core-standards

NAR Organizational Alignment - Core Standards FAQs

Originally Published: June 2014
Last Update: December 8, 2016 - View the December 2016 FAQ Supplement

Download a printer-friendly PDF of the FAQ document (PDF: 709 KB)

These FAQs are provided to assist local and state REALTOR® association leaders and association executives in understanding the Organizational Alignment Core Standards program and how to comply with its requirements. Periodically, the FAQs will be enhanced and updated to address arising issues and questions. Readers are encouraged to utilize the most recent version of the FAQs.

1. General Information

1.1. When do the Core Standards become effective?

The Core Standards became effective upon approval by the National Association of REALTORS® Board of Directors on May 17, 2014.

1.2. Do the Core Standards replace the Organizational Standards and the Organizational Standards Certification process?

Yes.

1.3. We are currently involved in certifying our compliance with the Organizational Standards. Should we continue that effort?

No. Because the Organizational Standards have been rescinded, there is no need to certify compliance with them.

1.4. When must local and state associations comply with the Core Standards?

Beginning July 1, 2016 the compliance cycle was changed to the calendar year. The next compliance deadline is December 31, 2017, and will remain December 31 in subsequent years. (Revised 12.1.16)

1.5. What will the certification period be for subsequent years?

As noted at FAQ 1.4, beginning July 1, 2016, the Core Standards compliance cycle was transitioned to the calendar year. (Revised 12.1.16)

1.6. What are the consequences for not meeting the Core Standards?

The consequence of not achieving compliance with the Core Standards is loss of charter status as a local or state association of REALTORS®.

1.7. If the state association does not confirm our local association’s compliance with the Core Standards by December 31st is that determination subject to review by NAR? What is the process?

No association will lose its charter without first being given an opportunity to appear before a panel of at least five (5) members of the NAR Association Executives Committee to show cause why the association’s charter status should not be terminated. In such cases the recommendation of the panel will be reported to the NAR Board of Directors for final action. (Revised 12.1.16)

1.8. Must the activities mandated by the Core Standards begin and be completed during the same compliance cycle? Will consumer outreach efforts, for example, initiated before July 1, 2016 satisfy the Core Standards for the third compliance cycle?

As long as the activity continued into the current compliance cycle, the fact that it was "initiated" before the start of the cycle doesn't make it ineligible. (Added 8.7.14) (Revised 12.1.16)

1.8.1. Certain of the suggested "Advocacy" and "Consumer Outreach" activities in the Compliance Tool often take place over a period of months, sometimes overlapping compliance cycles. Must they begin and be completed during the same compliance cycle?

As long as the activity was being conducted during the current compliance cycle, the fact it was "initiated" during the prior cycle doesn't make it ineligible. (Added 1.12.16)

1.9. Will the NAR Board of Directors vote on whether associations' charter will be revoked?

The charter revocation process will begin automatically after an association's compliance with the Core Standards isn't confirmed by the state association, and that determination is shared with NAR via the Compliance Tool.  If an association appeals the state association's conclusion that the local association had not met the Core Standards the local association will have an opportunity to appear before a five (5) member panel of the NAR Association Executives Committee to show cause why the association's charter shouldn't be revoked.  The panel's recommendation will be reported to the NAR Board of Directors for final action. If the Directors determine the charter should be revoked, the revocation will be effective immediately.  Revocation of the charters of associations that don’t challenge the state association’s determination of non-compliance will also be acted on by the Board of Directors during the REALTORS® Legislative Meeting in May. (Revised 4.29.15 and 12.1.16)

1.9.1. If our association is not certified by the state association as compliant with the Core Standards, and if we don't elect to appeal the state association's determination, when would our charter as a Member Board be officially revoked?

Hopefully all associations will be able to achieve compliance with the Core Standards, either on their own or by working jointly with another association (see FAQ 2.6 for alternative methods of achieving compliance). That said, if your association is not certified by the state association, and if you don't elect to appeal the state association's determination, your charter would be revoked by the NAR Board of Directors during the REALTORS® Legislative Meeting in May each year. (Added 4.29.15) (Revised 12.1.16)

1.10 If our charter is revoked, how long do we have to dissolve the corporation? And what happens to the corporation's assets?

Revocation of an association's charter doesn't automatically result in the corporation being dissolved. The future of the corporation will be determined pursuant to the provisions of the articles of incorporation and the association's bylaws. The decision may be to wind up the affairs of the corporation and dissolve or, alternatively, to continue to function as a real estate association, though not as a member of NAR.

If the corporation is dissolved, the assets would be paid out pursuant to the relevant bylaw provision. Generally the bylaws of associations of REALTORS® (Article XVII in the NAR model association bylaws) provide that upon dissolution the assets will be paid to the state association or to another non-profit, tax exempt organization. (Added 8.7.14)

1.11. A member of one of our local associations is concerned that if she pays her dues to her local association and it is subsequently determined that association did not satisfy the Core Standards and its charter is revoked, she will have to join a different local association and pay dues again this year. I think she is hoping for a credit in the event this occurs.

First, the vast majority of associations meet the Core Standards each year.

Second, no association will lose a charter until the NAR Board of Directors acts in May each year.

Third, if an association were to lose its charter, its territory reverts to unassigned status. At that point members of the former association could choose to be direct members of the state association and NAR (assuming the state association accepts direct members).

Last, given the spirit of collegiality and cooperation that's a hallmark of REALTOR® associations, it's hoped other area associations would welcome those members, and make their transition as easy and economical as possible. And, it shouldn’t be overlooked that the state and national dues allocations would have already been paid, and only the local allocation would be in play at that point. (Added 4.29.15) (Revised 12.1.16)

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2. Compliance Issues

2.1. What must we do to meet the Core Standards?

The Core Standards themselves spell out what's required of local and state associations to maintain their charters. In addition, an online compliance certification system (the "Compliance Tool") has been developed to facilitate tracking and reporting compliance. The system details the specific information required to demonstrate compliance. (Revised 9.26.14)

2.2. Will NAR develop an online compliance reporting/enforcement database?

Yes.  Please refer to the answer to question 2.1.

2.3. How does the reporting/enforcement database ("Compliance Tool") function?

The Compliance Tool provides simple, objective determiners for associations to confirm and/or demonstrate they've met the Core Standards requirements for the current cycle. (Revised 9.26.14)

2.3.1. I'm an association CEO. Can I delegate authority to another member of my staff to access the Compliance Tool and complete the certification form?

Yes. Follow this link and enter the requested information. Please note that a NRDS ID number is required for all secondary users. (Added 12.10.14)

2.3.2. Our inaugural and installation of officers is soon. Will our soon-to-be former president continue to have access to the Compliance Tool, and when will our new president-elect have access?

Two things need to happen to effect the changes. First, the association's officer information needs to be updated in NRDS. Once that happens, the next time an authorized user enters - and saves - information in the Compliance Tool, the updates will occur automatically. (Added 12.24.14)

2.3.3. I'm the Association Executive for 3 associations of REALTORS®. When I go into the Compliance Tool, I'm able to access two of the associations, but not the third? What should I do?

The first thing to do is check NRDS to be sure your NRDS number is included in the AE field for all three associations. Then go to the Local Association Dashboard in the Compliance Tool for one of the associations you are already accessing. You'll see "If you are the Association Executive for additional Associations add them here." Click on "here" and add the additional association. (Added 4.6.15)

2.3.4. We have quite a few financial policies and I'm not able to attach the consolidated document to the Compliance Tool. What can I do?

Some associations experienced difficulty attaching documents to the Compliance Tool. The issue in each case was the size of the file. Files cannot be larger than 10 megabytes. If your document is larger than that, you could reformat it as two (or more) documents, and attach them separately. Downloading the document to Dropbox and adding the link to the Compliance Tool is another way to do it. https://www.dropbox.com/help/topics/sharing_files_and_folders

Also, if you're uploading an image or a pdf, it could be resized and made smaller. (Revised 1.12.16)

2.4. What is the role of the state association in determining whether local associations meet the Core Standards?

Each year local associations will use the online compliance certification system ("Compliance Tool") to submit the required Core Standards information to the state association for review and validation. By January 30th each year, each state association, using the Compliance Tool, provides NAR with the names of their local associations compliant with the Core Standards. (Revised 1.12.16 and 12.1.16)

2.4.1 What must the state association do to determine whether local associations’ policies and procedures conform to local, state and federal laws?

It is not contemplated that state associations will be responsible for ensuring that local associations’ policies and procedures do not violate all potentially applicable laws and regulations. The state association will need to verify that state and federal tax returns have been filed, and that any other required corporate filings have been made. (Added 7.3.14)

2.4.2. Can the state associations view the compliance certification forms of local associations who've started to complete - but haven't submitted - the online form in the Compliance Tool?

State associations can view local associations' completed/submitted certification forms, and forms that associations have started to compile that aren't completed (or that haven't been submitted). Additionally, automated notices of submission and approval were added to the Compliance Tool in January, 2015. (Added 12.10.14) (Revised 3.9.15)

2.4.2.a. I'm the state AE. We're trying to help all of our local associations with the Core Standards but two of our local associations are missing from the Compliance Tool. They are listed accurately in the NRDS database. Why don't they appear in the Compliance Tool?

They will appear in the Compliance Tool - once they begin using it. Local Associations do not appear in the Compliance Tool until they begin to complete the certification form (Compliance Tool). State associations may want to contact "missing" local associations and remind them about the annual December 31 deadline. (Added 3.9.15) (Revised 12.1.16)

2.4.3. I submitted my compliance information. Now I need to add additional information. Can I get it back to make changes?

Yes. You will need to contact the state association. They will need to log on, go to "View Core Standards forms", click on "Return to association", and include a comment in the "comment" field. (Added 12.10.14)

2.5. Will state associations need to develop reporting systems/software? Or is it anticipated that all state associations will use the NAR-provided database?

It’s anticipated all state associations will use the NAR database.

2.5.1. What "proof" will local associations need to provide their state association to demonstrate compliance?

Many of the compliance criteria simply request that examples be submitted using the compliance database. In cases where a state association needs additional information to make a knowledgeable compliance determination, additional information may be requested from the local association.

It's important to keep in mind throughout the process that trust - at all levels of the REALTOR® organization - is essential to successful implementation of this effort. The profession itself exists on trust. Clients and customers trust the REALTORS® they work with. REALTORS® need to - and do - trust each other. Associations rely on the word of their members. Members need to be able to rely on what their association tells them. The representations made via the compliance database will be attested to by each local association's elected president and president-elect (or equivalent officers) as well as by the association's chief staff. Except in the most unusual circumstances, their assurance that the information shared via the compliance database is truthful and accurate to the best of their knowledge should be sufficient "proof". (Added 8.7.14)

2.6. What options/alternatives are available to local associations that have difficulty in meeting the Core Standards?

Given the goals of the Organizational Alignment/Core Standards program, some associations may find the needs of their members will be best served by merging with another association. Local identity, something understandably important to associations of any size, can be retained in large measure through community-specific chapters or councils of local associations. The Association Merger Procedures are available at www.nar.realtor. Additional information on mergers - and establishing chapters can be found at https://www.nar.realtor/ae/manage-your-association/chapter-formation.

Shared services is another option/alternative for associations that anticipate difficulty meeting the Core Standards. State associations might consider conducting a shared services workshop for local associations that might benefit from using shared services. Information on www.nar.realtor includes workshop materials and facilitator resources available at https://www.nar.realtor/ae/manage-your-association/shared-services (Revised 1.12.16)

2.6.1. Question 2.6 (above) refers to "chapters or councils of local associations" as a possibility for associations that merge with another association(s). Are there chapter models or other resources available?

Community-based chapters give associations dissolving either as the result of a merger or otherwise a way to retain a local presence and identity.

Chapters are sub-units of an existing, chartered local association of REALTORS®, with that association of REALTORS® being the entity chartered by NAR. In many cases, chapters are created when two or more associations form a larger "regional" association. In other cases, associations dissolve and surrender their charter with the understanding that another association would request assignment of the first association's former territory. Where an association dissolves without merging with another association, its territory becomes "unassigned", and it's important to keep in mind that the now-unassigned territory may be requested by more than one association.

Chapters give associations that surrender their charters a way to retain their identity and presence in their community. Please note that use of the term REALTOR® in a chapter's name must be in connection with the parent organization, e.g. The _______ Chapter of the _______ Association of REALTORS®.

Chapters' structure, as well as any privileges and responsibilities of chapters, are determined locally, often during merger discussions/negotiations. These and other key questions should be addressed with specificity in the "parent" association's bylaws or other governing documents. Comprehensive information on establishing and operating chapters is available on www.nar.realtor at http://www.nar.realtor/ae/manage-your-association/chapter-formation. (Revised 1.12.16)

2.7 Is there an ongoing professional development requirement for associations chief paid staff ?

Yes, each year the association’s chief paid staff officer must complete at least six (6) hours of REALTOR® association professional development. Training meeting the requirement is available annually at the NAR Association Executives Institute. Similar programs are available in many states. Receipt of the RCE designation is also deemed to satisfy the requirement – but only for the year in which it is received by the chief paid staff member.

It should also be noted that effective at the beginning of the third compliance cycle (July 1, 2016-December 31, 2017) this requirement applies even where an association has no paid staff. In associations with no paid or salaried staff, the individual (often an officer or director) primarily responsible for performing the functions ordinarily carried out by paid staff in other associations must complete at least six (6) hours of REALTOR® association professional development during each compliance cycle. (Added 7.3.14) Revised 12.1.16)

2.7.1 Our association is small but flourishing. We have no paid or salaried staff. Does the Core Standards professional development requirement for “chief paid staff” apply to us?

Yes. Starting with the third compliance cycle (July 1, 2016-December 31, 2017) the professional requirement was extended to apply to association with no paid staff. In those associations the individual (most often an officer or director) primarily responsible for performing the functions that would be carried out by paid staff in other associations must complete at least six (6) hours of REALTOR® association professional development during each compliance cycle. (Added 12.1.16)

2.8 Must the professional development training required of associations' chief paid staff be "in-person" or will relevant on-line and "distance learning" programs satisfy the requirement?

While attendance at in-person educational programs like the NAR AE Institute and similar programs conducted by state associations is an optimum learning experience because of the opportunity to interact with peers face-to-face, it should also be considered that much of the educational offerings available to REALTORS® from NAR (including REALTOR® University) and its Institutes, Societies and Councils is delivered online. What's important here is that the program addresses management/administration of real estate associations. Where a question arises about the relevancy of programming offered in satisfaction of this requirement, the state association could require documentation or explanation of how the course related to real estate association management. Given the broad experience and skillsets required of association executives, it's anticipated this requirement will be construed liberally. (Added 8.7.14)

2.8.1. Are there professional development opportunities available through NAR?

Yes. You'll find a comprehensive list of programs and courses available through NAR in FAQ 8.3.2. (Added 12.10.14)

2.9 How will consistent application and enforcement of the Core Standards be assured from one state to another? How will the state associations be "policed"?

The simple answer is that it's anticipated that each state association will make consistent, objective, good faith efforts to evaluate the information provided by their local associations in determining compliance. Obviously, this requires significant trust between all levels of the REALTOR® family. (Added 8.7.14)

2.10 Can state associations require local associations to submit their compliance information prior to December 31 each year?

Yes. State associations can set their own deadlines for their local associations to submit information demonstrating compliance with the Core Standards. Additionally, while the deadline for local associations to submit compliance information using the compliance database is December 31, state associations will have an additional 30 days (until January 30) to certify their local associations' compliance status to NAR. (Added 8.7.14) (Revised 12.1.16)

2.11. Can we attach video and audio files to the NAR Online Compliance Tool?

The Compliance Tool does not host video or audio files, but loading the file on your association's website and posting a link to it in the Compliance Tool is one way to make those files available to the state association. Downloading files to Dropbox and adding the link in the Compliance Tool is another way to do it. You can find information about using Dropbox at https://www.dropbox.com/help/topics/sharing_files_and_folders.

Additionally, some associations have downloaded videos to YouTube and linked to them from the Compliance Tool. (Revised 1.12.16)

2.12. Must each of the 62 entries in the Compliance Tool be answered?

While many of the items in the Compliance Tool require a response, there are exceptions. For example, Section III, Consumer Outreach, includes twenty-eight examples of activities that would meet the Core Standards. As established in the Core Standards,  every association needs to conduct at least four meaningful consumer engagement activities annually, including at least two activities demonstrating how the association is the “Voice for Real Estate in its market, and at least two activities demonstrating the association’s involvement and/or investment in the community.

  1. Being the “Voice for Real Estate” -­‐ promoting market statistics and/or real estate trends and issues (e.g., release through press releases, interviews, etc. of MLS statistics, local market statistics, NAR research reports, local/state analysis of NAR statistics, etc.)
  2. Community involvement and investment -­‐ promoting the value proposition of using a REALTOR® and/or engaging in community activities which enhance the image of the REALTOR®, such as organizing human resources (e.g. participating in a Habitat for Humanity build) or conducting fundraising activities to benefit local community or charitable organizations.

Additionally, activities not specifically described in the Compliance Tool can be reported in the Compliance Tool. An "Other" entry has been added to both of the subcategories under Consumer Outreach, and associations can explain how they've been the "Voice for Real Estate", and report other activities demonstrating the association's "Community Involvement and Investment. (Added 3.9.15) (Revised 12.1.16)

2.13. I'm the state association board services director and I'm responsible for confirming our local associations' compliance with the Core Standards. I understand why we can't review our local associations' strategic plans (we're considered to be competitors), but how do we confirm they have a compliant strategic plan?

All that's required is the state association review the certification information in the Compliance Tool to ensure the local association has certified that  its strategic (or business) plan has actionable implementation strategies; that it was reviewed and discussed by the board of directors during the current compliance cycle, including the date of the review and discussion; and that the date NAR approved the plan is shown. (Added 4.6.15) (Revised 12.1.16)

2.14. The AE of one of our smaller associations recently resigned unexpectedly. They have no other staff, and it's unclear when the position will be filled. We're a state association and, when they submit their compliance certification using the Compliance Tool, we will review it to determine if they've met the Core Standards. At this point can state staff help the local association's REALTOR® leadership complete the required certification?

Yes. Keep in mind that in addition to the AE, each association's president and president-elect can access the Compliance Tool, and can enter information for their association. That said, there's no reason why the state association or, for that matter, another local association couldn't provide assistance. (Added 4.6.15)

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3. Mergers

3.1. What financial and other resources are or will be available from NAR to facilitate mergers?

Grants at a minimum of $15,000 and a maximum of $25,000 will continue to be available to merged associations until June 30, 2016. Grant amount are calculated at $25 times the number of primary REALTOR® members in the newly-merged association but in no case will exceed $25,000. The merger grants are available for two years because in some cases merger discussions may not start until after the associations first attempt to meet the Core Standards on their own; also because merger negotiations can take considerable time to complete.

Special Supplemental Note to FAQ 3.1 – December, 2016

At the 2016 REALTORS Legislative Meeting, the NAR Finance Committee extended the availability of merger grants to the third compliance cycle (July 1, 2016 – December 31, 2017) with the caveat that the extension be limited to 25 additional grants with the total funding limited to $625,000.  (Added 12.1.16)

Special Supplemental Note to FAQ 3.1 - October 29, 2014

In order to provide a greater level of support to the local association community as they consider mergers to better serve members and achieve compliance with the Core Standards, the NAR Finance Committee has expanded eligibility for merger grants as follows:

The initial merger grant process, as outlined above, will continue. Initial mergers will be funded at $25 per member in the resulting merged association, with the minimum grant remaining $15,000 and the maximum grant also remaining $25,000. As initially approved and published, only one grant of not more than $25,000 was available to any merged association; any subsequent additional merger activity involving that association was not eligible for a further merger grant.

Effective immediately, funding for subsequent or "second generation" merger grants are available at the same rate of $25 per member, up to a maximum of $25,000 for an additional merger, but will be computed only on any incremental gain in membership to the final merged organization. The calculation of such grants will not include members who were included in the calculation of another merger grant. These supplemental merger funds will be available through the end of merger grant period, June 30, 2016.

Example: If an association that has 2,000 primary REALTOR® members merges with an association with 500 primary REALTOR® members (the "first merger"), the resulting entity would be eligible for a grant of $25,000. If that newly-merged association is later involved in a subsequent merger under which the previously-merged 2,500-member association now merges with a different 500-member association, an additional grant of $12,500 (500 additional members times $25 = $12,500) will be available. The additional grant (based on the second merger) cannot include the first 2,500 members (the total as a result of the first merger) because they were previously included in an earlier grant calculation. Only the additional incremental primary REALTOR® members added as a result of the second merger can be considered in this next grant calculation.

A comprehensive NAR Merger Kit and the white paper An Alternative to Merging are available . (Revised 1.12.16)

3.1.1. Our association previously merged with another association, resulting in the newly-merged association having eight hundred primary REALTOR® members. We requested - and received - an NAR merger grant of $20,000 (800 members times $25). We are now considering a merger with another association which, if consummated, will increase our membership to approximately nine hundred fifty primary REALTOR® members. Would we be eligible for a second merger grant, and if we would be, how would it be calculated?

You would be eligible for a second merger grant. It would be based on the one hundred fifty additional primary REALTOR® members gained through the second merger or $3,750. (Revised 10.29.14)

3.1.2. Our association has 250 members. We are in the process of completing a merger with another association that will result in the newly-merged association having 400 primary REALTOR® members. We realize the merger grant available from NAR would be greater than 400 members times $25 since the minimum grant amount is $15,000. Our question is if we later merge with still another association bringing the total of primary REALTOR® members to 500, would we then be eligible for a second merger grant of $15,000? If not, what amount would we be eligible for?

Under these circumstances, a second merger grant would be available. It would be calculated on the number of additional primary REALTOR® members gained through the second merger (100 additional primary REALTOR® members times $25 = $2,500). However, the calculation must exclude any of the 100 additional primary REALTOR® members gained if they were previously included in the calculation of different merger grant. (Revised 10.29.14)

3.1.3. Following up on question 3.1.2, what if we complete a third merger resulting in an association with 750 primary REALTOR® members. Would we then be eligible for another merger grant, and what would it be.

Yes, a second grant would be available. Because the initial grant was the minimum payable ($15,000) which is equivalent to 600 members times $25, the additional funds available as a result of the second merger would be $3,750 (150 members times $25) Members included in a previous merger grant calculation cannot be included in the calculation of the grant. (Revised 10.29.14)

3.1.4. We are a large association involved in merger discussions with several smaller associations. One of the mergers is about to be finalized. It will result in the newly-merged association having eleven hundred members. We realize the grant money from NAR is capped at $25,000. But if the pending merger is consummated and the newly-merged association later merges with still another association - resulting an association with twelve hundred and fifty primary REALTOR® members - are we eligible for another $25,000 merger grant?

The association would be eligible for a subsequent merger grant, but that grant would be calculated on the number of additional primary REALTOR® members gained (150 additional primary REALTOR® members times $25 = 3,750). But keep in mind that any of the 150 additional primary REALTOR® members gained who were already included in the calculation of another merger grant cannot be included in the calculation of a subsequent merger grant calculation. (Revised 10.29.14)

3.1.5. Our recently merged association (formerly Association A and Association B, now Association AB) is considering merging with Association XY. Until recently, Association XY was two associations - Association X and Association Y. They merged and the resulting association is Association XY.

Following the merger, Association AB had 1,500 members. We applied for and received an NAR merger grant of $25,000.

When Association X (300 members) and Association Y (200 members) merged, the resulting Association XY had a total of 500 primary REALTOR® members.

Our question is when Association AB merges with Association XY to create Association ABXY with 2,000 primary REALTOR® members, will the newly-merged association be eligible for another NAR merger grant? If it is, how will the amount be calculated?

Under these circumstances a third NAR merger grant is not available. While this merger brings an additional 500 primary REALTOR® members to the association now known as ABXY, the two earlier merger grants (to AB and to XY) were based on the size of the membership of the resulting associations (1,500 members of AB and 500 members of XY). Since the number of primary REALTOR® members in the new Association ABXY is not greater than the memberships of AB and XY at the time they each received merger grants, they are not eligible for an additional grant.

If the facts were different, the outcome could be different. If, for example, Association AB gained an additional 100 primary REALTOR® members after A and B merged, and now AB and XY merge, a merger grant could be made based on the 100 members who weren't included in the calculations of either the AB or the XY mergers. So an additional grant of $2,500 would be available (100 additional primary REALTOR® members times $25) (Added 10.29.14)

3.1.6. We are a small association in what some would call a “remote” area. There are no other associations close enough to make a merger practical or feasible. After careful consideration our leadership has concluded that we may not be able to meet the Core Standards and we may need to dissolve the corporation and relinquish our charter as a Member Board. While this isn’t a merger, per se, there will still be costs related to winding up the affairs of the association (e.g. cancelling our lease, staff severance, etc.). Is a “merger” grant from NAR a possibility under these circumstances?

Your situation was discussed by the NAR Finance Committee at the 2014 Annual Convention (REALTORS® Conference) where it was determined that applications for funds in circumstances such as yours will be considered by the Committee on a case by case basis through June, 2016. In such cases, the merger grant “minimum” of $15,000 would not be applicable, and any grant made would be based on the number of primary REALTOR® members in the “dissolving” association (i.e. $25 times the number of primary REALTOR® members). (Added 11.13.14)

3.1.7. Our small association explored the possibility of merging with a larger nearby association, and our elected leaders decided surrendering our charter and dissolving the corporation is preferable to expending the time, effort and money that considering, negotiating and implementing a merger would involve. We polled our membership, and most of our members felt if that happens, they'd likely become members of the other association. We realize the territory currently assigned to us by NAR would revert to "unassigned" status, and that other associations could request it be added to their existing jurisdiction.

While the costs of dissolving will be less than the costs of merging, there will still be some costs (e.g. terminating our MLS vendor contract, buying out our office lease, severance pay, etc.). Our question, though, is whether an NAR "merger grant" would be available if we dissolve our association rather than merge with the other association?

As noted in the answer to FAQ 3.1.6, situations like you describe were discussed by the NAR Finance Committee, and the Committee determined that applications for funds in circumstances like yours will be considered on a case by case basis until June 30, 2016. The merger grant "minimum" of $15,000 will not apply, and any grant made would be based on the number of primary REALTOR® members in the "dissolving" association (i.e. $25 times the number of primary REALTOR® members). (Revised 1.12.16)

3.2. What can we use the merger grant for?

Merger grants may be used to cover any costs incurred in bringing about a successful merger of two or more associations, such as severance packages for AEs, technology costs, legal fees, facilitator fees, travel expenses, and administrative costs.

3.2.1. After we receive a merger grant, how long do we have to use the money?

There is no deadline for spending grant monies. (Added 3.9.15)

3.3. Is there a directory of NAR-approved merger facilitators?

The directory of NAR-approved merger facilitators is available at www.nar.realtor. (Revised 8.7.14)

3.4. (Deleted 12.8.14)

3.5. (Deleted 12.8.14)

3.6. How do we obtain financial assistance for mergers from NAR?

The merger grant program is administered by the NAR Finance Committee through the Finance Division. Grant applications are available on www.nar.realtor. (Revised 9.26.14)

3.7. If three (or more) local associations merge, can each request funding from NAR?

Merger grants will only be available to successfully merged associations, based on the number of primary REALTOR® members in the resulting merged association. Secondary members (i.e. those who hold their primary REALTOR® membership in another association) cannot be included in this calculation. (Revised 9.26.14)

3.8. How will the amount of financial assistance from NAR be determined?

Please see the answer to question 3.1.

3.9. Our association completed a merger with two other associations prior to the 2014 REALTOR® Party Conference and Trade Expo. Will “merger funding” be available to us? 

No. Please see the answer to question 3.1.

3.10. Can we retain our local identity/autonomy by becoming a chapter or council of a local association?

Yes. As discussed in the answer to question 2.6, a degree of local identity and presence can be maintained by establishing community-specific chapters or councils of local associations. Please also see Question 2.6.1 for further information on the relationship between local associations of REALTORS® and their chapters. (Revised 8.7.14)

3.11. Is there a difference between a chapter and a council?

For purposes of local associations of REALTORS®, the terms are synonymous.

3.12. Are chapters and/or councils chartered by NAR?

No. Only local and state associations of REALTORS® are chartered by NAR.

3.13. If we become a chapter of another local association can we retain our current name (e.g. “ABC Association of REALTORS®”)?

Technically, no. But essentially the same result can be achieved. When two (or more) associations of REALTORS® merge, there is only one resulting association. Let’s say the ABC association and the DEF association merge, and the resulting merged association calls itself the XYZ Association of REALTORS®. If the members of the association formerly known as the ABC Association of REALTORS® wanted to form a chapter, it could be known as the ABC Chapter of the XYZ Association of REALTORS®.

3.14. Can we contract now with someone to facilitate our merger?

If you contract with a facilitator now – or later – remember the facilitator grant will be disbursed by NAR only after approval of the merger by the membership of the merging associations, so you will want to make that clear in your agreement with the facilitator.

3.15. Does NAR set merger facilitators’ fees?

No. That is a matter of agreement between the associations considering merging - and the facilitator.

3.16. I have an insurance question. Recently a smaller association merged with our association. The president of the now-dissolved association is asking whether she and the other officers and directors would be covered under the NAR-provided professional liability insurance if they would be sued related to their leadership roles in the operation of that association.

The former association is covered for claims related to activities prior to and up to the date of the merger. (Added 4.6.15)

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4. Strategic Plans

Important Note: The strategic planning grant program ended June 30, 2015.

4.1. Do the Core Standards require associations to have a strategic plan? And what’s required during each compliance cycle?

Yes, every local and state association must have a strategic (or business) plan and must annually certify that its board of directors has reviewed and discussed the plan. Associations must also annually certify that their strategic (or business) plan includes an advocacy component, a consumer outreach component, and actionable implementation strategies. (Revised 12.1.16)

4.2.  (Deleted 12.1.16)

4.2.1 (Deleted 12.1.16)

4.3.   (Deleted 12.1.16)

4.3.1  (Deleted 12.1.16)

4.3.2  (Deleted 12.1.16)

4.4. Is there a directory of NAR-approved strategic planning facilitators?

The directory of NAR-approved strategic planning facilitators is available at www.nar.realtor. (Revised 8.7.14)

4.5.  (Deleted 12.8.14)

4.6. (Deleted 9.26.14)

4.7.  (Deleted 12.1.16)

4.8.  (Deleted 12.1.16)

4.9. What must our strategic plan include to meet the Core Standards?

Every local and state association must annually certify that their strategic or business plan includes an advocacy component, a consumer outreach component, and actionable implementation strategies. Each year every association must also certify that its board of directors has reviewed and discussed the plan. (Revised 7.3.14 and 12.1.16)

4.10.  (Deleted 12.1.16)

4.11. Does NAR set strategic planning facilitators’ fees?

No. That is a matter of agreement between the association and the facilitator.

4.12. Our association has strong, collegial relationship with the state association. However, we are also competitors when it comes to offering certain products, services and benefits to members. Our plans for new offerings are incorporated in our strategic plan or, in some cases in our business plan. We do not want to share that information with the state association or with other competitors. Do the Core Standards require us to make these plans available to the state association?

The short answer is no. Strategic and/or business plans will not be made available to the state association or to any other association in your state. (Revised 9.26.14 and 12.1.16)

4.13.   (Deleted 12.1.16)

4.13.1. Our association’s strategic plan was approved by NAR in early 2015 in connection with the first (2014-15) compliance cycle. Do we need to resubmit our strategic plan every year going forward to comply with the Core Standards?

Only changes to your plan’s Advocacy and Consumer Outreach components need to be submitted to NAR for review at csgrantrequest@realtors.org.  (Added 10.15.15) (Revised 12.1.16)

4.14. Because local associations' strategic plans can't be viewed by other associations (including state associations), how will the state associations know the strategic plans of their local associations have been approved by NAR?

A field has been added to the Compliance Tool for local associations to include the date of approval by NAR. (Added 3.9.15)

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5. Advocacy

5.1 Our local association has its own RPAC promotional material it annually distributes to the membership. Can we continue to use those materials, or do the Core Standards require use of materials provided by the state association or by NAR?

Local associations can comply by using any RPAC promotional materials they choose to educate the membership on the value of investing in RPAC. It is recommended that local material be reviewed by legal counsel to ensure it meets the state and federal PAC regulations. Most state associations and NAR make excellent promotional material for use by local associations.

5.1.1. Are there RPAC materials available explaining the importance and value of investing in RPAC?

Yes. NAR will customize, design, print and deliver RPAC fundraising brochures for your association. http://www.realtoractioncenter.com/rpac/for-associations/fundraising-programs/rpac-partnership/customized-brochures.html (Added 3.9.15)

5.1.2. Are there grants available from NAR for informing our membership about the value of investing in RPAC?

Yes, RPAC Local and State Fundraising Grants are available to produce and distribute fundraising videos and DVDs, to produce and distribute fundraising materials, and for RPAC messaging at new member orientation. http://www.realtoractioncenter.com/rpac/for-associations/rpac-partnership/ (Added 3.9.15)

5.2 (Deleted 12.1.16)

5.3 (Deleted 12.1.16)

5.3.1. Is receiving an advocacy-related grant an activity demonstrating compliance with the Core Standards?

Simply applying for and receiving an advocacy-related grant from NAR is not sufficient to meet the Core Standards. Rather, the initiative or activity for which the funds were intended for must be conducted. (Added 12.1.16)

5.4 Our association develops and conducts our own advocacy programs. Do they satisfy the Core Standards requirements, or must we use REALTOR® Party programs?

The Core Standards require associations to demonstrate advocacy engagement. If the program or activity is advocacy-based, it will meet the requirement subject to the state association review and confirmation.

5.5. Am I required to include RPAC in my dues billing statement?

There are two options. You can:

  • Include RPAC in your association dues billing statement.
  • Write a check in the full amount of the NAR established RPAC goal from your local association’s account to the NAR PAF (Political Advocacy Fund). That check should be sent to your state association and not to NAR directly. Check with your state association to ensure legal compliance. 

5.5.1 What are the consequences of including only our local PAC on our members’ dues billing statements?

Failure to include RPAC contributions on members’ dues billings will result in the association having to write a check for the full amount of the NAR-established RPAC goal payable to the NAR PAF (Political Advocacy Fund). (Added 7.3.14)

5.5.2. What if my local association regularly meets its fundraising goal annually without doing dues billing? Must I still dues bill for RPAC or the PAF to comply with the Core Standards requirement?

Surpassing your fundraising goal, even if by a significant amount, does not relieve your association of its obligation to comply with the Core Standard requirement to include RPAC or the PAF in your dues billing statement or to send a check in the amount of the NAR-established RPAC fundraising goal. (Added 9.26.14)

5.5.3. Do we have to bill all members the same RPAC or PAF amount on their dues billing statements, or can we bill different types of members for different amounts (for example, $35 for agents and $75 for brokers)?

You may bill any amount for RPAC or the PAF on the dues billing statement as long as it is at least "in an amount adequate to meet any NAR established fundraising goals." (Added 9.26.14)

5.5.4. Do State Associations with at-large REALTOR® members need to request a voluntary RPAC or PAF contribution in the dues billing statements sent to such members?

Yes, a State Association that bills at-large members directly should include RPAC or PAF in their dues billing and the state will transmit the NAR portion accordingly. (Added 9.26.14)

5.5.5. If my Local Association elects to write a corporate check as opposed to implementing dues billing, is there a limit on the amount for which the corporate check can be written?

There is no legal limit on how much can be sent to NAR's Political Advocacy Fund (PAF). There may be a limit if the association elects to also make a contribution using association treasury funds to the State PAC where corporate contributions are permitted but limited in amount, and in some states associations may be prohibited from making contributions to the state PAC. Please check with your state association for more information about the available options. (Added 9.26.14)

5.5.6. (Deleted 12.1.16)

5.5.7 If we write a corporate check that represents a contribution from each member, does that put our Association at 100% participation?

A corporate check from an association does not equate to 100% participation by its members. In order for a contribution to be counted towards RPAC participation, the national RPAC Trustees voted it must be a voluntary contribution made by the member. (Added 9.26.14)

5.5.8. What does it mean to include RPAC "above the line" or "below the line" in my dues billing statement?

Including RPAC "above the line" means the suggested RPAC investment amount is included in the total amount due, even though the RPAC investment is voluntary and non-payment does not affect the member's membership status. The statement should also indicate that the member may deduct the amount of the contribution from the "Total" due if he or she elects not to contribute. "Below the line" means the suggested RPAC investment amount is NOT included in total amount due to satisfy the member's dues requirements. Sometimes, a second "total" line may be added so the member can see the amount with and without the voluntary RPAC investment.

Be sure you include the required RPAC disclaimer on your dues billing. Below are two templates for you to use as a starting point.  The first template should be used if the state is splitting monies received via dues billing with NAR as it must meet the requirements of the Federal Election Commission (FEC).  It is important to note that some modifications may be necessary if your state’s RPAC policies or practices are different. Also be sure to check with your state association to obtain and include any additional disclaimer language that may be required by state law.  The second template should be used if all monies received via dues billing will be provided to the state PAC and not split with National RPAC.

Disclaimer Templates

If the proceeds of the fundraising activity will be split with National RPAC and the solicitation contains a suggested contribution amount (such as in the case of dues billing):

Contributions are not deductible for federal income tax purposes. Contributions to RPAC are voluntary and are used for political purposes. The amounts indicated are merely guidelines and you may contribute more or less than the suggested amounts. The National Association of REALTORS® and its state and local associations will not favor or disadvantage any member because of the amount contributed or a decision not to contribute.  You may refuse to contribute without reprisal. ____% of each contribution is used by your state PAC to support state and local political candidates; ___% is sent to National RPAC to support federal candidates and is charged against your limits under 52 U.S.C. 30116.  [Add the state contribution solicitation notice, if any]

If the proceeds of the fundraising activity will be not split with National RPAC, and the state will retain 100% of the contributions:

Contributions are not deductible for federal income tax purposes.  [Add the state contribution solicitation notice, if any]

Sample RPAC dues billing statements below:

ABOVE THE LINE EXAMPLE
 
ABC Association of REALTORS®
Local $XX
State $XX
National $XX
Public Awareness Campaign $XX
RPAC Investment (voluntary) $XX
(Deduct from total if not contributing)


Total $XX
BELOW THE LINE EXAMPLE #1
 
ABC Association of REALTORS®
Local $XX
State $XX
National $XX
Public Awareness Campaign $XX


Total $XX
RPAC Investment (voluntary)       $XX
BELOW THE LINE EXAMPLE #2
 
ABC Association of REALTORS®
Local $XX
State $XX
National $XX
Public Awareness Campaign $XX


Subtotal $XX
RPAC Investment (voluntary) $XX


Total $XX

(Added 10.29.14) (Answer and RPAC Disclaimer revised 4.29.15)

5.5.9. Can contributions invested via dues billing that are mandatory assessments, where state law permits such assessments, count towards RPAC Participation?

 To count towards RPAC Participation via NAR's recognition program, investments must be voluntary, and the minimum amount is $15. (Added 12.24.14) (Revised 12.1.16)

5.6. What if I don’t reach my NAR-established RPAC goal through the member dues billing?

Your Association will be in compliance if you included the NAR-established RPAC goal in your dues billing, regardless of the amount collected.

5.7.   (Deleted 12.1.16)

5.8. We place Calls for Action on our MLS sign-in page. Does that demonstrate adequate proof of participation?

Yes. You need to demonstrate CFA promotion to your membership. To see your state and local association Call for Action response rate, go to http://www.realtoractioncenter.com/for-associations/cfa-report/.

5.9. The "Advocacy" section of the Compliance Tool asks associations to demonstrate significant participation in State Calls for Action, and allows supporting documents to be attached. But our state didn't issue a Call for Action. How do we answer?

It should be noted the compliance criteria (#13) the requirement includes an "If applicable" qualifier. If there were no state issued Calls for Action, then no action is required. The state association, which reviews local association compliance certifications, should realize this requirement wouldn't apply during the compliance cycle being reported. If a local association wants to provide information, it could be attached in the field where supporting documentation would otherwise be appended. (Added 3.9.15)

5.9.1. Several months ago we emailed (or thought we emailed) a Call for Action to our REALTOR® members. We just learned that due to a technical glitch, the email was never sent. The issue discussed in the Call for Action was decided more than a month ago, so there's no point to sending it now. If neither our state association or NAR issues another Call for Action between now and December 31st, will our charter be revoked?

It's been anticipated since the start of the Organizational Alignment/Core Standards initiative, that the compliance criteria would be applied reasonably and with flexibility. In your circumstances, it's clear your association made a good faith effort to communicate the Call for Action that failed due to an email glitch. You will want to explain to the state association what happened, and what other efforts e.g., publication of the Call for Action on the association's website, in the online newsletter, etc., had been made. An association should not be in the position of losing their charter - or having to defend their charter - because of a computer glitch. (Added 4.6.15) (Revised 12.1.16)

5.10. Our Association (Association A) received a Placemaking grant from NAR. Before the activity was conducted we (Association A) merged into Association B. Then the new Association AB actually conducted the activity. Can the new merged Association AB include it as one of its Advocacy activities even though the grant was made to the former Association A?

Yes. Conducting the activity is what's important. (Added 3.9.15)

5.11. Our Association has a number of REALTOR® members who have been active participants in the Broker Involvement Program for several years. Would attaching that roster to the Compliance Tool demonstrate "advocacy engagement"?

If your association has actively recruited members during the current compliance cycle, those recruitment efforts would demonstrate engagement - for the current cycle . Examples of engagement include, but aren’t limited to, conducting outreach programs/efforts to recruit new participants, encouraging brokers to sign up at membership meetings, sending recruitment emails to members, or hosting functions specifically focused on Broker Involvement Program recruitment. (Added 4.6.15) (Revised 12.1.16)

5.12. Has the Advocacy component of the Core Standards been changed from what was required during the first two compliance cycles?

Yes, comprehensive enhancements to the Advocacy component were adopted in May, 2016 effective with the third (July 1, 2016 – December 31, 2017) and future compliance cycles. In addition to the existing requirements related to RPAC solicitations on dues billings communicating the value of RPAC, and Calls for Action, local and state associations must also support the REALTOR Party “Vote, Act, Invest” goals by conducting six initiatives/ activities with at least two activities/initiatives supporting each of the goals. Examples of acceptable activities/initiatives for each goal are listed in the online Compliance Tool. Please note that these are not the only activities or initiatives that will meet the requirement, and that each goal has an “Other” entry where explanations and/or examples can be included.  (Added 12.1.16)

5.13.  In the Compliance Tool under Advocacy, both the “Vote” and the “Act” goals show Independent Expenditures and Issues Mobilization campaigns will meet the Core Standards. What are they and how are they different?

Put simply, an independent expenditure is a political campaign communication that expressly advocates for the election of a clearly identified candidate. The communication is not made in cooperation with, in consultation with, or in concert with or at the request or suggestion of a candidate, the candidate’s authorized committee, or the candidate’s political party.

On the other hand, an issues mobilization campaign is a political campaign communication that expressly advocates for the passage or defeat of a clearly identified legislative issue, regulatory action, or ballot initiative. (Added 12.1.16)

5.14. Can you explain what a legislative or advocacy outreach operation is?

A legislative or advocacy outreach operation is any activity in which the association educates or engages REALTORS® on legislative priorities important to the association. For purposes of the Core Standards, qualifying activities could include specifically asking your REALTOR® members to take action to educate lawmakers on your association’s positions regarding legislation or real estate issues. (Added 12.1.16)

5.15. Our association used an Issues Mobilization grant from NAR to conduct two separate (but related) activities. Can both of the activities be used to demonstrate compliance with the Advocacy requirement of the Core Standards?

The answer to your question will depend on whether there were really two separate (albeit related) activities. For example, an association could use part of the grant to conduct public polling to gauge public support for repeal of a sign ordinance. Assuming the poll showed significant public support for the association’s position, the association could use the balance of the grant to mail postcards to voters encouraging them to contact their elected officials to urge repeal. In a case like this, both activities would demonstrate compliance with the Core Standards (i.e. count as two compliance activities). (Added 12.1.16)

5.16. If our association contributes Issues Mobilization monies to support a campaign being conducted by a neighboring association, would this be a Core Standards “Invest” qualifying activity?

Simply writing a check or otherwise making funds available to another association that is conducting an Issues Mobilization Activity would not be considered a qualifying “Invest” activity. (Added 12.1.16)

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6.  Professional Standards/ Code of Ethics

6.1. What do the Core Standards require with respect to new and continuing member training?

The Core Standards require associations to provide new and continuing member Code of Ethics training as required by Professional Standards Policy Statements #47 and #48. Those Policy Statements discuss the various ways associations can satisfy the duty to provide Code of Ethics training.

Professional Standards Policy Statement #47, New Member Orientation, provides:

Effective January 1, 2001, applicants for REALTOR® membership shall complete an orientation program on the Code of Ethics of not less than two (2) hours and thirty (30) minutes of instructional time. This requirement can be satisfied through instruction provided by the local Board or by another Board and can include classroom instruction, home study, correspondence study, or Internet-based instruction. Any orientation program must meet the learning objectives and minimum criteria established by the National Association of REALTORS® from time to time. REALTORS® who having completed such orientation shall not be required to complete further Code of Ethics orientation upon application for membership in another Board provided that REALTOR® membership has been continuous or that any break in membership is for one (1) year or less.

Professional Standards Policy Statement #48, REALTORS®ʼ Code of Ethics Training, provides in relevant part:

Beginning January 1, 2017 through December 31, 2018, and for successive two (2) year periods thereafter, REALTORS® are required to complete biennial ethics training of not less than two (2) hours and thirty (30) minutes of instructional time. Realtors® completing such training during any two (2) year cycle shall not be required to complete additional ethics training in respect of this requirement as a requirement of membership in any other Board or Association.

A Realtor® completing the new member Code of Ethics orientation during any two (2) year cycle shall not be required to complete additional ethics training in respect of this requirement until a new two (2) year cycle commences.

Failure to complete the required periodic ethics training shall be considered a violation of a membership duty.

Failure to meet the requirement will result in suspension of membership for the first two months (January and February) of the year following the end of any two (2) year cycle or until the requirement is met, whichever occurs sooner. On March 1 of that year, the membership of a member who is still suspended as of that date will be automatically terminated.

Every Board and Association is required to provide access to necessary ethics training programs either locally, in conjunction with other Boards and Associations, or through other methods (including, but not limited to, home study, correspondence courses, or Internet-based instruction). Any training offered pursuant to this requirement must meet the learning objectives and minimum criteria established by the National Association of REALTORS® from time to time.

(Revised 12.1.16)

6.2. What options are available for local associations in enforcing the Code of Ethics and conducting dispute resolution?

Local associations have wide latitude in how they meet their enforcement obligations. Enforcement can be conducted by the association itself, associations can develop multi-association or regional enforcement mechanisms, and state associations can take on some or all enforcement duties.

6.2.1. Must every state and territorial association have a standing Professional Standards Committee?

Not necessarily. While enforcement of the Code of Ethics is commonly accomplished through associations’ Professional Standards Committees and Boards of Directors, the Organizational Alignment recommendations approved by the NAR Board of Directors recognized that most associations are already required to enter into cooperative enforcement agreements (please refer to Professional Standards Policy Statement #40 in the NAR Code of Ethics and Arbitration Manual).  Following is taken from the actions of the NAR Board of Directors in May, 2014:

Every association will maintain a viable professional standards process to enforce the Code of Ethics and provide arbitration and mediation as member services. Associations must have a fully functioning professional standards committee with administrative capacity to conduct the program, or must administer professional standards enforcement through a multi-board (or regional) professional standards agreement with other associations or with the state association.

While cooperative enforcement agreements generally delegate some or all of a local association’s Code enforcement responsibility to a multi-board or regional process – or to the state association, there is no prohibition on state associations entering into an agreement under which some or all of the state association’s Code enforcement responsibilities are delegated to another association, or are administered pursuant to a regional or multi-board enforcement process. (Added 10.24.14)

6.2.2. Can an association have its own Professional Standards Committee while also participating in a multi-association or regional cooperative enforcement agreement?

Yes. Associations structure cooperative enforcement agreements in a variety of ways. (Added 4.29.15)

6.3. Has NAR developed alternative "expedited" Code of Ethics enforcement procedures?

The original "expedited" procedures for enforcement of the Code of Ethics remain available at Section 20 (f-q) in the NAR Code of Ethics Arbitration Manual.

Additionally, at the 2014 REALTORS® Conference & Expo (November 2014), the Professional Standards Committee recommended, and the Board of Directors approved, several new and enhanced enforcement tools. These include:

  • Clarification of the existing procedures (including timeframes)
  • An alternative "fast track" hearing process which can be adopted at associations' discretion
  • A model "citation" policy (including a schedule of fines for eligible citations) which can be adopted at associations' discretion
  • Increased use of "remote" testimony
  • Enhanced ombudsman procedures and mandatory provision of ombudsman services in 2016
  • Enhanced information about the appropriate use of "alternate" panel members
  • Restrictions on the availability of continuances

This information and materials can be found in the Code of Ethics and Arbitration Manual except for the fast track hearing process and the model citation policy. Information about those processes can be found at http://www.nar.realtor/policy/fast-track-supplement-to-ceam and at http://www.nar.realtor/policy/nar-model-citation-policy-and-schedule-of-...(Revised 12.10.14 and 12.1.16)

6.4.  (Deleted 12.1.16)

6.4.1. Is every association required to offer ombudsman services?

Beginning in 2016, every state and local association is required to offer, either directly or as part of a cooperative enforcement agreement (consistent with Professional Standards Policy Statement #40, Cooperative Enforcement Agreements, ombudsman services to members, to members' clients, and to consumers. (Added 12.10.14)

6.5. What "ombudsmen" resources are available from NAR?

Comprehensive tools and resources to help local and state associations implement and administer ombudsman programs are readily available at www.nar.realtor. http://www.nar.realtor/ae/manage-your-association/local-and-state-associ.... FAQs are at http://www.nar.realtor/ae/manage-your-association/local-and-state-associ.... (Revised 1.12.16)

6.6. Is a “citation system” an acceptable enforcement supplement?

Yes.

6.7. Is there an NAR model "citation system?"

Information about the model citation system can be found at  http://www.nar.realtor/policy/nar-model-citation-policy-and-schedule-of-....  (Revised 12.15.14 and 12.1.16)

6.8. Is “ethics mediation” an acceptable enforcement supplement?

Yes.

6.9. What “ethics mediation” resources are available from NAR?

Detailed procedures are available on www.nar.realtor. Visit Ethics Mediation or search www.nar.realtor for “ethics mediation.” 

6.10 Our Grievance Committee doesn't meet on a scheduled basis. Rather, when an ethics complaint or an arbitration request is filed, we select members from the Grievance Committee roster to review the complaint/request. Is this permissible under the Core Standards and applicable policy?

Yes. (added 8.7.14)

6.11. Must our association's website include information available to members and the public about professional standards policies and procedures?

Association websites must link to the Code of Ethics and professional standards resources available from NAR, and from the state association if available. A link to the NAR resources can be found in Section I of the online Compliance Tool, Additionally, NAR's Member Policy staff has created a comprehensive compendium of information that includes the Code of Ethics, explanatory whitepapers (e.g. Before You File an Ethics Complaint, the Sanctioning Guidelines, and others), standard forms for filing and processing ethics complaints and arbitration requests, the Statements of Professional Standards Policy adopted by the NAR Board of Directors, as well as resources for professional standards administrators. These materials can also be found at www.nar.realtor. (Added 4.29.15) (Revised 12.1.16)

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7. Consumer Outreach

7.1. Where can I find examples of association consumer outreach initiatives?

Examples of how your association can be the “Voice for Real Estate” and qualifying “Community Involvement and Investment” activities can be found in Section III of the online Compliance Tool. Additionally, an “Other” entry has been added to both of the Consumer Outreach subcategories so associations can explain how they’ve been the “Voice for Real Estate” in their community, and can report other activities/initiatives demonstrating their “Community Involvement and Investment”. Both permit examples to be attached. Consumer Outreach Best Practices are available at http://www.nar.realtor/ae/manage-your-association/consumer-outreach-best...(Revised 12.1.16)

7.2. Some of our association’s “Community Involvement and Investment” activities are organized and conducted by our association’s wholly-owned subsidiary Foundation. Do activities satisfy the Core Standards if they’re conducted by our REALTOR® Foundation?

Yes. (Added 10.24.14) (Revised 12.1.16)

7.3. Are NAR grants available that can be used to meet the "Consumer Outreach" and the Advocacy Core Standards?

 Diversity, Housing Opportunity, Placemaking and Smart Growth grants are available to fund Community Involvement and Investment, and Advocacy activities. http://www.realtoractioncenter.com/for-associations/community-outreach/ (Added 3.9.15) (Revised 12.1.16)

7.4. (Deleted 12.1.16)

7.5. Our association conducted an activity we believe shows how we're the Voice for Real Estate locally, but the activity isn’t listed among the examples shown in the Compliance Tool. Can we still use that activity to demonstrate compliance with the Core Standards? And shouldn't that be true for the Community Involvement and Investment subcategory?

Yes. The suggested activities shown in the Compliance Tool are intended as examples of activities that would that will satisfy the Core Standards, not as an exclusive list of compliant activities. And, as mentioned in Question 7.1, an “Other” entry has been added to both of the Consumer Outreach subcategories so associations can explain how they’ve been the “Voice for Real Estate” in their community, and can report other activities/initiatives demonstrating their “Community Involvement and Investment”, and both subcategories permit examples demonstrating compliance to be attached. (Added 3.9.15) (Revised 12.1.16)

7.6. If our association makes a financial donation to a local charity from our general funds, would that be an "activity" demonstrating "Community Involvement and Investment" under the "Consumer Outreach" Core Standard?

No. This section of the Core Standards contemplates associations conducting actual activities such as those offered as examples in the Compliance Tool. Simply writing a check, without there being any actual member involvement in an association-conducted activity, while commendable, would not meet the requirement. (Added 4.6.15) (Revised 12.1.16)

7.7. If we conduct two different fundraisers for two different charities at two different times of the year, can we use both to demonstrate compliance with the "Community Involvement and Investment" requirement under "Consumer Outreach"?

Yes, but keep in mind that the association will also need to conduct at least two  demonstrating how it’s been the “Voice for Real Estate”. (Added 4.6.15) (Revised 12.1.16)

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8. Unification Efforts and Supports of the REALTOR® Organization

8.1. What does “have access to” legal counsel require?

At a minimum, every association will have access to a specific attorney or law firm that can provide legal guidance with respect to laws and regulations governing the operation of real estate associations and other matters that might create liability to the association. This could be met by having an attorney on the association’s staff, or through an arrangement with local legal counsel. If the state association offers legal services to its associations, that would meet the requirement as well.

8.2. (Deleted 12.1.16)

8.3. What training for local and state association chief staff (and in associations with no paid staff, by the individual primarily responsible for performing the functions ordinarily carried out by paid staff) satisfies the Core Standards requirements?

As noted in Question 2.8:

While attendance at in-person educational programs like the NAR AE Institute and similar programs conducted by state associations is an optimum learning experience because of the opportunity to interact with peers face-to-face, it should also be considered that much of the educational offerings available to REALTORS® from NAR (including REALTOR® University) and its Institutes, Societies and Councils is delivered online. What's important here is that the program addresses management/administration of real estate associations. Where a question arises about the relevancy of programming offered in satisfaction of this requirement, the state association could require documentation or explanation of how the course related to real estate association management. Given the broad experience and skillsets required of association executives, it's anticipated this requirement will be construed liberally.

(Revised 8.7.14 and 12.1.16)

8.3.1. Does attendance at the annual NAR Leadership Summit count toward satisfaction of the Core Standards training requirement? The NAR Professional Standards Administrator training? Other programs conducted by NAR or by our state association?

Programming at events like the Association Executives Institute, the NAR Leadership Summit, the Professional Standards Administrator Seminar, the Advanced Professional Standards Education Seminar, that portion of the NAR Attorney Seminar open to AEs, and other similar programs conducted by NAR or by state associations that can be fairly characterized as “REALTOR® association professional development” will count toward satisfaction of the requirement. (Added 11.13.14)

8.3.2. What other professional development programs and courses are available from NAR?

Following are some of the course offerings available from NAR, together with suggested credit hours:

Staff and Volunteer Leadership Development Programs

Business Specialties Courses

Designations

Certifications

Other Courses

Graduate Certificate Program in Real Estate Association Management

Global and Commercial Courses

Certified International Property Specialist Designation Courses

Commercial

(Revised 4.21.16)

8.4. How do local associations demonstrate that they have promoted “to their members the importance of participating in NAR-conducted efforts to assess member understanding of the overall value provided by associations at all three levels of the Association?”

NAR will conduct annual surveys of local associations’ REALTOR® members to determine whether associations have heightened their members’ awareness of the REALTOR® organization’s value proposition.

8.5. Our state association does not have access to state licensing information. How do we satisfy the Core Standards requirement to provide local associations with lists of nonmember licensees?  Also, there is no reference in the online “Compliance Tool” to state associations providing state licensing information to local associations. Isn’t that an Organizational Alignment requirement?

The Core Standards require that “To ensure proper dues reporting and collection, every state association will provide to each local association a comparative list of non-member licensees to the state membership records, at least semi-annually.” That said, state associations can’t be required to share information that’s not available to them, which is the case in several states. In those cases, it’s anticipated those state associations would still make reasonable efforts to obtain that information for their local associations. This requirement is not reflected in the online Compliance Tool since it is applicable only to the state associations. (Revised and reinstated 10.7.14)

8.6 Can "shared services" be used to satisfy certain Core Standards (e.g. press releases) if the partner organization isn't another association of REALTORS® (for instance our local Chamber of Commerce)?

Yes, as long as the content itself meets the Core Standards requirement, the "partner" organization doesn't matter. (Added 8.7.14)

8.7. Section IV - Unification Efforts and Support for the REALTOR® Organization asks for the date of last approval of our association bylaws, MLS rules and MLS Bylaws (if the MLS is incorporated). We submit those documents to NAR periodically, but often at different times. As a result, the approval dates vary. What do we do if we have two or more approval dates to report?

The online Compliance Tool has separate fields for associations to use to report the last approval date for association bylaws, MLS rules and MLS bylaws . If the MLS is a committee of the association, simply leave the date of approval for MLS bylaws blank. (Added 3.9.15) (Revised 12.1.16)

8.8. Where do we send our governing documents i.e., association bylaws, MLS rules, and MLS bylaws (our MLS is a wholly-owned subsidiary of the association) for review and approval by NAR?

Please send governing documents by email to member_policy@realtors.org. Information on the governing document review process can be found at http://www.nar.realtor/policy/association-governing-document-review-process.

Note: Associations that are shareholders in a regional MLS, and that have adopted a common set of MLS bylaws and/or rules, do not need to submit those documents to NAR if they have already been submitted for review by the regional MLS. (Added 4.6.15) (Revised 12.1.16)

8.9.  (Deleted 12.1.16)

8.10. Section IV - Unification Efforts and Support for the REALTOR® Organization requires that every association's bylaws and MLS bylaws (if the MLS is incorporated) and MLS rules be reviewed and approved by NAR at least every two (2) years. Our question is within two years of what, the effective date of the Organizational Alignment/Core Standards initiative, the end of the first compliance cycle, some other date or event?

The two year requirement is measured back from the date the association completes and submits its Core Standards compliance certification using the Compliance Tool. For example, if an association submits its compliance certification on April 1, 2015, then the date of governing document(s) compliance cannot be prior to April 1, 2013. (Added 4.29.15)

8.11. Do the Core Standards require associations to have a strategic plan?

Yes, as discussed in Question 4.1, every local and state association must have a strategic (or business) plan, and must annually certify that its board of directors has reviewed and discussed the plan. Associations must also annually certify that their strategic (or business) plan includes an advocacy component, a consumer outreach component, and actionable implementation strategies. (Added 12.1.16)

8.12. Recently added Core Standard IV.I. requires associations to offer, promote or provide at least one professional development opportunity for the general membership during each compliance cycle. Do we have to actually conduct classroom training to comply with the new requirement? And does “professional development” mean training?

Professional development includes training and other methods to help members develop or enhance real estate–related skills. The Core Standard doesn’t require associations to actually conduct – or even sponsor classroom training. The requirement can be met by something as simple as pointing members via email or the association website to reasonably available classroom and online programs, tools and resources available from NAR, from the state association, from NAR’s Institutes, Societies and Councils and their state and local chapters, or from other sources and providers. (Added 12.1.16)

8.13. What resources are available to meet the Core Standards “REALTOR® Safety” requirement?

This Core Standard requires associations to annually certify that they’ve conducted - or promoted - a REALTOR® safety activity. Comprehensive REALTOR® Safety information and resources are available at http://www.nar.realtor/topics/realtor-safety and at http://www.nar.realtor/field-guides/field-guide-to-realtor-safety. The online Compliance Tool asks associations to explain or describe the REALTOR® safety activity they’ve conducted or, alternatively - promoted during the current compliance cycle. (Added 12.1.16)

8.14. The Core Standards now require local and state associations to annually provide resources for or access to leadership development education and/or training for elected REALTOR® leaders, and to document the training, tools programs they offer or provide access to. Does this mean that all of our officers and directors must complete annual leadership training to meet the Core Standards? What if my president won’t participate?

This Core Standard requires associations to provide resources and/or access to training for REALTOR® leaders. At a minimum this includes the president and president-elect, though many associations will make leadership development opportunities more widely available. Please note nothing in the Standard requires REALTOR® leaders to take advantage of opportunities made available by the association (though hopefully many will). And, association won’t lose their charters because the president didn’t choose to enhance her or his leadership skills.

8.15. What kind of leadership development “resources” must our association provide for our REALTOR leaders?

“Resources”, as used in the Core Standard, means educational resources, not financial resources. It’s expected associations will identify leadership development opportunities their elected leaders can pursue, not that associations would pay, for example, for a degree in organizational development. If an association provided its leaders with information about programs like the NAR Leadership Summit, the state association’s leadership training, or similar leadership development/education opportunities that are reasonably accessible to those leaders, that would meet the Core Standard. There will likely be many other classroom and on-line leadership development/training opportunities associations can make their leaders aware of to meet this requirement. (Added 12.1.16)

8.16. Recently added Core Standard IV.I. requires associations to offer, promote or provide at least one professional development opportunity for the general membership during each compliance cycle. Do we have to actually conduct classroom training to comply with the new requirement? And does “professional development” mean training?

Professional development includes training and other methods to help members develop or enhance real estate–related skills. The Core Standard doesn’t require associations to actually conduct – or even sponsor classroom training. The requirement can be met by something as simple as pointing members via email or the association website to reasonably available classroom and online programs, tools and resources available from NAR, from the state association, from NAR’s Institutes, Societies and Councils and their state and local chapters, or from other sources and providers. (Added 12.1.16)

8.17. Are there resources available from NAR for our association to use in conducting the required annual performance for our chief staff?

A CEO review toolkit, including sample forms contributed by local and state associations is available at http://www.nar.realtor/ae/manage-your-association/human-resources-toolki.... (Added 12.1.16)

8.18. Our association has no paid staff. Are we required to conduct an annual performance appraisal for the member who’s primarily responsible for performing the functions ordinarily carried out by paid staff in larger associations?

No. The annual performance appraisal requirement applies only to associations with paid staff. (Added 12.1.16)

8.19. Our association contracts with a neighboring association for management services. Must we conduct a performance appraisal for that association’s chief staff member?

No. The responsibility for conducting the performance appraisal is with the association that employs the chief staff member. (Added 12.1.16)

8.20. Our association and two others jointly contract with the same association executive for association management services. In other words, we “share” the same association executive. Must each association annually conduct a performance review for that AE?

No, that isn’t required under the Core Standards, though each association could conduct separate performance reviews if they choose. What’s important is that the association executive receive an annual performance review. Consideration might be given to having a knowledgeable member (possibly the president or president-elect) of each association jointly conduct the performance appraisal. (Added 12.1.16)

8.21. If our association executive has a provision in her employment contract requiring the association to provide an annual performance review, is that term in the contract sufficient to demonstrate the association has a policy addressing the annual review requirement of the Core Standards?

If your AE’s contract requires the association to provide an annual performance review, that contractual term is sufficient to meet the Core Standards. But that raises the question of  what happens when the contract expires, or the AE leaves or retires, and the new AE doesn’t have a contract, or the new contract is silent on the issue of annual performance reviews. A better approach might be to include a provision in the association’s financial (or other) policies clearly establishing that the association’s chief staff will receive an annual review. (Added 12.1.16)

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9. Technology

9.1. What is required for a website to be considered “interactive?”

“Interactive website” is defined as one that permits users to move between websites and that can include active links.

9.2. Is there specific content/information that must be available on local and state association's interactive websites?

Associations' interactive websites (defined as including the ability to move between websites and to create active links) must give members and consumers access to professional standards and arbitration filing processes available, and must link to the websites of the other levels of the REALTOR® organization for promotion of member programs, products and services.

As noted in FAQ 6.11, association websites must link to the Code of Ethics and professional standards resources available from NAR, and from the state association if available. A link to the NAR resources can be found in Section I of the online Compliance Tool . Additionally, NAR's Member Policy staff has created a comprehensive compendium of information that includes the Code of Ethics, explanatory whitepapers (e.g. Before You File an Ethics Complaint, the Sanctioning Guidelines, and others), standard forms for filing and processing ethics complaints and arbitration requests, the Statements of Professional Standards Policy adopted by the NAR Board of Directors, as well as resources for professional standards administrators. These materials can be linked to at www.nar.realtor. (Revised 8.7.14 and 12.1.16)

9.3. Will NAR provide funding to develop local and state association interactive websites?

The Organizational Alignment/Core Standards implementation effort does not include funding for development of local or state association websites.

9.4. Are there technology information resources available from NAR?

The REALTOR® Association Core Services Technology Guide is available on www.nar.realtor.

9.5 How can our association prove it uses email to communicate with our members?

The assertion of the association President, President-elect and Association Executive that the association uses email to communicate with members should be satisfactory "proof." (added 8.7.14)

9.6 How do we prove to the state association that we have an interactive association website?

The website's URL should be sufficient to enable the state association to confirm your association has a qualifying interactive website. (Added 8.7.14)

9.7. Our MLS has a website accessible by our members and by consumers. It includes some information about our association as well. Does that satisfy the Core Standards requirement?

There is no prohibition on an association and its MLS sharing a website. But to satisfy the Core Standards it should be clear to consumers - and to members as well - that when they land on the website they have arrived at a destination that's the source of information about the association, its programs and the resources available to members and to consumers. (Added 9.26.14)

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10. Financial Solvency

10.1. What must local and state associations do to demonstrate fiscal integrity and financial solvency?

Each association must adopt financial policies to ensure the fiscal integrity of their financial operations. These financial policies might cover topics and subjects such as:

  • fraud awareness and prevention   
  • budgeting
  • dues collection
  • financial information disclosure
  • officer, member and staff travel
  • investing
  • reserve levels
  • payment policies
  • compliance reporting
  • compensation
  • revenue recognition
  • asset capitalization
  • financial reporting
  • conflicts of interest
  • whistleblower
  • document retention

10.1.1.a. How do I know which policies my Association must adopt to meet the standard?

As each state and local association engages with their auditors to address the Core Standards requirement for an audit, review or compilation, any accompanying review of internal controls will help associations identify gaps in their existing financial policies. Ideally, financial policies are established based on the business activities of the association. Many will be integral parts of the association's internal control structure. For example, an association where staff does not travel to state or national meetings or on other business may not need a staff travel policy. Associations' business activities and structure will drive the decision as to which policies are needed.

While the IRS suggests in Form 990 that every organization have conflict of interest, whistleblower and document retention policies , these are simply suggested best practices, and not NAR requirements.

Auditors are likely to encourage adoption of fraud prevention, budgeting, revenue recognition, investments, and payment policies as the cornerstones of good internal control practices.

Put simply, NAR does not mandate which policies associations must adopt because other factors including the recommendations and advice of auditors, tax professionals, legal counsel and others will help associations identify and adopt the financial policies necessary for their business practices.

Important reminder: Templates for these suggested policies are readily available online at www.nar.realtor. (Added 12.24.14)

10.1.1.b. Are we required to share our state and/or federal tax returns with the state association or with NAR?

No. Documentation confirming that the required returns have been filed such as a letter from the association's CPA, accountant, tax preparer or the treasurer will satisfy the requirement. (Added 7.3.14) (Renumbered 12.24.14)

10.1.1.c. Our accountant told us we don't have to file tax returns because we are an "exempt" organization. Is that accurate?

If the association obtained tax-exempt status from the IRS it will also have been assigned an Employer Identification Number ("EIN"), and must file annual federal tax returns.

Further, if an association has been classified as "nonprofit" in the state, it must comply with the state's laws regarding nonprofit corporations.

Also, keep in mind that unincorporated businesses are considered sole proprietorships or partnerships, and the "owners" must report their share of the business's income and losses on their personal returns. Another reason to ensure your association is properly incorporated. (Added 1.12.16)

10.1.2.a. What is a Financial Information Disclosure policy?

A Financial Information Disclosure policy ideally will be developed by the association's Finance Committee and adopted by the association's Board of Directors. The policy spells out who will have authorized access to the association's financial information, particularly information deemed to be confidential.

For example, full financial statement packages, including balance sheets, income statements and budget reporting might be appropriately available to the association's elected officers, members of the Executive Committee and members of the Board of Directors since those individuals may have a legitimate need for a clear and accurate picture of the association's financial position. Specific, detailed information about revenues, expenses, investment holdings, cash positions, and other matters of financial operations might be necessary for members of the Finance Committee to fulfill their fiduciary responsibilities. Other members involved in association governance, but not involved in overall financial management decisions, might be given access to information that is directly related to their roles and responsibilities. Such information might include to PAC information, fundraising data, member recruitment/retention information, dues collection information, and similar focused information might be appropriate to share with such members. Members not involved in association leadership or governance might - as a matter of association policy - be afforded a high level of operating summary focusing on the oft-asked question of "where do my dues dollars go?"

The issue of who is entitled to the association's financial information - and what information they are eligible to receive should be determined in advance in the context of a clear, written Financial Information Disclosure policy. Such a policy, providing clarity and consistency in sharing financial information serves the best interests of associations and their members. (Added 12.24.14)

10.1.2.b. Our association commonly files for one or more extensions for filing our state and/or federal tax returns. What do we do if we haven't filed the current year's returns when it's time to demonstrate compliance with the Core Standards?

Documentation confirming filing of the most recent returns (see FAQ 10.1.1.b.) will satisfy the requirement. (Added 7.3.14) (Renumbered 12.24.14)

10.1.2.c. What is a Compliance Reporting policy?

This simply refers to the fact that the association has a process in place to ensure that federal, state and other regulatory reports are prepared and filed on a timely basis. (Added 3.9.15)

10.2. What financial reports are necessary to satisfy the Core Standards? Must the report be attached to the compliance certification?

Each association must obtain an auditor's report on an audit, review or compilation. The report itself does not have to be attached to compliance certification (Compliance Tool). The following information is required:

  • Date of last financial audit/review/compilation
  • Name of the individual or firm conducting the review
  • Year end to which the report relates
  • If an audit, what type of opinion was received

Definitions of these terms by the American Institute of Certified Public Accountants are provided in questions 10.3-10.5.

(Revised 3.9.15 and 12.1.16)

10.2.a. (Deleted 12.1.16)

10.2.1 How do we know if we are eligible to meet the Core Standards by obtaining a "CPA's Compilation Report?"

Only associations with gross revenues of less than $50,000 (including MLS-generated revenues and revenues from other business subsidiaries) can satisfy the Core Standards using a "CPA's Compilation Report" (defined in Question 10.5 below). Please note, though, that state and national dues and assessments are not considered to be revenue for purposes of this measurement. (Added 8.7.14) (Revised 12.1.16)

10.2.2 Are the revenues generated by our MLS included in the $50,000 cut-off for using a "CPA's Compilation Report" to satisfy the Core Standards?

Yes.

If the MLS is operated as a committee of the association of REALTORS® (and not a separate corporation), then the MLS's revenues and expenses are part and parcel of the association's overall finances, and would be included in the association's financial review duties under the Core Standards.

If the MLS is separately incorporated, any revenues received by the association as well as revenues received from other business subsidiaries would be counted as part of the association's revenues for purposes of the Core Standards. (added 8.7.14) (Revised 12.1.16)

10.2.2.a. Are RPAC contributions included in the $50,000 cut-off for using a "CPA's Compilation Report" to satisfy the Core Standards?

No. (Added 3.9.15)

10.2.3 Our CPA wants to know if footnotes are required for a "CPA's Compilation Report" to satisfy the Core Standards.

No, the Core Standards do not require footnotes. (added 8.7.14)

10.2.4.  (Deleted 12.1.16)

10.2.4.a. For the first two compliance cycles our association submitted signed CPA engagement letters indicating that to save money the required financial review would be conducted after “tax season” which was also after the end of the compliance cycle. Is that practice still permitted?

No. Beginning with the third compliance cycle (July 1, 2016 – December 31, 2017) the Core Standards compliance cycle was transitioned to the calendar year. This will enable association to have the required financial reviews conducted after “tax season”. (Added 12.1.16)

10.2.4.b. Because the third compliance cycle is 18 months (July 1, 2016 – December 31, 2017) to facilitate the transition to the calendar year, will we need to have two financial reviews conducted?

For the third compliance cycle, most associations will only need to provide the date; the name of the individual or firm that conducted their review or audit; the year-end to which the report relate; and if it was an audit, the type of opinion received. But if an association submitted a CPA engagement letter for the second (and now completed) cycle, the information mentioned above about the report or audit for that cycle must be shown at #62 AND information about the audit or report for the third cycle must be shown at #61 in the Compliance Tool. You’ll note the transition to a calendar year compliance cycle obviated the need for CPA engagement letters since associations will still be able to have the work done after “tax season” where in some cases the costs may be less. (Added 12.1.16)

10.2.5. Our association's gross revenues (excluding amounts received for state and national dues and assessments) are greater than $50,000. What type of financial reporting are we required to have?

Associations with revenues of more than $50,000 (excluding amounts received for state and national dues and assessments) must have a CPA's audit opinion or an Accountant's Review Report. (Added 9.26.14)

10.2.6. Our association hasn’t conducted audits, reviews or compilations in the past. To complicate matters, our 2014 approved budget doesn’t include funds to have the required reports prepared by a CPA for the current fiscal year. Is there a way we can comply with the Core Standards going forward without going into debt?

At the 2014 Annual Convention (REALTORS® Conference) the Finance Committee authorized staff to accept a signed CPA engagement letter committing the association to having the required reports performed in 2015 for the association’s 2014 fiscal year. That means for the second (and future) reporting cycles, the association will need to be able to confirm that their required audit, review, or compilation was conducted. (Added 11.13.14)

10.2.6.a. For the first compliance cycle we obtained a signed CPA engagement letter committing our association to have the required report performed in 2015 for our 2014 fiscal year. The engagement letter was attached to the Compliance Tool and in June we were certified as compliant with the Core Standards for the first cycle. In August our CPA provided us with an opinion that our financial statements conformed to the Generally Accepted Accounting Standards (GAAS).

We've now obtained a second signed CPA engagement letter for our 2015 fiscal year, and our audit will be performed next August (2016). What information needs to be entered into the Compliance Tool for the second compliance cycle? And will we be able to continue to have our audits performed in the summer when it's less expensive?

The Compliance Tool has been upgraded to accommodate associations like yours that choose to have their audits or other reporting done after the end of the annual compliance cycle. For the current fiscal year, Item 48 in the Compliance Tool asks for the date of the association's last financial audit/review/compilation, who performed it, the applicable year, and the type of opinion. However, if the current fiscal year's report will not be available until after the end of this compliance cycle, Item 48 is where you will attach the new CPA engagement letter.

Since you also obtained a CPA engagement letter for the first compliance cycle, information about the audit/review/compilation conducted last August should be entered at Item 48a.

At this point there is no prohibition on associations continuing to obtain CPA engagement letters and having their audit/review/compilation conducted after the end of the compliance cycle, provided that both Items 48 and 48a in the Compliance Tool are completed each year.

(Added 1.12.16)

10.2.7. We maintain our financial records on a cash basis which is not in accord with the Generally Accepted Accounting Principles (GAAP). Do the Core Standards require us to follow the GAAP?

If your financial reports are not prepared according to the GAAP, the preparer should clearly disclose the basis used to the client. (Added 4.29.15)

10.3. What is a “CPA’s audit opinion?”

Audited financial statements provide the user with the auditor's opinion that the financial statements are presented fairly, in all material respects, in conformity with the applicable financial reporting framework. In an audit, the auditor is required by auditing standards generally accepted in the United States of America (GAAS) to obtain an understanding of the entity's internal control and assess fraud risk. The auditor also is required to corroborate the amounts and disclosures included in the financial statements by obtaining audit evidence through inquiry, physical inspection, observation, third-party confirmations, examination, analytical procedures and other procedures.

The auditor issues a report that states the audit was conducted in accordance with GAAS, the financial statements are the responsibility of management, provides an opinion that the financial statements present fairly in all material respects the financial position of the company and the results of operations are in conformity with the applicable financial reporting framework (or issues a qualified opinion stating the financial statements are not in conformity with the applicable financial reporting framework; the auditor may also issue a disclaimer of opinion or an adverse opinion if appropriate).

10.4. What is an “Accountant’s review report?"

Reviewed financial statements provide the user with comfort that, based on the accountant's review, the accountant is not aware of any material modifications that should be made to the financial statements for the statements to be in conformity with the applicable financial reporting framework.

A review engagement involves the CPA performing procedures (primarily analytical procedures and inquiries) that will provide a reasonable basis for obtaining limited assurance that there are no material modifications that should be made to the financial statements for them to be in conformity with the applicable financial reporting framework.

In a review, the CPA designs and performs analytical procedures, inquiries and other procedures, as appropriate, based on the accountant's understanding of the industry, knowledge of the client, and awareness of the risk that he or she may unknowingly fail to modify the accountant's review report on financial statements that are materially misstated. A review does not contemplate obtaining an understanding of the entity's internal control; assessing fraud risk; testing accounting records; or other procedures ordinarily performed in an audit.

The CPA issues a report stating the review was performed in accordance with Statements on Standards for Accounting and Review Services; that management is responsible for the preparation and fair presentation of the financial statements in accordance with  the applicable financial reporting framework and for  designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the financial statements; that a review includes primarily applying analytical procedures to management's financial data and making inquiries of management; that a review is substantially less in scope than an audit and that the CPA is not aware of any material modifications that should be made to the financial statements for them to be in conformity with  the  applicable financial reporting framework.

10.5. What is a “CPA’s compilation report?”

In a compilation engagement, the accountant assists management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements.

In a compilation, the CPA must comply with the Statements on Standards for Accounting and Review Services (SSARSs), which require the accountant to have an understanding of the industry in which the client operates, obtain know ledge about the client, and read the financial statements and consider whether such financial statements appear appropriate in form and free from obvious material errors.

A compilation does not contemplate performing inquiry, analytical procedures, or other procedures ordinarily performed in a review; or obtaining an understanding of the entity's internal control; assessing fraud risk; or testing of accounting records; or other procedures ordinarily performed in an audit.

The CPA issues a report stating the compilation was performed in accordance with Statements on Standards for Accounting and Review Services; and that the accountant has not audited or reviewed the financial statements and accordingly does not express an opinion or provide any assurance about whether the financial statements are in accordance with the applicable financial reporting framework.

10.6. Will NAR provide financial assistance to associations that have not utilized such reporting in the past?

No. Fiscal integrity and financial reporting are corporate responsibilities of every association, regardless of size.

10.7. If our association is considering filing bankruptcy, who do we contact at NAR?

The Office of the General Counsel.

10.8. What is the consequence of filing for bankruptcy without informing NAR first?

Loss of charter status.

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11. State Association Funding

Important Note: The state association implementation grant program ended June 30, 2015.

11.1. (Deleted 12.1.16)

11.2.  (Deleted 12.1.16)

11.3.  (Deleted 12.1.16)

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