The new Residence Practitioners Act (PPA) and its restrictions paved the way for house practitioners making use of “accredited payment processing agents” to apply for exemption from running their own have confidence in accounts.
Now that the serious estate industry’s new regulator, the Home Practitioners Regulatory Authority (PPRA) has finalised its ‘Guideline on audit, accounting data and trust account requirements’ there is an prospect for house practitioners, who dread the expense and administration that arrives with the annual audit year, to discover major aid.
As a standard rule for residence practitioners, Section 54 of the PPA states that they will have to open up and preserve separate rely on accounts for their clients’ have faith in monies and that these accounts, moreover the practitioner’s company accounts, need to be audited every single yr.
Importantly, as per the former regulator’s requirements, these annual audits need to be carried out by accredited auditors.
And though numerous of the audit requirements and residence practitioners’ obligations have remained the very same, there are a number of considerable adjustments and, possibly, a several short term issues.
A person of these variations is the period of time home practitioners have to get their trust and organization accounts audited soon after their money yr-finish.
The audit report submission deadline has increased from the earlier four months to a six-thirty day period timeframe – and despite the fact that that seems uncomplicated, it is not.
While the new PPA arrived into impact on 1 February 2022 – that is, at a specific level in time – residence practitioners have different monetary yr-finishes. This suggests that in most instances, the effective date of the new laws does not coincide with property practitioners’ economical calendar year-finishes, and as a result their mandatory audit reporting intervals.
To tackle this misalignment, the PPRA introduced transitional provisions by its guideline, issued towards the end of May perhaps 2022.
Essentially, the guideline stipulates that the submission deadline of audit reports of home practitioners will be determined by their financial calendar year-conclude day:
- If a practitioner’s fiscal yr ended on or right before 30 September 2021, the submission deadline remains 4 months just after its financial year-conclusion, and the provisions of the old Estate Company Affairs Act (EAAA) will utilize and
- If a practitioner’s money calendar year finished on or immediately after 31 October 2021, the new six months’ submission deadline will utilize, as will the provisions of the new Assets Practitioners Laws (PPRs).
Interest gained on trust accounts before 1 February 2022 will be accounted for in conditions of the old EAAA and desire acquired on trust accounts on or soon after 1 February 2022 will be accounted for in accordance with the provisions of the new PPRs.
Due to the temporary overlap of the two acts’ applicability, the guideline is made up of a in depth table that clarifies which act will use to which months of the residence practitioner’s economic yr, as determined by these types of house practitioner’s economic calendar year-conclusion.
As a pretty optimistic exception to the typical prerequisite of Area 54, the PPA introduces the possibility of exemption in Sections 4 and 23. In conditions of Segment 4, any person may, matter to specific provisions of this section, be exempted from compliance with any certain provision of the PPA.
Additional especially, Portion 23 gives the possibility of exemption from maintaining a believe in account beneath specific instances, and states that exempted house practitioners’ accounting documents may possibly endure a distinct (lighter) examining course of action.
Regulation 2 offers further more specifics, with Regulation 2(1) outlining the instances in which this can transpire, for instance when a property practitioner:
- Has under no circumstances obtained any belief monies, other than as permitted in Regulation 2(4) or
- No extended gets any belief monies, other than as permitted in Regulation 2(4) and
- Submits an affidavit to the PPRA asserting that the practitioner already fulfills all these demands, and also undertakes to carry on conference these demands likely ahead.
Property practitioners would need to undertake the software process to use for exemption as the procedure does not happen instantly.
Regulation 2(3) specifies that a house practitioner will have to comply with all the over mentioned prerequisites to be exempted from acquiring its monetary statements and other accounts audited.
As soon as exempted, they can have those accounts independently reviewed by a registered accountant, which will be a much a lot easier and less costly endeavor.
Home practitioners must even more use an accredited ‘payment processing agent’ to be exempted from working their have rely on accounts, and must follow the prescribed course of action
The points that surface in Regulation 2(4) describe what a compliant “payment processing agent” is:
- They have to also be a residence practitioner, from which it follows that they need to possess a legitimate Fidelity Fund Certification.
- All of a home practitioner’s rely on resources must be processed by the payment processing agent.
- The payment processing agent will have to work a belief account environment that complies with the act and the rules – in other text, a suite of various trust accounts for distinct home practitioners, in a one have confidence in environment.
- The general believe in account surroundings, and each of the unique house practitioners’ person have faith in accounts in just that have faith in ecosystem, will have to be audited each year. This indicates that:
- The payment processing agent should permit two belief account audit procedures: just one for each of its clientele (each individual home practitioner), and another holistic audit of all of the assets practitioners’ believe in accounts, alongside one another in the payment processing agent’s in general belief ecosystem.
- Audit stories on the total have faith in ecosystem, as well as particular person audit reviews on each individual of the assets practitioners’ belief accounts, will have to be submitted to the PPRA per year.
This describes how home practitioners who have been exempted from holding have confidence in accounts can be excused from formal audits and only have to have their accounting documents independently reviewed by a registered accountant: the audit compliance stress was taken on by the payment processing agent.
The guideline contains 11 annexures that present, between some others, template affidavits in respect of rely on monies that house practitioners really should use when they use for exemption a template audit report on have faith in accounts a summary of fines for contraventions of the PPA and even a listing of frequently requested questions.
The way ahead
The PPRA has been working through several challenges, and we are delighted to see that the guideline presents a great deal much more clarity on the higher than sections and laws.
We do, nonetheless, have cause to imagine that the Unbiased Regulatory Board of Auditors (Irba) will shortly be speaking about the proposed audit report on have faith in account templates with the PPRA, immediately after which even further updates to the guideline may possibly follow.
From our viewpoint, we are relaxed that we have met, and keep on to fulfill, all the requirements of remaining a payment processing agent and even further that, as much as it could come to be important, can put into practice any essential alterations.
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Jan Davel is CEO of PayProp South Africa.