The Advisory: Volume 8, Issue 3, June 2010
New Safety of Trust Property Strategy: Pilot Program to be Phased In
By Steve Raby, QC, Bencher and Chair, Trust Safety Implementation Task Force, Law Society of Alberta
The rollout of the Law Society’s new strategy to ensure continued safety of trust property and the continued reputation of the profession will begin with a pilot project.
In April 2010, the Benchers approved a revised rollout of the new program, authorizing a pilot to be phased in commencing May and June 2010 with full implementation to occur in January 2011.
The Law Society’s new strategy around safety of trust property will introduce new control techniques and new audit measures. These new measures will be applied to lawyers based on demonstrated success in complying with trust rules and maintaining adequate books and records.
Firms Selected for Pilot Program:
The pilot program will involve five or more selected firms which use the PCLaw accounting software. Firms with month ends starting in June 2010 which meet the participation criteria will be invited to participate in the pilot in exchange for being relieved of their obligation to retain an accountant to perform an external audit and file a Form T.
The pilot participants will be required to:
- Propose an acceptable Responsible Lawyer who will undertake to comply with the condition to complete an online LESA course.
- Submit its accounting data for its prior fiscal year using the file transfer technology.
- Submit a law firm self-report in a designated format. A new electronic law firm filing (ELFF) will replace the prior form S and the electronic delivery of the form will be through the new Law Society of Alberta’s website.
- Participate in a feedback process regarding the pilot program elements.
In April, when the Benchers approved the pilot it was on the basis that the new accounting rules would be approved by the Benchers in the fall after receiving feedback from the pilot participants.
Amendments to the rules were approved in April 2010 to prohibit the use of trust accounts if no legal services are provided. This will make clear that lawyer trust accounts are only to be used in conjunction with the provision of legal services.
Accounting rule amendments may include the following requirements:
- Trust account approval for lawyers.
- New electronic banking transaction requirements.
- Express lawyer accountability for supervising staff and trust transactions.
- Electronic reporting requirements.
- Miscellaneous matters including the requirement that lawyers not sign blank cheques and the requirement to comply with Canada Deposit Insurance Corporation (CDIC) filing.
Education Program Begins in September
A key component of the Law Society of Alberta’s Safety of Trust Funds project is enhancing lawyers’ understanding of the importance of safeguarding trust property and the risks of failing to maintain adequate controls.
Legal Education Society of Alberta will be providing an education program on the Security of Trust Funds. The LESA Security of Trust Funds education program will be developed as an online learning resource, available free of charge during the pilot period and to pilot participants by September 1, 2010. It will consist of three modules as follows:
Module 1 – Introduction to Trust Safety
Module 2 - Developing and Implementing Safe Accounting Procedures and Controls
Module 3 - Duties of the Responsible Lawyer
The new trust accounting education program is one of several strategies the Law Society is implementing to enhance the safety of trust funds
Law Society of Alberta’s Audit Program
The audit program will be managed through a new group under the direction of the Manager, Trust Safety. The focus of the new department will be the following:
- To provide support to lawyers to enable them to understand and effectively manage procedures to safeguard trust money.
- To keep lawyers informed of new strategies to better manage and safeguard trust money and to respond to emerging risks.
- To efficiently and effectively verify rule and procedural compliance to enhance the safety of the trust money.
- To respond promptly and effectively to any risks identified to the safety of trust property.
This mandate is an expansion of the current focus of audit. The group will take responsibility for environmental scanning of threats to the safety of trust property and will develop and communicate strategies for lawyers to safeguard against the threats. It will be responsible for maintaining the currency of the LESA course and for supporting an ongoing communication and education strategy through Law Society publications.
These program components will continue to build the public confidence in lawyers to hold the money of others.
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