What’s new in trust accounting
The QLS Trust Account Investigation team provides an update on recent changes in trust accounting.
In the last 18 months there have been several important developments in trust accounting.
Here are the interesting ones you should know about:
Abolition of the prescribed deposit account (from 1.1.17)
The abolition of the prescribed deposit account, an outcome for which Queensland Law Society had long advocated, means that law practices now maintain all general trust monies in the one bank account. This eliminates the possibility of law practice trust accounts being overdrawn due to funds being held in the prescribed deposit account.
Introduction of the Trust Account Consultancy program
The Trust Account Consultancy program is a complimentary service for newly established law practices across Queensland.
The program involves a QLS trust account investigator providing a one-on-one consultation with the law practice to assist the practice to comply with its trust accounting obligations.
The one-on-one consultation is aimed at:
- assessing the law practice’s existing procedures
- answering specific concerns of the practice on trust accounting issues
- providing guidance to the practice to enable it to improve its record management or procedures in relation to trust accounting.
The benefits of the program are:
- streamlining of trust account processes
- improving internal controls and risk management
- improved accuracy and completeness of trust account records.
Introduction of the Trust Account Referral Course
The Trust Account Referral Course was introduced to provide legal practitioners, whose actions are capable of constituting unsatisfactory professional conduct or whose fitness to practice has been called into question, with additional awareness of their trust accounting obligations.
Legal practitioners may be referred or recommended to complete the course by the Queensland Civil and Administrative Tribunal, the Legal Practice Committee, the Legal Services Commission, or the Queensland Law Society Council or its Executive Committee.
The one-day course is led by one of the Society’s trust account experts, who delivers specialised training in trust accounting, and explains competency expected of solicitors when handling trust money.
Review of the Legal Profession Regulation 2007
The Queensland Government asked Queensland Law Society to undertake a review of the Legal Profession Regulation 2007 in early 2017.
The Society, via its Trust Account Investigation team, made ten recommendations to the Queensland Government, of which nine were accepted, resulting in the Legal Profession Regulation 2017 which commenced on 1 September 2017. A summary of the changes to the regulations is shown in table one.
Table one:
s29(1) Keeping and printing trust records
Change in regulation now allows law practices that maintain computerised trust accounting records to retain monthly reports (cashbook, reconciliation statements, listing of ledger balances and listing of controlled money) in an electronic format as long as the reports can be printed later upon request.
Former s29(1)(e-f) have been incorporated into s29(2).
s44(3) Reconciliation of trust records
Principal of the law practice to review monthly reconciliation statement.
Evidence of the principal’s review to be annotated to the monthly reconciliation statement.
s50(2) Withdrawal of controlled money
Withdrawal from controlled money account can only be effected by cheque or electronic funds transfer.
s51(9) Register of controlled money
Principal of the law practice to review monthly reconciliation statement.
Evidence of the principal’s review to be annotated to the monthly reconciliation statement.
s55(1) Register of investments
Deletion of the former s55(1): “This section applies if trust money mentioned in section 238(3) of the Act is invested by a law practice for or on behalf of a client, but this section does not itself confer power to make investments.”
s55(2)(g) Register of investments
The former s55(3)(g) was:
“… particulars sufficient to identify the source of the investment, including for example:
(i) A reference to the relevant trust ledger, and
(ii) A reference to the written authority to make the investment, and
(iii) The number of the cheque for the amount to be invested.”
It has been replaced with s55(2)(g), that is: “… particulars sufficient to identify the source of the investment”.
s57(2) Register of powers and estates in relation to trust money
Subsection 2 has been inserted:
“Subsection (1) does not apply if the law practice or associate is also required to act jointly with 1 or more persons who are not associates of the law practice.”
s58 Procedure and requirements for withdrawing trust money for legal costs — Act, s258
This section has been restructured into the following categories:
(i) Bill of costs given to client (s58(2)),
(ii) Costs agreement or trust account authority held (s58(3)), and
(iii) Reimbursement of outlay paid (s58(4)).
Each of these sections has two parts and both parts must be complied with before effecting a withdrawal.
s66 Way in which external examination must be carried out — Act, s273
New subsection 2 that allows Queensland Law Society to grant external examiners an exemption from reporting in the approved form.
In those last 18 months the Trust Account Investigation Unit has also:
- undertaken more than 1200 investigations of law practices (Investigation of Affairs — 363; Trust Account Compliance Reviews — 787; and Trust Account Consultancies — 83)
- received and responded to more than 7700 queries (3100 emails and 3600 phone calls) from law practices, external examiners and clients of law practices. Over 99% of queries were responded to on the same day as they were received.
- updated all resource material on the Society’s trust account resource page, include a re-write of the guidelines in relation to trust account operations in relation to PEXA (Property Exchange Australia) and electronic funds transfer (EFT).
If you have any trust account questions, please contact us on 07 3854 5908 or email managertai@qls.com.au.
