8.3 Conversion, Remittance Deadlines & Audit Access

Conversion, Remittance Deadlines & Audit Access

Setup and books are only half of the money chapter. The Act still disciplines the licensee who has a special account but will not pay the seller, will not return an unsold title, or will not open the file when the Division asks. Study one concept and three clocks: conversion, contract remittance, the 30-day written-request standard in 20-15(14), and 24-hour audit production in 20-15(16).

Conversion is using the money; commingling is mixing it

Commingling (20-15(13), 1440.270(f) sentence 1) is mixing other people's funds with personal or ordinary business funds, or failing to keep others' funds in an escrow or trustee account.

Conversion is treating those funds as if they were yours — unauthorized personal or business use. Rule 1440.270(f) states the conversion-style ban in operational language: a licensee shall not disburse monies from any special account for his own personal or business use, except commissions, compensation, fees, advertising, or other expenses incurred pursuant to the terms of the auction listing contract.

Writing a special-account check to pay the auctioneer's truck loan, even with a sticky note that says "replace on Monday," is conversion-style conduct. So is holding seller net proceeds as a personal cash-flow loan, or moving buyer deposits into payroll because "the commission will more than cover it after we settle." Completing a pretty journal does not legalize the debit. 20-15 still allows fines not to exceed $10,000 for each violation, plus probation, suspension, revocation, or refusal to renew.

Practice-bank items sometimes label a late remittance as conversion. That is the right instinct when the firm is using the seller's money. The statutory citation for a written demand that sits unanswered is 20-15(14), taught next — not a homemade "must remit three days after the gavel" rule.

Remit on the contract; 20-15(14) is a 30-day written-request floor

Illinois auction law does not contain a sentence that says "remit net proceeds within X days after the sale." Do not invent one for the exam.

Two separate duties apply:

1. Contract timing. The written auction contract (Chapter 6, 15-10) is where the parties set when the seller is paid. If the listing contract says net proceeds will be remitted within ten business days after the sale, that is the professional deadline the settlement sheet should meet. Pay from the special account, not from operating cash you hope to replenish later.
2. 20-15(14). It is a ground for discipline to fail to account for, remit, or return any moneys, property, or documents coming into the licensee's possession that belong to others, acquired through the practice of auctioneering, conducting an auction, or providing an auction service, within 30 days of the written request from the owner of those moneys, property, or documents.

20-15(14) is broader than a proceeds check. It covers moneys, property, or documents — unsold lots, titles, keys, bills of sale, clerk sheets the owner is entitled to, and leftover deposits. The clock starts on the owner's written request, not on sale day and not on a voicemail. Paying some, but not all, of what the owner requested, or ignoring the letter because "we always pay at the end of the month," still fails the 30-day written-request standard.

A licensee can violate both clocks: late under the contract even if 30 days have not run, and separately late under 20-15(14) if a written owner request sits unanswered for more than 30 days. Meeting 20-15(14) is not a defense to a contract breach, and a contract that is silent on remittance does not erase 20-15(14).

If a PSI item asks "how many days after the auction must the Act be remitted," the correct move is to refuse a fake statutory sale-plus-X-days rule, point to the contract, and keep 30 days from the owner's written request as the 20-15(14) disciplinary floor.

Settlement statement: gross, commission, ads, net

The deal-file settlement sheet (1440.270(c)(2)) is how remittance is documented. It should let a seller, a court, or an IDFPR investigator see the arithmetic:

• Gross proceeds collected (and deposited into the special account).
• Commission / compensation / fee authorized by the listing contract.
• Advertising and other contract-authorized expenses.
• Net remitted to the seller.

Worked figures. A livestock and equipment auction posts $120,000 gross. The listing contract is 8 percent commission, $4,000 advertising (within the 15-10 estimate and 120 percent rule from Chapter 6), and $600 clerk/cashier expense the seller agreed in the writing to pay.

• Commission = $120,000 × 8% = $9,600.
• Total authorized deductions = $9,600 + $4,000 + $600 = $14,200.
• Net to seller = $120,000 − $14,200 = $105,800.

All $120,000 is first escrow money in the special account (270(b), 270(g)). The firm then disburses its $14,200 pursuant to the listing contract (270(f)) and remits $105,800 on the contract timetable. Skipping the special account and sending the seller $105,800 from the operating account while parking $120,000 in payroll is still a 20-15(13)/(15) problem. Rounding the net to "about $106,000" without itemizing ads and commission is a settlement-sheet failure that also makes 20-15(14) accounting harder when the owner later writes.

24-hour record production — 20-15(16)

20-15(16) makes it a disciplinary ground to fail to make available to Department personnel during normal business hours all escrow and trustee records and related documents maintained in connection with the practice of auctioneering, conducting an auction, or providing an auction service within 24 hours after a request from Department personnel.

Tested pieces:

• During normal business hours — not "after the Saturday sale" and not "when the bookkeeper returns from vacation next week."
• Within 24 hours after a request — this is not the 10-day reconciliation clock and not the 30-day owner-request clock.
• All escrow and trustee records and related documents — journals, ledgers, deal files, bank statements, written reconciliation worksheets, listing contracts that authorize disbursements, and the consent and depository notices.

Electronic records still have to be producible in 24 hours. "It's in the cloud and our vendor is closed" is not a 20-15(16) exception. 20-15(19) is a different duty: failing to provide information within 30 days in response to a written request made by the Department. Do not substitute that 30-day general-information clock for the 24-hour escrow-record clock.

Consent to examine and audit is a practice condition

1440.270(d) requires written notice of the depository's name and location and a written consent giving the Division authority to examine or audit any or all special accounts. The PSI handbook lists the Consent to Examine and Audit Special Accounts among the documents required to become licensed. IDFPR's form is required of every auctioneer and auction firm applicant whether or not the applicant currently holds special accounts. If accounts exist, the form identifies the federally insured depository and the persons authorized to withdraw. Part C authorizes the depository to allow a duly authorized IDFPR representative to examine and audit the named special accounts at any time.

That consent is a condition of getting and keeping the license, not a courtesy the firm can put back in the drawer when an audit would be inconvenient. Changing banks requires an updated notice and consent — the form itself is also used when accounts change. Refusing the Division access after signing is both a 270(d) problem and a 20-15(16) production problem. The Division's sample bookkeeping systems under 270(e) do not replace the duty to open the actual journal, deal files, ledger, and reconciliation worksheets when asked.

Putting the clocks on one page

Work every remittance item in four questions: Did the money go into the special account the next business day? Does the settlement sheet itemize gross, contract commission, ads, and net? Does the listing contract set a pay date the firm missed? Has the owner made a written request that is now more than 30 days old? If an investigator is at the door, the additional question is whether the escrow records can be produced within 24 hours during normal business hours. Those are the tested facts. A made-up "must mail the check three days after the sale" statute is not among them.