GettingThrough a Law Society Inspection?

Transcription

1 GettingThrough a Law Society Inspection? Seamus McGrath Senior Investigating Accountant Law Society of Ireland

2 Solicitors Accounts Regulations How to get through a Law Society Inspection A presentation By Seamus McGrath Senior Investigating Accountant Law Society of Ireland

3 The Law Society s Responsibilities Protect the public Protect clients interests in particular clients moneys Protect the reputation of the legal profession Minimise claims the Law Society s Compensation Fund

4 Compensation Fund Financial Investments 13m as at 31/12/2012 Annual Contribution 700 per solicitor First 5m claims borne by the Fund Insurance Cover in place on the next 50m Maximum claim is 700,000 per client

5 Inspections Limerick Area 2009/2012 Approximately 45 inspections (50%) Approximately 29 contentious reports 3 Solicitors referred to the Disciplinary Tribunal 2 Cases referred to the High Court Small number of substantial deficits on client accounts Non compliance with Section 68 In active balances on the client ledger Many cases of outlay being written off

6 Principles of Solicitors Accounts Act with integrity, in the client s best interests Keep other people s money separate from money belonging to the solicitor or the practice monies Keep client money safely in a bank or financial institution or relevant branch thereof that is situated within the state Use each client s monies for that client s matters only Account for interest on clients monies

7 Principles of Solicitors Accounts Use controlled trust money for the purposes of that trust only Establish and maintain proper accounting systems and proper internal control systems to ensure compliance Investigate and clear long outstanding balances Deliver an annual accountant s reports as required by the Regulations Comply with Anti-Money Laundering Legislation Comply with undertakings

8 Reg 4 General Duty to pay clients money into client account Pay client monies into client account without delay. Pay outlays into the client account e.g. counsel fees, land registry, doctors fees etc.

9 Reg 5 Solicitors own monies in client a/c Do not hold monies to which the solicitor is beneficially entitled in the client account longer than 3 months.ie fees and outlays, monies which should be billed. Do not pay into or hold in the client account monies other than client monies

10 Reg 7 Withdrawal of fees Make it clear to clients that monies held are being or will be applied in satisfaction of professional fees Reg 11 Do not withdraw monies from client account in respect of professional fees and outlay not properly payable at the time of withdrawal

11 Reg 7 :Debit balances: Personal expenditure: Debit balances-overpayments to or on behalf of clients - drawing against uncleared cheques Do not discharging personal /office expenditure from the client account-eg wages, drawings, loans etc

12 Reg 7: Interest obligations Account to clients for interest Treat client monies held in an interest bearing client account for the benefit of a specific client as clients monies. Transfer interest on general client deposit to the office account (within 3 months or by next accounting date)

13 Reg 8 :Pay fee to office : Bank Drafts Lodge monies withdrawn from client account properly required towards payment of fees and outlay into the office account. For cheques made payable to banks to purchase bank drafts record on the cheque the name of the person shown as payee on such draft. ( Staff Fraud)

14 Reg10 : Office Ledger Credit balances Record, without delay, as a debit on the office ledger the amount of professional fees in any bill of costs furnished to the clients Do not allow credit balances to arise on the office ledger and without delay correct the position

15 Reg 11: Duty to Furnish Bills of Costs Withdrawing fees not properly due Furnish clients with a bill of costs and do not leave monies in the client account. Do not withdraw monies from client account in respect of professional fees and outlay not properly payable at the time of withdrawal

16 Reg 12: Proper books of accounts Maintain proper books of account at all times Maintain books of account that show the true financial position Keep a separate clients ledger accounts for each client matter ( builders) Keep on each client matter file appropriate evidence of outlay disbursed

17 Reg 12 :Balancing Statements : Prepare balancing statements Within 2 months of the balancing dates Extract a list of office balances within 2 months of the accounting dates

18 Reg 13-18: Controlled Trusts Pay controlled trust monies into controlled trust bank account without delay Do not hold monies to which the controlling trustee is beneficially entitled in the controlled trust bank account Record the receipt of controlled trust monies into a controlled trust bank account Do not hold monies other than trust monies in trust a/c

19 Reg 20: Minimum Accounting Records Keep accounting records Register of bank accounts Original returned paid cheques Keep copies of drafts Keep proper files Retaining records for 6 years

20 Reg 21: Accountants Reports Furnish an accountants report to the Society within 6 months of accounting date Notify Society of change of accounting date not later than one month prior to change Obtain prior written consent to extend accounting period beyond one year

21 Reg 26 Closing Accountants Reports File a closing accountants report when the solicitor is retiring or has ceased to be a sole practitioner up to the date the solicitor ceased to receive hold control or pay clients monies

22 Key Controls Books of account to be written up at all times Lodge clients monies without delay to client account Get written instructions from clients if monies to be lodged anywhere other than the client account Get stamp duty from client before issuing any undertaking Don t write a client account cheque without an up to date ledger account Don t draw against uncleared cheques

23 Key Controls Investigate debit balances on client ledger immediately Investigate credit balances on the office ledger Understand the books of account Regular balancing of client & office ledgers Investigate long outstanding balances Drawdown fees within the 3 months Ensure stamp duty paid with 30 days of execution Complete outstanding registrations

24 Key Controls Know obligations to account for interest Ensure bills of costs are provided to clients before the fees are paid to office account Manage client expectations-get the stamp duty Know obligations to account for interest Comply fully with Section 68 of Solicitors Amendment Act 1994 Document your anti money laundering procedures

25 Control of Staff Control cheque signatories Restrict access to internet banking Control issuance of undertakings Manage staff receiving cash directly from clients Control cheques made payable to banks

26 Proposed New Regulations Balancing at three six and nine month dates New Interest Regulations to require solicitors to pay a reasonable rate of interest Solicitor required to review client ledger listing for slow moving or dormant balances Register of Estates Register of monies placed on joint deposit Register of client files Register of undertakings

27 Proposed New Regulations Register of powers of attorney Register of wills Register of deeds Money laundering compliance file Prohibition on borrowing from clients Prohibition on solicitors lending monies to clients 3 months to file the reporting accountants report Extended role for the Reporting accountant

28 Proposed New Regulations Check for compliance with Section 68 Review aged analysis for undue delays Review compliance with Interest Regulations Review the financial position of the practice. Notify Society within 7 days of reason for resignation

29 Reference Material Solicitors Amendment Acts 1954 to 2002 Solicitors Accounts Regulations 2001 S.I 421 of 2001 Solicitors Accounts Regulations 2005 S.I 719 of 2005 Solicitors Accounts Regulations 2006 S.I 111 of 2006 Interest of Client Monies Regulation S.I 372 of 2004

30 Organisations Institute of Legal Accountants in Ireland Law Society Practice Advisory Services page 9 of the hard copy Support Services Directory which has been sent to all solicitors. The practice advisory service is covered on page 11 of the latest edition (2012) which is now on the website (members' area) and this is the link: s/supportservicesdirectory.pdf