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The brand new Property Practitioners Act (PPA) and its laws paved the way in which for property practitioners utilizing “accredited cost processing brokers” to use for exemption from working their very own belief accounts.
Now that the true property trade’s new regulator, the Property Practitioners Regulatory Authority (PPRA) has finalised its ‘Guideline on audit, accounting data and belief account necessities’ there is a chance for property practitioners, who dread the fee and administration that comes with the annual audit season, to seek out vital aid.
As a common rule for property practitioners, Part 54 of the PPA states that they need to open and hold separate belief accounts for his or her shoppers’ belief monies and that these accounts, plus the practitioner’s enterprise accounts, have to be audited yearly.
Importantly, as per the earlier regulator’s necessities, these annual audits ought to be undertaken by accredited auditors.
And though most of the audit necessities and property practitioners’ tasks have remained the identical, there are just a few vital adjustments and, maybe, just a few short-term issues.
Considered one of these adjustments is the time frame property practitioners should get their belief and enterprise accounts audited after their monetary year-end.
The audit report submission deadline has elevated from the earlier 4 months to a six-month timeframe – and though that sounds easy, it isn’t.
Whereas the brand new PPA got here into impact on 1 February 2022 – that’s, at a selected cut-off date – property practitioners have totally different monetary year-ends. Because of this most often, the efficient date of the brand new laws doesn’t coincide with property practitioners’ monetary year-ends, and consequently their obligatory audit reporting intervals.
Transitional provisions
To handle this misalignment, the PPRA launched transitional provisions by means of its guideline, issued in direction of the tip of Might 2022.
Primarily, the rule of thumb stipulates that the submission deadline of audit studies of property practitioners might be decided by their monetary year-end date:
- If a practitioner’s monetary yr ended on or earlier than 30 September 2021, the submission deadline stays 4 months after its monetary year-end, and the provisions of the previous Property Company Affairs Act (EAAA) will apply; and
- If a practitioner’s monetary yr ended on or after 31 October 2021, the brand new six months’ submission deadline will apply, as will the provisions of the brand new Property Practitioners Rules (PPRs).
Curiosity earned on belief accounts earlier than 1 February 2022 might be accounted for when it comes to the previous EAAA and curiosity earned on belief accounts on or after 1 February 2022 might be accounted for in accordance with the provisions of the brand new PPRs.
Because of the short-term overlap of the 2 acts’ applicability, the rule of thumb incorporates an in depth desk that clarifies which act will apply to which months of the property practitioner’s monetary yr, as decided by such property practitioner’s monetary year-end.
Learn:
As a really optimistic exception to the overall requirement of Part 54, the PPA introduces the potential for exemption in Sections 4 and 23. By way of Part 4, any individual might, topic to particular provisions of this part, be exempted from compliance with any particular provision of the PPA.
Extra particularly, Part 23 affords the potential for exemption from maintaining a belief account below sure circumstances, and states that exempted property practitioners’ accounting data might bear a distinct (lighter) reviewing course of.
Regulation 2 offers additional particulars, with Regulation 2(1) outlining the circumstances during which this could occur, for instance when a property practitioner:
- Has by no means acquired any belief monies, apart from as permitted in Regulation 2(4); or
- Now not receives any belief monies, apart from as permitted in Regulation 2(4); and
- Submits an affidavit to the PPRA asserting that the practitioner already meets all these necessities, and in addition undertakes to proceed assembly these necessities going ahead.
Property practitioners would want to undertake the applying course of to use for exemption as the method doesn’t occur routinely.
Regulation 2(3) specifies {that a} property practitioner should adjust to all of the above listed necessities to be exempted from having its monetary statements and different accounts audited.
As soon as exempted, they’ll have these accounts independently reviewed by a registered accountant, which might be a far simpler and cheaper endeavor.
Property practitioners should additional use an accredited ‘cost processing agent’ to be exempted from working their very own belief accounts, and should comply with the prescribed process
The factors that seem in Regulation 2(4) describe what a compliant “cost processing agent” is:
- They have to even be a property practitioner, from which it follows that they need to possess a legitimate Constancy Fund Certificates.
- All of a property practitioner’s belief funds have to be processed by the cost processing agent.
- The cost processing agent should function a belief account surroundings that complies with the act and the laws – in different phrases, a collection of various belief accounts for various property practitioners, in a single belief surroundings.
- The general belief account surroundings, and every of the totally different property practitioners’ particular person belief accounts inside that belief surroundings, have to be audited yearly. Because of this:
- The cost processing agent should allow two belief account audit processes: one for every of its shoppers (every property practitioner), and one other holistic audit of the entire property practitioners’ belief accounts, collectively within the cost processing agent’s total belief surroundings.
- Audit studies on the general belief surroundings, in addition to particular person audit studies on every of the property practitioners’ belief accounts, have to be submitted to the PPRA yearly.
This explains how property practitioners who’ve been exempted from maintaining belief accounts could be excused from formal audits and solely should have their accounting data independently reviewed by a registered accountant: the audit compliance burden was taken on by the cost processing agent.
The rule of thumb contains 11 annexures that present, amongst others, template affidavits in respect of belief monies that property practitioners ought to use after they apply for exemption; a template audit report on belief accounts; a abstract of fines for contraventions of the PPA; and even an inventory of steadily requested questions.
The best way ahead
The PPRA has been working by means of quite a few challenges, and we’re delighted to see that the rule of thumb offers far more readability on the above sections and laws.
We do, nonetheless, have motive to imagine that the Unbiased Regulatory Board of Auditors (Irba) will quickly be discussing the proposed audit report on belief account templates with the PPRA, after which additional updates to the rule of thumb would possibly comply with.
From our perspective, we’re comfy that we have now met, and proceed to satisfy, all the necessities of being a cost processing agent and additional that, so far as it’d develop into mandatory, can implement any mandatory adjustments.
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Jan Davel is CEO of PayProp South Africa.
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