The SRA Accounts Rules 2019 – Five key areas

For example, in a firm with a large finance team, it is not unreasonable to expect errors to be corrected within a day or so but in a small firm with one, possibly part-time finance manager, it might take longer. The important point is to document your own expectations and procedures.

All firms should have a written policy and define the term “promptly” in respect of the following rules:

• Payment of monies into client account (rule 2.3)

• Returning funds to the client at the end of a matter (rule 2.5)

• Allocating mixed payments received (rule 4.2)

• Correcting breaches upon discovery (rule 6.1)

• Investigating and resolving any differences on bank reconciliations (rule 8.3)

2. Treatment of disbursements (Rules 2.1 and 4.3)

Under the old rules, disbursements that had been incurred (whether billed or unbilled) could be transferred to office (or “business”) account to reimburse the firm for the amounts spent. Under the new rule 4.3 they can only be transferred when a bill or notification of costs has been raised. Please note that the new rules do not explicitly mention disbursements here but the SRA has confirmed “costs” include disbursements. If a disbursement has been billed (whether or not it has been incurred) it must be treated as office money. In practice this means it is likely firms will need to raise bills more quickly than before, to enable them to transfer funds from client to office account and recover the amounts spent. It should also be noted that there is no longer a distinction between professional and non-professional disbursements.

3. Client’s own accounts (Rule 10.1(b))

Under the old rules, these accounts did not need to be included in reconciliations. Under the new rules, they do.

4. Payment of interest (Rule 7.2)

Under the old rules there was provision for firms to come to a different arrangement regarding payment of interest to clients. This has not changed but it is now clearer that the SRA intends firms to put this arrangement to clients, in writing, in such a way that enables them to give informed consent.

5. Reviewing bank reconciliations (Rule 8.3)

Under the old rules there was a requirement to prepare bank reconciliations but there was no formal requirement for a person in authority to sign them off. Now there is and either the Compliance Officer for Finance and Administration (COFA ) or a manager (partner) of the firm should evidence that they have signed off the reconciliations. A client of ours was once asked by an SRA officer during a routine visit to “talk me through” the bank reconciliation.  Do make sure the person who signs them off understands what they’re looking at!