Trust and Auditors: A few key reminders
While trusts are often required for particular industry practices, such as real estate, they do require strict management. The penalties can include jail time if it appears something naughty is occurring, giving that extra incentive to know your stuff. As such we thought it would be suitable to give a brief summary of what is important, not a replacement for legislation, but to help recap and remind of key things to be aware of.
The most notable thing to remember is not to mix clients funds with company or personal accounts. The business cannot borrow money from the trust and replace or pay back later. Additionally trust accounts can never be negative or overdrawn. Funds received for the trust account are required to be deposited into the trust bank account before the close of the next business day. This needs to be banked in the same form as it was received, for example cash received must have cash deposited. Payments are to be made within 14 days if there was an agreement in writing, such as agents' commission. Traditionally the deposit covers the agent's commission though this is not required just a common practice. Supporting documents are required for every transaction, such as sales contracts and settlement statements, invoices, payment slips and receipts etc.
An auditor must be appointed within a month of opening a trust account. This auditor will need to audit 3 times a year. Two audits will be unannounced, the first two for the first year will be conducted within 8 months of the trust account being established. There will be one final audit at the end of the audit year. The audit year ends on the same month the licence was issued.
A useful document to refer to is the Agents Financial Administration Act 2014 for real estate agencies.
The Great Bean Counters do offer auditing services for trusts as well as set up trusts. As such we are well prepared to assist for further questions around management of your trust , as well as all your other accounting services and needs.
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