Fraudulent activity and your trust account

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Fraudulent activity and your trust account

As a property agent, you will need to deal with trust money. There are many rules to adhere to in terms of operating a trust account, handling trust money and audit reporting.

If you are the principal licensee of the business, fraud within your trust account will not only affect your business but also, you personally.

If your business was to fall victim to fraudulent activity would you know what to do and how to rectify the problem with The Office of Fair Trading?

We have shared some tips on what you should do to ensure your trust account remains compliant at all times.

Bonds:

A rental bond is a security deposit paid at the start of a tenancy. If the property manager/owner takes a bond, they must give the tenant a receipt and lodge the bond with the Residential Tenancy Authority within 10 days. It is an offence not to do so. With cash bonds, always ensure the monies have been deposited into the trust account and the online transfer to the RTA has been completed in the specified time frame. It is recommended to print an RTA bond listing periodically to check all tenants have paid a bond and it is registered with the RTA (Residential Tenancy Authority).

Trust Account Cash Book Reconciliation:

The principal agent should always verify the reconciliation statement as true and accurate and do this within five days of the end of the month.

Record Keeping:

Agents/licensees must keep full and accurate accounting records that show the true position of all trust money. Agents must keep hard copies of the trust account ledger and reconciliations for 5 years. The trust account records must be kept in a secure and safe place. The agent must be able to provide the records to their auditor and The Office of Fair Trading on request.

Licensees responsibilities:

Ensure your auditor is performing three (3) examinations per audit year. Licensees are ultimately responsible for lodging their audit reports however, an auditor may lodge the report on the client’s behalf.

Deficiencies in a trust account:

Should an agent/licensee find there is a deficiency in their trust account, they should contact their auditor and advise the OFT on how it has been rectified.

It is a recommendation to generate a file changes report monthly from your software. This will identify the following;

  • Cancelled receipts
  • Cancelled payments
  • All changes that have occurred in the software in that month, including change of owners/tenants etc.


In summary

Always be mindful that this is your business and it is your responsibility to ensure that your staff adhere to legislation.

The Office of Fair Trading can inspect trust account records at any time. Breaches of the Act are taken very seriously and penalties for misuse of trust funds could incur fines or up to five (5) years imprisonment per offence.

 

Next steps

If you are interested in exploring this topic further, please complete the following booking form and Deslea Firth, Auditor will be in contact with you.