as of the statement date. Brokers must ensure that only reconciled balances are reflected on the position report.

What should be included in total premium receivables?

From time to time, receivable totals are overstated by the inclusion of pre-billed items (premiums for policies with effective dates occurring after the reporting period). These pre-billed receivables should be excluded.

What are the most common problems associated with the reported over 90-day premium receivable balance?

Frequently, brokers report the net over 90-day receivable balance. In essence, the net trust position would be overstated as the over 90-day credits owing to insureds are used to reduce the true over 90-day receivable balance. When reporting on Line 3 of Form 1, please ensure that the credits are added back to the net figure to reflect the true over 90-day balance.

What are the most common problems associated with trust investments?

A number of trust investments do not comply with all the requirements of Reg. 991, section 1. For example: In most instances, trust investments are not properly denoted “in trust”; others are not in the name of the registered entity; others are not eligible instruments and yet others are not redeemable on demand as required by the Act.

Are trust assets to be used as collateral or pledged as security for a bank loan?

Bank managers should realize that in the event of a default, broker’s trust assets cannot be ceased. Brokers, however, are obliged to see that trust assets are specifically excluded from any assignment or pledge document.

What are the common errors in respect to insurer payables?

Amounts owed to insurers are improperly reduced by the amount of direct bill or monthly payment plan commissions expected from insurance companies. In some cases, brokers report only the company billings for the two months proceeding the reporting date although they owed some or all of the prior month accounts to insurers.

In a number of cases, the payable balances listed in the general ledger are not reasonably stated. Brokers should make sure that the accounts payable are either reconciled or at least reviewed on a regular basis.

Should binder billed policies be reflected in the trust position?

When a binder billed policy has been invoiced, the asset is immediately recognized. As such, the corresponding liability should be included in the net trust calculation.

Brokers must ensure that all binder-billed policies have been aged in the manner in which all premiums receivable balances are aged, using the latter of the effective date or the invoice date.

What should be reported as retail sales tax payable?

Retail sales tax is comprised of two components:

  • The amount which has been invoiced to the insured but not collected by the broker.
  • The amount which has been collected by the broker but not remitted to the provincial treasurer.

As long as the retail sales tax invoiced is reflected as a premium receivable and the retail sales tax collected has been deposited in the trust bank account, both components must be reflected as a trust liability.