Australian Trust Accounting – Business Requirements Document
1 Australian Trust
In Australia, the individual state government requires that law firms comply with the statutory rules laid out as follows:
- Victoria: Legal Profession Regulations 2005, S.R. No. 152/2005 dated November 2005. The Legal Profession Regulation came into operation on 12 December 2005.
- Queensland: Legal Profession Act 2004
- New South Wales: NSW Legal Profession Regulation 2005 as at 4 December 2006. Made under Legal Profession Act 2004.
The Victoria Legal Profession Regulations 2005, S.R. No. 152/2005 while not exactly a copy of NSW, it is in general more comprehensive, thus we will use it as the basis for this document.
Legal Profession Regulations 2005, S.R. No. 152/2005 Overview
The requirements are included in the following sections of the Legal Profession Regulations 2005:
· Computerized Accounting System
- Copies of trust records to be printed
- Chronological record of information to be made
- Requirements regarding computer accounting systems
- Back-ups
· General Trust Account
- Ability to establish a general Trust account
- Ability to receipt Trust Money
- Deposit Records for Trust Money
- Payment by Cheque
- Payment by Electronic Funds Transfer
- Trust account Receipt Cash book
- Trust account payment Cash book
- Recording Transactions in Trust Ledger accounts
- Journal Transfers
- Reconciliation of Trust records
· Controlled Money
- Maintenance of controlled money accounts
- Receipt of controlled money
- Deposit of controlled money
- Withdrawal of control money (must be authorized)
- Register of controlled Money
· Transit Money
· Trust Money
- Trust Account statements – law practice
- Trust Account statements – institutional clients
- Register of Investments
- Trust Money subject to specific powers
- Register of powers and estates in relation to trust money
- Intermixing money
- Withdrawing trust money for legal costs – law practices
- Withdrawing trust money for legal costs – approved clerks
- Keeping Trust records
- Retaining Other records and information
- Statement regarding receipt or holding of trust money
· External Examinations
· Miscellaneous
Please refer to document Australian_trust_reports.xls for suggested NSW report formats.
GLOSSARY
Legal Profession Regulations: LPR
Legal Profession Act: LPA
Entity: means a person of body
The Act: means the Legal Profession Act 2004 (Australia)
ADI: Authorized Deposit-taking Institution. Currently is includes the following financial institutions: ANZ, Bank West, Bendigo Bank, Commonwealth Bank of Australia, Macquarie, National Australian Bank, St. George, Westpac, Bank Of Queensland.
BSB number: Bank State Branch Number, 6 digit number, which is assigned to a particular Branch or ADI
Associate: an associate of the law practice
Authorized: authorized by the law practice or approved clerk to sign cheques drawn on the general trust account OR (as the case requires) effect, direct or give authority for an EFT from the general trust account
EFT: Electronic Funds Transfer
NWS: New South Wales
Controlled Money: means money received or held by a law practice in respect of which the practice has a written direction to deposit the money in an account (other than a general trust account) over which the practice has or will have exclusive control
Transit Money: means money received by a law practice subject to instructions to pay or deliver it to a third party, other than an associate of the party
Power and Estates: the money is to be dealt under a power to receive or disburse for or on behalf of another person exercisable jointly and severally with the other person or a nominee of the other person. A law practice that exercises a power to deal with trust money must deal with the money only in accordance with the power relating to the money.
Written Direction Money: the practice as a written direction by an appropriate person to deal with it otherwise than by depositing it in the general trust account held at an approved authorized deposit taking institution (approved ADI).
General Trust account: General Trust account is used for all trust money received and not falling under Controlled Money, Transit Money Written Direction Money and Power Money. It must be held with an approved ADI
Investment: money that is entrusted to or held by a law practice for investment purposes, whether on its own account or as agent
NOTES
· The Queensland Law Society does not assess computerized accounting systems. Section 22 of the Trust Accounts Regulation sets out the requirements for a complying computerized trust accounting system. In the past the Department of Justice and Attorney General used to assess computerized trust accounting systems with a view to approval of their use by solicitors. The practice was discontinued in 1994.
· The Law Institute of Victoria currently does not offer computerized accounting systems assessments
· The Law Society of NSW has examined as at February 2005 a number of software packages and issued a certificate based upon compliance with the LPR 2002 pursuant to the LPA 1987. (http://www.lawsociety.com.au/page.asp?partID=8087)
1.1 Qualifier:
There may be defects in the documents, but they are of sufficient quality at this point for work to begin on the Functional Design Specifications (FDS). We want to acknowledge that the BRDs are to be versioned in Starteam and all changes accounted for therein.
2 Business Context
The Australian Trust regulations.
Victoria
http://www.liv.asn.au/regulation/trust/
Queensland http://www.qls.com.au/content/lwp/wcm/connect/qls/for%20the%20profession/resources%20for%20practitioners/trust%20accounting
New South Wales
http://www.lawsociety.com.au/page.asp?partID=355
2.1 Client Processes
2.2 Risks/Assumptions
The person creating the Trust accounts and managing the Trust funds is knowledgeable about the taxation rules for the country and the operations they are performing.
3 User Profiles
The primary users of this functionality will be the clerks using the Trust module.
4 High-Level Description of Functionality
COMPUTERIZED ACCOUNTING SYSTEMS
Requirement / 3E Support / Change Required /CAS1. Copies of trust records to be printed
(1) The law practice must print a paper copy of trust records as follows:
(a)trust account cash books are to be printed monthly as at the end of each named month, unless a copy of the books as at the end of the named month is retained in electronic form that is readable or reportable on demand,
(b)reconciliation statements prepared under clause 72 (Reconciliation of trust records) are to be printed as at the end of each named month,
(c)trust ledger trial balances are to be printed monthly as at the end of each named month,
(d)lists of controlled money accounts and their balances are to be printed monthly as at the end of each named month,
(e)trust ledger accounts, the register of controlled money and the trust account transfer journal are to be printed before they are archived or deleted from the system,
(f)trust ledger account and controlled money account details are to be printed on request by and provided to an investigator as defined in section 658 of the Act.
(2) The trust records printed monthly as at the end of a named month under subclause (1) (a)–(d) must be printed within 15 working days after the named month.
(3) The paper copies printed under subclause (1) are to be retained by the law practice, except where they are printed on request under that subclause.
(4) The electronic copy of the trust account cash books under subclause (1) (a) is to be retained by the law practice. / 1. Trust Account Cash Book – report
2. Reconciliation statements – report
3. Trust Ledger Trial Balances – report
4. List of controlled money accounts and their balances – report
5. Trust Ledger account and trust money accounts details as requested by auditor - report
CAS2. Chronological record of information to be made
(1) The law practice must maintain a record, compiled in chronological sequence, of the creation, amendment or deletion of information in its computerised accounting system in relation to the following:
(a)client name,
(b)client address,
(c)matter reference,
(d)matter description,
(e)ledger account number.
(2) The record is to be retained by the law practice. / Effective dated information. / n/a
CAS3. Requirements regarding computer accounting systems
(1) The law practice must ensure that its computerised accounting system is not capable of accepting, in respect of a trust ledger account, the entry of a transaction resulting in a debit balance to the account, unless a contemporaneous record of the transaction is made in a manner that enables the production in a permanent form, on demand, of a separate chronological report of all occurrences of that kind.
(2) The law practice must ensure that the system is not capable of deleting a trust ledger account unless:
(a)the balance of the account is zero and all outstanding cheques have been presented, and
(b)when the account is deleted, a copy of the account is retained in a permanent form.
(3) The law practice must ensure that any entry in a record produced in a permanent form appears in chronological sequence.
(4) The law practice must ensure that each page of each printed record is numbered sequentially or is printed in such a way that no page can be extracted.
(5) The law practice must ensure that its computerised accounting system is not capable of amending the particulars of a transaction already recorded otherwise than by a transaction separately recorded that makes the amendment.
(6) The law practice must ensure that its computerised accounting system requires input in every field of a data entry screen intended to receive information required by this Part to be included in trust records. / 1. std 3E
2. a. ok
b – effective dated info
3. std 3E
5. effective dated info / 4. page number on reports
6. make fields required
GENERAL TRUST ACCOUNT
Requirement / 3E Support / Change Required /GTA1. A law practice or approved clerk may at anytime open a general trust account but must, as soon as practicable after receiving trust money required to be paid in a trust account, establish a general trust account (as per GTA2) if they dot not already have such trust account / In 3E it is already possible to create a Trust Bank Account and receive trust money. / n/a
GTA2. A general trust account must satisfy the following requirements:
(a)the account is established in this jurisdiction, before, on or after 1 October 2005, with an approved ADI, and
(b)the account is and is to be maintained in this jurisdiction, and
(c)the name of the account includes:
(i)the name of the law practice or the business name under which the law practice engages in legal practice, and
(ii)the expression “law practice trust account” or “law practice trust a/c”, and
(d)the account is of a kind that is for the time being approved by the Law Society Council. / All operational, except point c. For point c in 3E it is already possible to create a Bank account with User enterable description that could contain the name of the business and the designated expression (cannot use the field Account Name as it’s only 20 char) / n/a
GTA3. After receiving the trust money, the law practice must make out a receipt. / In 3E is it possible to create a Trust receipt and print that receipt / n/a
GTA4. The receipt must be made out as soon as practicable:
(a)after the trust money is received, or
(b)in the case of trust money received by direct deposit—after the law practice receives or can access notice or confirmation (in written or electronic form) of the deposit from the ADI concerned. / Operational only. / n/a
GTA5. The receipt, containing the required particulars, must be made out in duplicate, whether by way of making a carbon copy or otherwise, unless at the time the receipt is made out those particulars are recorded by computer program in the trust account receipts cash book. / For particulars see GTA6. Receipt already supported in 3E. / n/a
GTA6. Receipt required particulars are as follows:
(a)the date the receipt is made out and, if different, the date of receipt of the money,
(b)the amount of money received,
(c)the form in which the money was received,
(d)the name of the person from whom the money was received,
(e)details clearly identifying the name of the client in respect of whom the money was received and the matter description and matter reference,
(f)particulars sufficient to identify the purpose for which the money was received,
(g)the name of the law practice, or the business name under which the law practice engages in legal practice, and the expression “trust account” or “trust a/c”,
(h)the name of the person who made out the receipt,
(i)the number of the receipt. / The following information can already be specified on a receipt:
- Receipt date = transaction date
- Amount of Money = amount
- Name of person on whose behalf the money is received = beneficiary from account
- Matter reference and description = Matter
- Purpose = Intended Use
- Name of law practice = Unit Description (?)
- ‘Controlled Money Receipt’ = receipt type (?)
- Name of person making the receipt = User / Need to handle:
- Form in which money is received (cash, cheque etc.) à new receipt type
- Name of person from which the money is received (drawn by)
- Receipt Number
GTA7. The receipts must be consecutively numbered and issues in consecutive sequence / Check if current index could be used for receipt number. / Receipt Sequential number.
GTA8. If a receipt is cancelled or not delivered, the original receipt must be retained / Check if deleted receipt is kept in system. / n/a
GTA9. if a law practice receives trust money that is required to be paid into a general trust account and the money is not paid into a general trust account by direct deposit.
(2) A deposit record must be produced to the approved ADI at the time the deposit is made.
(3) The following particulars must be recorded on the deposit record:
(a)the date of the deposit,
(b)the amount of the deposit
Iwhether the deposit consists of cheques, notes or coins (and the amount of each),
(d)for each cheque:
(i)the name of the drawer of the cheque,
(ii)the name and branch (or BSB number) of the ADI on which the cheque is drawn,