The new Assets Practitioners Act (PPA) and its polices paved the way for property practitioners employing “accredited payment processing agents” to utilize for exemption from operating their have believe in accounts.
Now that the actual estate industry’s new regulator, the Assets Practitioners Regulatory Authority (PPRA) has finalised its ‘Guideline on audit, accounting information and have confidence in account requirements’ there is an option for assets practitioners, who dread the charge and administration that arrives with the yearly audit season, to discover sizeable relief.
As a basic rule for assets practitioners, Part 54 of the PPA states that they have to open and continue to keep different belief accounts for their clients’ trust monies and that these accounts, as well as the practitioner’s business accounts, need to be audited each yr.
Importantly, as for every the preceding regulator’s demands, these annual audits need to be carried out by accredited auditors.
And though several of the audit needs and residence practitioners’ duties have remained the exact, there are a couple of important alterations and, perhaps, a several non permanent difficulties.
One particular of these modifications is the interval of time property practitioners have to get their rely on and business accounts audited just after their monetary yr-finish.
The audit report submission deadline has elevated from the past 4 months to a six-thirty day period timeframe – and even though that seems easy, it isn’t.
Whereas the new PPA arrived into influence on 1 February 2022 – that is, at a unique stage in time – assets practitioners have different monetary year-ends. This signifies that in most conditions, the productive date of the new legislation does not coincide with assets practitioners’ money 12 months-ends, and consequently their required audit reporting periods.
To handle this misalignment, the PPRA launched transitional provisions as a result of its guideline, issued to the stop of May 2022.
Effectively, the guideline stipulates that the submission deadline of audit studies of assets practitioners will be decided by their financial 12 months-end date:
- If a practitioner’s economic yr ended on or in advance of 30 September 2021, the submission deadline remains 4 months just after its fiscal 12 months-close, and the provisions of the old Estate Company Affairs Act (EAAA) will apply and
- If a practitioner’s fiscal yr ended on or following 31 Oct 2021, the new 6 months’ submission deadline will utilize, as will the provisions of the new House Practitioners Polices (PPRs).
Desire earned on trust accounts in advance of 1 February 2022 will be accounted for in terms of the outdated EAAA and curiosity acquired on rely on accounts on or following 1 February 2022 will be accounted for in accordance with the provisions of the new PPRs.
Because of to the short term overlap of the two acts’ applicability, the guideline contains a comprehensive table that clarifies which act will implement to which months of the assets practitioner’s fiscal calendar year, as established by these types of property practitioner’s fiscal calendar year-finish.
As a very good exception to the typical need of Section 54, the PPA introduces the likelihood of exemption in Sections 4 and 23. In phrases of Portion 4, any individual could, subject to certain provisions of this area, be exempted from compliance with any unique provision of the PPA.
Additional specifically, Segment 23 provides the likelihood of exemption from maintaining a belief account beneath specified circumstances, and states that exempted residence practitioners’ accounting records may perhaps endure a various (lighter) examining process.
Regulation 2 gives even more details, with Regulation 2(1) outlining the situations in which this can take place, for instance when a residence practitioner:
- Has under no circumstances received any believe in monies, other than as permitted in Regulation 2(4) or
- No for a longer period gets any rely on monies, other than as permitted in Regulation 2(4) and
- Submits an affidavit to the PPRA asserting that the practitioner now fulfills all these needs, and also undertakes to carry on assembly these specifications likely ahead.
Residence practitioners would have to have to undertake the application procedure to utilize for exemption as the procedure does not occur mechanically.
Regulation 2(3) specifies that a house practitioner need to comply with all the over listed necessities to be exempted from acquiring its financial statements and other accounts audited.
After exempted, they can have these accounts independently reviewed by a registered accountant, which will be a considerably simpler and less expensive enterprise.
Residence practitioners will have to even further use an accredited ‘payment processing agent’ to be exempted from functioning their own belief accounts, and should abide by the approved technique
The points that appear in Regulation 2(4) explain what a compliant “payment processing agent” is:
- They need to also be a house practitioner, from which it follows that they ought to have a valid Fidelity Fund Certification.
- All of a property practitioner’s trust money will have to be processed by the payment processing agent.
- The payment processing agent ought to work a believe in account ecosystem that complies with the act and the regulations – in other phrases, a suite of various belief accounts for distinctive home practitioners, in a single belief surroundings.
- The general have confidence in account environment, and each and every of the various home practitioners’ person have confidence in accounts in just that rely on environment, will have to be audited annually. This implies that:
- The payment processing agent should permit two trust account audit processes: one particular for every single of its clients (each individual house practitioner), and a different holistic audit of all of the property practitioners’ trust accounts, collectively in the payment processing agent’s overall have confidence in atmosphere.
- Audit experiences on the in general rely on surroundings, as effectively as individual audit reviews on every of the assets practitioners’ rely on accounts, ought to be submitted to the PPRA per year.
This points out how home practitioners who have been exempted from trying to keep trust accounts can be excused from formal audits and only have to have their accounting data independently reviewed by a registered accountant: the audit compliance stress was taken on by the payment processing agent.
The guideline includes 11 annexures that deliver, among other people, template affidavits in respect of have confidence in monies that house practitioners should really use when they implement for exemption a template audit report on belief accounts a summary of fines for contraventions of the PPA and even a list of usually asked issues.
The way ahead
The PPRA has been functioning by way of quite a few difficulties, and we are delighted to see that the guideline provides much far more clarity on the higher than sections and regulations.
We do, having said that, have cause to consider that the Independent Regulatory Board of Auditors (Irba) will before long be speaking about the proposed audit report on have faith in account templates with the PPRA, just after which further more updates to the guideline could possibly follow.
From our point of view, we are comfortable that we have fulfilled, and keep on to satisfy, all the specifications of remaining a payment processing agent and additional that, as considerably as it may well turn out to be required, can carry out any needed variations.
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Jan Davel is CEO of PayProp South Africa.