Legal Practice Act 28 of 2014

Maintaining Trust Accounts
April 17, 2019

Legal Practice Act 28 of 2014

Does your accounting system handle the following requirements as set out by the LPA?

  1. Trust account management rules
    (Many of these are captured in your Law Society’s rules)

    Trust account requirements Quantim option
    Strict separation of duties for EFT and cheque payments. Quantim sets parameters for users and what they are able to do on the system according to the logon and password.
    Levels of authority and checks and balances in place. Users can only see what they are authorized to use.
    Strict password and pin security in place. Each user gets a unique username & password.
    Controlled access to computers.
    Strict rules and procedures relating to recipients’ bank account details (e.g. FICA the recipient) and more importantly any changes to a recipient’s bank account detail (re-FICA the recipient). Quantim requests FICA details and these documents can be stored in the documents folder for each client.
    Extraction and balancing of accounting records at least on a quarterly basis, preferably monthly. Balancing can be done on a daily basis.
    Extraction of trust creditors listing at least quarterly, preferably monthly. Can be done daily.
    No debit balance on each of the trust creditors accounts at any given point. Quantim does an automatic reverse transfer ensuring no Trust debit balances or Business credit balances.
    No deficits on the aggregate balances at any given point. Trust surplus report ensuring no trust deficits.
    Maintenance of accounting records and their supporting documents, including proof of EFT payments and returned paid cheques from the banks, for a period of at least 5 years following the last entry into the records. We have a detailed requisition system that saves to the system and kept for as long as required.
    Strictly defined processes/procedures/checks and balances for payment requisitions and both EFT and cheque payments. Requisitions must be authorized prior to payments made.
    Strictly defined procedures for journals authorisations and recording thereof. Detailed transaction listings ensure you have full reviews of all transactions with detailed descriptions.
    Strictly defined procedures for transfer of fees from trust account to business account and maintenance of fee schedules. Quantim will only do trust to business transfers if trust funds are available and appropriate business debit balance.
    Monthly trust bank reconciliations for each of the trust accounts. Bank reconciliations can be done automatically or by hand on a daily basis.
    No payments out of suspense account – funds to be first identified and allocated to the correct account before payment is done.
    Funds remaining unidentified or unallocated in suspense for a period of 2 years and more – to be paid over to the AFF.
    Declaration of income received and correct determination and payment to SARS of income tax and VAT.
    Payment of interest (s78(1) and s78(2)(a) accounts to the AFF on a monthly basis.  (Beyond 2017, include levy on s78(2A) interest). Investments are reflected separately and captured on its own.
    Maintenance of a valid FFC

    o      Annual audit, with no qualification

    o      Attorneys statement on trust account.

    2. Staff professional development rules

     

    Trust account requirements Quantim option
    Staff recruitment and training. Quantim provides full accounting training not only on the system but also on legal accounting procedures.
    Performance management.
    Continuing professional development. Quantim does ongoing support, training and updates.

     

If your accounting software does not provide the above service and ensure you comply with the new LPA, contact Quantim at 083 395 8271 or visit our website www.quantim.co.za for more information or to book a demonstration.