When do you conduct your annual reviews for exempt persons? We've been doing them between January and March 15. That's caused a bit of a problem because we have a large amount of exempt persons so the review pretty much consumed our time. We're looking to spread out the reviews throughout the year.

Thanks!!

Some institutions do it in one big "push" once a year; others stagger the reviews. As you have realized, it largely depends on the number of exemptions being managed and the staff available to do the work.

If you decide to stagger the reviews, adjust the review dates by doing some reviews earlier. To keep the example simple, if all your exemptions are next due for renewal in February 2012 (and it's currently August 2011), review 25% of them in November 2011, another 25% in August 2011. Complete the regular review for the remaining 50% in February 2012, and do half of those exemptions again in May 2012. In each case, plan to do the next review twelve months later. That sets up a quarterly review cycle, with 25% of the exemptions scheduled each quarter.

What you must not do is allow exemptions to go longer than 12 months between reviews.

The March 15 date was of historical importance, it was the date you required to file biennial renewals. Reviewing customers in that time frame simply made sense. Now, that rationale is gone and, if you have that much volume, "short pitting" some of them; i.e. doing some reviews before they're due to spread out the next set of due dates may make some sense.

I was recently informed by an auditor that I needed to have the Franchise Tax Certification of Account Status in the exempt file to prove that they were authorized to conduct business. Prior to this I had done one annual review in January, but these expire in May and I will have to print all new ones. So I am having to move my review date to late May or June. The examiners have never asked for this before, but now that it is in the audit work papers I think they may in the future.

Part of the qualification for phase II exemptions is that the business "[i]s incorporated or organized under the laws of the United States or a State, or is registered as and eligible to do business within the United States or a State." I'm guessing that your auditor figured out that the Franchise Tax Certification of Account Status is one way to document that status.

Just remember that an auditor does not run your bank or dictate policy. If you have a satisfactory way to document the status of your phase II exempt persons, the auditor's comment is just a suggestion.

"So I am having to move my review date to late May or June."

There is no reason to move the review dates. Reviews are only required annually - regardless of when these expire. As long as they are good on the review date - move on.

While that document may be the only way your auditor knows how to verify existence, there are several others and the choice is yours, not your auditor's. You can easily use SOSDA or the Comptroller's office to verify the existence of a creature of statute in Texas.

Do you do anything special for Phase I customers?