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New Ohio Escrow Account Regulations

With a December 31 deadline not too far away, Barnes Dennig would like to help educate you on how a recent ruling by The Ohio Department of Insurance (ODI) might affect your company. The ODI has filed revised rules pertaining to Senate Bill 185, the Ohio Home Ownership Protection Act, which will require annual “reviews” of title agency escrow accounts. Final rulings are expected to become effective mid-July 2008.

What is the “Annual Review”?
The Ohio legislature has passed a new review requirement for title agents. The annual review procedures require the testing of agent escrow account reconciliations as an agreed upon procedures engagement defined in "Statements on Standards for Attestation Engagements" issued by the American Institute of Certified Public Accountants.

Who is impacted by the new review requirement?
Every licensed title insurance agent who handles the funds of clients or third parties shall have an independent review made of its escrow accounts each year.

When is the review required to be performed?
Title agents must have an independent review made of their escrow accounts every year by December 31, for the preceding 12 months ending August 31. Review procedures should be scheduled as soon as possible with your independent reviewer in order to comply with the December 31 deadline. The title agent must file the annual review report and accompanying schedules with its title insurance company by January 31.

Who is an “independent reviewer” that meets the qualifications?
The independent reviewer must be a certified public accountant (CPA). The independent reviewer may not be an employee of a title insurance company, nor may the reviewer be an employee of or hold any ownership interest in:

  1. either the business entity being reviewed
  2. any affiliates of the business entity reviewed
  3. any owners of the business entity being reviewed, or
  4. any financial institution or its affiliate in which one or more escrow accounts subject to review under this rule are held.

What is the scope of the procedures?
The scope of testing will depend on the number of escrow accounts and the number of transactions conducted in those accounts. The reviewer will request Company account and affiliate information as well as escrow account reconciliations. Account reconciliation testing will involve sampling transactions from two different months during the period under review.