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Bookkeeping Guide for Paralegals

Table of Contents
Preamble
Introduction: Why Keep Books and Records?
Types of Accounting Systems
Bank Accounts in a Legal Service Practice

General Retainers
Cash Receipts
  1. General Account
  2. Trust Accounts
          a)   Mixed Trust Account
          b)   Separate Interest Bearing Trust Account

Financial Institutions for Paralegals’ Trust Accounts
Maintaining Financial Records

  1.  Six Years
  2.  Ten Years
Disbursing Trust Funds
  1. Cheques vs Bank Drafts
  2. Internet Trust Disbursements

Client Identification and Verification Requirements
Billing Clients
Credit and Debit Card Payments
Automated Teller Machines
Conclusion

Sample Books & Records

  1. Trust Receipts Journal
  2. Trust Disbursements Journal
  3. Clients’ Trust Ledger
  4. Trust Transfer Record
  5. General Receipts Journal
  6. General Disbursements Journal
  7. Clients’ General Ledger
  8. Fees Book
  9. Trust Bank Reconciliation, Client Trust Listing and Trust Comparison
10.    a)   Detailed Duplicate Trust Account Deposit Slip

          b)   Detailed Duplicate General Account Deposit Slip
11.    Duplicate Cash Receipts Book
12.    a) Client Identification and Verification (individual client)
          b) Client Identification and Verification (organization)
13.    Valuable Property Record

Appendices

By-Law 9
       Form 9A -  Sample Completed Form 9A
Sample Letter of Direction to a Financial Institution
Report on Opening or Closing a Trust Account
Internal Control Self-Assessment Guide
Use of Credit Cards in The Paralegal Practice
Monthly Financial Review Checklist 

Preamble

We have written this Guide to help paralegals licensed by the Law Society of Ontario and their staff cope with the more common bookkeeping issues in a legal services office and also to better understand the Law Society’s By-Law 9 (See the Appendices). While written especially with paralegals practising on their own or in small offices in mind, these recommendations can be used in any size legal services office. The Guide provides general advice; it does not cover every possible situation that can arise in a legal services office and it is not legal advice. If you have questions about the By-Laws, you can call the Law Society Practice Management Helpline at 416-947-3315 or toll free in Ontario 1-800-668-7380 ext. 3315. You can also check the Law Society’s website: www.lso.ca. If you have specific bookkeeping, accounting or tax questions, we suggest that you consult an accountant or lawyer who practises in these areas.

Introduction: Why Keep Books and Records?

There are several reasons to keep books and records.

The Law Society sets out in By-Law 9, the minimum requirements for books and records to be maintained in a legal services practice. The minimum requirements are aimed at protection of the public and therefore focus on trust records.

General trust law requires trustees, including paralegals holding client funds, to be able to account to beneficiaries at any time. In order to do this, you have to have recorded the money you received from each client, how much money you disbursed for each client, and what the unexpended balance is for each client. You also have to keep your bank statements and deposit slips as independent records (source documents) of your trust transactions.

But the most important reason to keep books and records is because it is in your best interest. By maintaining complete, accurate and up to date records, you will have current financial information available so you can make sound financial decisions about your practice. Proper accounting records also help you to meet your statutory obligations in filing reports on time to the Canada Revenue Agency for income tax and HST, and to the Law Society.

Types of Accounting Systems

There are several different kinds of accounting systems: manual double entry, one write, spreadsheet software, general accounting software, and legal accounting software. When choosing an accounting system you should consider what will work best in your practice - the number of transactions you have, whether you maintain your records yourself or hire someone to do them for you, what you can afford, and how well you understand bookkeeping and computer programs. Please note that the Law Society cannot make this decision for you. You must determine what system is right for you and your practice.

Sample:

Type of system Advantages Disadvantages
manual double entry
  • simple
  • inexpensive
  • time consuming if large number of transactions
  • does not automatically post to subledgers
  • arithmetic errors more common
one write
  • simple
  • inexpensive
  • posts to subledgers
  • time consuming if large number of transactions
  • arithmetic errors more common
spreadsheet software
  • inexpensive
  • automatic calculations
  • time consuming if large number of transactions
  • requires training
  • errors due to incorrect formulae are more difficult to detect
general accounting software
  • automatic calculations
  • posts to subledgers
  • produces financial reports
  • reports not designed for trust accounting
  • requires training
  • customization or additional records may be needed to achieve compliance
legal accounting software
  • designed for trust accounting
  • automatic calculations
  • posts to subledgers
  • produces financial reports

  • expensive

  • requires training

Bank Accounts in a Legal Services Practice

You may have as many bank accounts as you need to operate your practice, but keep in mind that each bank account increases your record keeping obligations.

Most legal services offices will have at least one general account and one mixed trust account. It is important to understand what money goes into your trust account and what money goes into your general account.

Whenever you receive money:
  • on behalf of a client
  • for future disbursements
  • for future or unbilled legal services
  • an overpayment of your billed services

you are receiving trust funds. Once you receive trust funds you must deposit them into a trust account by the end of the next banking day. In the case of an overpayment of your billed services, you must transfer the amount that belongs to you to your general account as soon as practical. Depending on the client’s instructions, you could either hold the overpayment in trust for the client for future fees and disbursements or return it to the client.

Whenever you receive money that is entirely:

  • payment for completed legal services for which you have sent the client a bill
  • reimbursement for proper expenses you have made on behalf of a client
  • your or your firm’s money
  • a general monetary retainer

you are not to pay it into your trust account. This money would normally be deposited into your general account.

You cannot rely on section 8(1)(a) of By-Law 9 to deposit funds to your general account. This section requires you to obtain a client’s written direction not to put the client’s funds in a mixed trust account. It is meant for clients who want their funds to be put in an interest bearing trust account which must be a separate account only for that client’s money. Trust money for future fees and disbursements must always be deposited to a trust account. It is not your money and therefore cannot be deposited to your general account.

A word about general monetary retainers (referred to in section 8(2)2 of By-Law 9)

Before deciding that a payment is a general retainer, you should be aware that the Law Society has established the following criteria for general monetary retainers:

  1. The onus is on you to establish that the retainer is a true general retainer.
  2. A written agreement between you and your client which describes the payment as a general retainer, will not be accepted as conclusive, and the circumstances surrounding the payment will be scrutinized carefully.
  3. It will be concluded that a retainer is a specific retainer which must be deposited in your trust account where your client does not understand the nature of the general retainer agreement and intended the payment to cover specific legal services to be provided, and where the total amount paid by the client, including the general retainer, is comparable to your usual fee for the services provided.

General monetary retainers are extremely rare as clients are likely to expect that any payment to their paralegal is intended to go toward payment of their legal services fees.

Cash Receipts

When you receive cash, whether in trust or for your general account, you must prepare a duplicate cash receipt that identifies:

  • the date of receipt
  • the person from whom the cash is received
  • the amount of cash received
  • the client for whom the cash is received and any related file number

and containing:

  • your signature or the signature of a person authorized by you to accept cash
  • the signature of the person from whom the cash is received

There is a sample duplicate cash receipt in the Sample Books and Records section of this Guide: document #11. 

Please note that you may not accept cash equivalent to $7,500 CDN or more, from a person with respect to any one client file except as permitted by section 6 of By-Law 9.

1.   General Account

The general account is your firm’s operating account. This is the account you use to:

  • deposit payments from clients you have billed for completed legal services
  • pay your office expenses: rent, office supplies, staff salaries, bank charges, etc.
  • pay disbursements on behalf of your clients
  • pay yourself.

No money belonging to clients should be in this account.
Try to avoid using a personal account as your office general account. Whatever bank accounts you use for your legal services practice must be produced on an audit. Personal accounts might not have the bank statements, returned cheques and duplicate deposit slips you are required to keep. For convenience it is usually best to have your general bank account at the same financial institution as your trust account.

2.   Trust Accounts

The trust account is for your clients’ money, so if you do not receive trust funds in your legal services practice you do not need to open a trust account.

Trust accounts are the accounts you use to:

  • deposit money you receive from your clients to be paid to another party
  • deposit money you receive from other parties on behalf of your clients
  • deposit money you receive from clients for future legal services and disbursements
  • disburse money as directed by your clients
  • reimburse your practice for proper expenses you have made on behalf of your clients
  • transfer money to your general account for fees after you have sent a bill to your client for completed legal services.

Avoid trust funds languishing in trust accounts. You should review your client trust ledger accounts monthly. Any amounts that you can bill and transfer to your general account or refund to the client should be done promptly. If your trust reconciliation shows cheques that have been outstanding for more than a few months, follow up with the payees to find out whether they received the cheques. Once a cheque is stale dated, (i.e. has not been cashed within six months from the date of the cheque), you should stop payment on the cheque, re-establish the liability in the client trust ledger account for the applicable client, and reissue the cheque if appropriate. If you are unable to locate the client, despite having made reasonable efforts to do so throughout a period of two years, you can apply to pay the money to the Law Society’s Unclaimed Trust Fund. Information on the fund and the Application Form can be found on the Law Society website.

 

Whenever you open or close a trust account, you must immediately inform the Law Society in writing of the location and account number of any account into which you have deposited client trust funds:  By-Law 8 subsection 4(1)5. A sample Report on Opening or Closing a Trust Account can be found in the Appendices. 
 

There are different kinds of trust accounts:

a)   Mixed Trust Account

The most common type of trust account in a legal services office is called a “mixed” or “pooled” trust account. These trust accounts are any bank accounts that hold money for more than one client. When opening a mixed trust account, you must give a written direction to your financial institution to pay any interest on the account directly to The Law Foundation of Ontario. You should send a copy of this letter to The Law Foundation of Ontario. You must report annually on all mixed trust accounts, as well as the opening and closing dates (if applicable) through your Paralegal Annual Report.  This information will be shared with The Law Foundation of Ontario.  A sample Letter of Direction to a Financial Institution can be found in the Appendices.

Make sure that the agreement you sign when opening a mixed trust account directs the financial institution to deduct any service charges for your trust account from your general account, and does not allow the financial institution to remove any money from your trust account on its own. Note, however, that if you deposit a cheque to your trust account and it is returned “not sufficient funds” or NSF, your financial institution will deduct that amount from your account because your financial institution never received the money. Be careful not to disburse funds from your trust account on behalf of a client until the cheques for that client have cleared; that is, your financial institution has actually received the money from your client’s financial institution. You should check with your financial institution to find out how many days it requires to clear a cheque after you have deposited it.
 
Whenever you receive trust funds, you must immediately deposit them into a trust account that is in your name or in the name of the legal services practice where you are either a partner or an employee. You should deposit any trust money you receive by the end of the next banking day. If you have your own separate legal services practice but share office facilities in association with other paralegals, you must have your own separate trust account and separate books and records for your trust transactions. Your trust account should be clearly identified as “trust” on your bank statement and cheques.

You should contact your bank branch to update the information on the beneficiaries of any mixed trust accounts as of April 30, by May 30 each year for Canada Deposit Insurance Corporation (CDIC) purposes, as eligible deposits are insured up to a maximum of $100,000 per beneficiary (i.e. client) of the trust account. Please contact CDIC for details or consult the CDIC website for specific information about trust accounts and The Joint and Trust Disclosure By-Law.
 

b)   Separate Interest Bearing Trust Account

This type of trust account holds trust funds for only one client. Typical separate interest bearing accounts are passbook accounts, GICs, and Term Deposits. The interest on these accounts belongs to the client and should be recorded in your trust receipt records as it is earned for each client. Similarly, any service charges are charged to the clients and recorded as disbursements for those clients.

If you expect you are going to be holding a large sum of money for a client for an extended period of time, you should discuss with the client whether he or she wants interest on the money. You should get the client’s instructions in writing as required by section 8(1)(a) of By-Law 9, taking care that the client is not looking to you for investment or financial advice.
 
Not all separate interest bearing accounts are guaranteed by CDIC, so you will want to be sure your client understands the nature of the investment and whether there will be sufficient funds available when the client needs them before accepting your client’s written instructions.
 
If the client does instruct you to put his or her money in an interest bearing account, consider whether the money will be required on short notice since some investments have reduced or no interest on early redemption. Also, decide how interest will be handled and record the client’s S.I.N. and/or corporate number for allocation of interest income.  This money, however, must still be recorded in your trust records as it is your client’s money and considered trust funds for the purposes of By-Law 9.

If you are asked to hold disputed funds in an interest bearing account, consider getting written instructions from all parties that allow you to charge a monthly fee for administering the funds if the parties have not agreed on the disposition of the funds within a reasonable time, for example, three to six months. 

Financial Institutions for Paralegals’ Mixed Trust Accounts

Your mixed trust accounts must be kept at one of the following institutions:

  • chartered bank
  • provincial savings office
  • credit union or league subject to the Credit Unions and Caisse Populaires Act, 1994
  • registered trust corporation.

When opening a mixed trust account, check with the financial institution to make sure:

  • it has an agreement with The Law Foundation of Ontario for the payment of interest on mixed trust accounts
  • it can provide you with the monthly bank statements and returned cheques, including certified cheques, as required by By-Law 9 (imaged cheques, clearly showing front and back of cashed cheques, which will eventually be provided by all financial institutions, are acceptable).

Maintaining Financial Records

You must keep your financial records available for the time periods set out in section 23 of By-Law 9. This means you must keep the records described in section 18 of By-Law 9 for:

1.   The most recent six (6) full years plus the current year:

  • record of transfers between clients’ trust ledger accounts
  • general account receipts and disbursements journals
  • fees book or chronological file of bills to clients
  • book of duplicate cash receipts.

2.   The most recent ten (10) full years plus the current year:

  • trust account receipts and disbursements journals
  • client trust ledger
  • monthly trust comparisons for all trust accounts supported by trust account reconciliations and client trust listings
  • valuable property record
  • bank statements, including GIC, term deposit or other bank confirmations; pass books; cashed cheques, including certified cheques and any imaged cheques; detailed duplicate deposit slips
  • signed requisitions for electronic transfers of trust funds (Form 9A)
  • signed printed confirmations of electronic transfers of trust funds.

While By-Law 9 obliges you to keep your records current at all times, ensuring your financial records are accurate, legible, detailed, and up to date will help you to run your legal services practice more efficiently. It can be very costly both in time and money, and can damage your client relationships to let your records fall into arrears. See the “Sample Books and Records” section of this Guide for examples of how to prepare financial records required by section 18 of By-Law 9.

While section 21 of By-Law 9 permits you to keep your financial records electronically, you must be able to produce paper copies of your records for the Law Society for the time periods described above. We suggest you print your journals and records monthly to avoid the all too common problems with computer crashes, data corruption, and software update incompatibility. If you prepare any of your financial records by hand they must be permanent, for example prepared in ink, or prepared in pencil in draft then photocopied.

Keep in mind that whether you do your own record keeping, assign it to a staff member or retain a bookkeeper or accountant to maintain it, you, (and your partners if any), are responsible for ensuring that your office maintains the required records and follows the money handling requirements in By-Law 9. You should ensure that whoever is maintaining your accounting records is familiar with the Law Society’s By-Law 9. Some items you and your staff should be vigilant about are:

  • overdrawn or inactive client trust ledger accounts
  • uncorrected or unexplained reconciling items on the trust bank reconciliations
  • trust receipts outstanding beyond the following banking day
  • review of the trust comparison for accuracy by the 25th of the following month.

You should ensure that you have control of your accounting records at all times and that they are kept secure and confidential.

Consult the sample Internal Control Self Assessment Guide in the Appendices for these and other internal controls appropriate for your office, especially if you handle client trust funds, to ensure you and your staff are following the correct record keeping and money handling procedures.
 

Disbursing Trust Funds

It is important to have an audit trail, recording each step and preserving original and supporting documentation (source documents), for all transactions in a business, but especially if you handle client trust funds. A trust disbursement must always be initiated in writing by a paralegal licensed by the Law Society, who is permitted to handle trust funds. The signed written authorization, e.g. cheque, Form 9A, letter of direction to your financial institution, then becomes part of your accounting records. If you declare bankruptcy you are not permitted to handle or have trust accounts in your name (section 2 of By-Law 9).

Section 9 of By-Law 9 allows you to withdraw trust funds you are holding for a client for the following reasons only:

  • to make a proper payment to or on behalf of the client
  • to reimburse your office for proper expenses incurred on behalf of the client
  • to pay yourself or your office, fees for legal services for which you have sent a fee bill to the client
  • to transfer funds to another trust account for a client
  • to withdraw funds that according to By-Law 9 should not have been deposited to the trust account.

You may disburse trust funds by cheque, bank draft, and wiring funds through your bank. You may also use Internet banking if you follow the requirements of section 12 of By-Law 9. If you withdraw trust funds to pay your fees and/or disbursements, section 10 of By-Law 9 limits you to the follow methods: a cheque payable to you or your paralegal firm name, transfer to a non trust account, (i.e. general bank account), in your or your paralegal firm’s name, and electronic transfer.  Withdrawing trust funds in cash is risky and should only be done on the client’s written instructions; you should always get a signed receipt from the payee.  Always check your clients’ trust ledger to ensure you hold sufficient funds in trust for a particular client before disbursing funds for that client. You should confirm your financial institution’s holding periods on funds to be sure cheques you have deposited from clients have cleared and will not be returned NSF (not sufficient funds).

If you received fees, disbursements, expenses, or bail in cash, section 6(e) of By-Law 9 requires that you make any refund of those payments in cash.

1.   Cheques vs Bank Drafts

You should be aware that cheques leave a better audit trail than bank drafts. Cashed cheques, including certified cheques, are your records and you must arrange for your financial institution to return them to you with your bank statements each month. Some financial institutions provide imaged cheques which are sent to you electronically. Bank drafts are the financial institution’s records. Financial institutions do not usually retain their original records for the ten year time period that you are required to keep your bank records. Returned cheques confirm that the funds have cleared and have the endorsement details on the back. Your copy of a bank draft will not confirm any of this information and you may have to spend time and money to obtain a copy of the bank draft from your financial institution to prove payment.

You must not issue trust cheques or bank drafts payable to “cash” or “bearer” (section 11 of By-Law 9) and you should withdraw cash from the trust account only when necessary (e.g. refunds of fees, disbursements, expenses, or bail paid in cash as per section 6(e) of By-Law 9), or on the client’s written direction. You should always get a detailed receipt signed by the payee for any cash disbursement.

2.   Internet Trust Disbursements

If you disburse any funds by Internet banking, you must follow the procedure set out in section 12 of By-Law 9:

  • complete a Form 9A for each client transaction (See the Appendices for a sample completed Form 9A)
(This Form must be signed by a person who has signing authority on your trust account. Except for exceptional circumstances, this must be a lawyer or paralegal licensed by the Law Society who is entitled to hold trust funds.)
  • one person using a password, enters the transfer data as set out in the Form 9A
  • another person with a separate password, authorizes the transfer
(A paralegal practising alone without employees may both enter the data and authorize the transaction.)
  • print the electronic confirmation of the transaction that includes:
    1. your trust account number
    2. name, branch, and address of the account to which the funds have been transferred
    3. name of the account to which the funds have been transferred
    4. number of the account to which funds have been transferred
    5. time and date the transaction details and authorization were received by your financial institution
    6. time and date the confirmation of the transaction is sent to you from the financial institution
(While this confirmation must be obtained by the end of the next banking day, realistically it may not be available unless it is printed immediately.)
  • no later than the close of the second banking day after the transaction, compare the Form 9A with the printed confirmation and verify that the money was withdrawn as specified in the Form 9A
  • write the client name, client matter, and any file number on the printed confirmation
  • sign and date the printed confirmation.

Both the Form 9A and printed confirmation should be kept in numerical order by requisition number with your financial records. You may want to keep a copy in the client’s file as well.

Client Identification and Verification Requirements – By-Law 7.1 Part III

As of December 31, 2008, subsection 22(1) of By-Law 7.1 requires that you obtain specific details identifying your clients for all new client matters; and if you receive, pay or transfer funds, or if you give instructions to receive, pay or transfer funds, then you are also required to obtain verification of the client’s identification. You should review section 23 of By-Law 7.1 for the specific identification and verification requirements and subsections 22(2), (3) and (4) for exemptions for certain licensees, types of funds, and certain clients. You should familiarize yourself with the definitions in section 20 and also for how long you must keep the client identification and verification information as set out in subsection 23(14) of the By-Law. There are sample completed identification forms for individuals and organizations in the Sample Books and Records and you can find more Law Society resources and further information on the Society website at: https://www.lso.ca/paralegals/practice-supports-and-resources/topics/the-paralegal-client-relationship/client-identification-and-verification-requirement

Billing Clients

In every matter, you should send invoices to the client containing a clear statement of what amount is owing, and providing adequate detail of the legal services you provided and any disbursements incurred on the client’s behalf.  You should always send a final bill, but if the matter is lengthy it might be appropriate to send interim invoices, e.g. monthly. The invoice information should be recorded in a Fees Book detailing the fees charged to the client, other billings charged to the client, the date of billing and the client who is billed. Alternatively you can keep copies of the invoices in date order in a Chronological Billings File.
 
If you have money in trust to pay your invoice, then once you have completed the services you agreed to provide for the client and sent the client an invoice for those services, By-Law 9 section 9(1)(3) allows you to transfer the money to your general account. The invoice should be entered and posted in your financial records before you transfer money from Trust to General for earned fees.

A proper system of invoicing is not limited to practices where an invoice is required to release monies from Trust.  When you provide services without having a monetary retainer paid in advance, it is still essential that you have a proper system of invoicing.  Your invoices are the foundation upon which your billing and accounting records system is built.

Credit and Debit Card Payments

If you accept credit or debit card payments from clients, you must make arrangements with your financial institution to have retainers for future fees and disbursements paid directly into your trust account, and payments for your fee bills to clients, paid directly into your general account. You will likely need two merchant accounts to accomplish this. You cannot deposit both retainers and payments into one account, then immediately transfer the funds that do not belong in that account to your other account. If you accept both types of payment by debit card, you will have to use two machines, one for your trust account and one for your general account. See the Appendices for “Use of Credit Cards in The Legal Practice.

If you use your own credit card to make a payment on behalf of a client, you should record the payment details in your general disbursements journal on the day you make the payment.

Automated Teller Machines

If your financial institution offers ATM access to your trust account, you may use it for deposits only. Ensure that your bank card is encoded for deposit only.  Read the financial institution’s agreement carefully and make sure you understand the risks involved in using this method of deposit. In some agreements the depositor is responsible for the funds until they are received by a representative of the financial institution. You should always print a receipt of an ATM deposit and keep it with your deposit book along with a record of the source of the funds and the client reference.

Conclusion

We hope you find the information provided in this Guide helpful in maintaining the books and records of your practice.  Remember it is your responsibility as a paralegal to ensure your practice is in compliance with the Rules of Professional Conduct and the Law Society’s By-Laws. Keeping clear, complete, and current financial records not only helps you to stay in compliance with the Law Society’s Rules and By-Laws, it will also make your practice operate more efficiently and allow you to provide better service to your clients. If you have any questions or comments on this Guide, please contact the Practice Management Helpline at 416-947-3315, toll free in Ontario 1-800-668-7380 ext. 3315, or visit the Law Society’s website at www.lso.ca.

Sample Books & Records  

The following are examples of financial records described in By-Law 9, showing how you can record the typical kinds of transactions that occur in a legal services office.

1.   Trust Receipts Journal: subsection 18(1) of By-Law 9

For each amount you receive in trust for a client, you must record:

  • date you received the money
  • method by which you received the money
  • purpose for which you received the money
  • person or institution from whom you received the money
  • amount you received
  • name of the client for whom you received the money.

Sample:
Paula Paralegal
Trust Receipts Journal

Date 2014

Funds

Received From

Client

Amount

Method of Payment

Purpose

Jul 12

Jane Piper

Piper - re: small claim court

300.00

Cheque

Retainer

Aug 3

Susan Silver

Silver - re: traffic

100.00

Credit Card

Retainer

Aug 9

Jane Piper

Piper - re: small claim court

125.00

Cheque

Retainer

Aug 16

Ali Said

Said - re: summary charge

600.00

Cert. Cheque

Retainer

Aug 18

David Silver

Silver - re: small claim court
100.00
Cash Retainer

2. Trust Disbursements Journal: subsection 18(2) of By-Law 9

For every payment you make from the trust account, you must record:

  • date you made the payment
  • method you used to make the payment, for example: cheque, bank draft, electronic trust transfer
  • purpose for which you made the payment
  • number of the document you used to make the payment, for example: cheque number, bank draft number, electronic trust transfer requisition number
  • person or institution to whom you made the payment
  • amount of the payment
  • name of the client on whose behalf you made the payment.

Sample:
Paula Paralegal
Trust Disbursements Journal
Date 2014 Method /
Ref #
Paid To Purpose Client Amount
Jul 30 ET # 0081 Paula Paralegal Agent fee Piper - re: small claim court 282.50
Aug 5 Cheque # 012 City of Toronto Set fine Silver - re: traffic 325.00
Aug 16 Cheque # 013 Minister of Finance Notice of Garnishment Piper - re: small claim court 100.00
Aug 23 Cheque # 014 Minister of Finance Set fine Said - re: summary charge 500.00
Aug 23 ET # 0082 Paula Paralegal Process serving fee Said - re: summary charge 400.00
Aug 27 Cheque # 015 Minister of Finance Plaintiff’s Claim Silver - re: small claim court 75.00

Note: The trust receipts journal and trust disbursements journal can be combined into one journal, often called the “Trust Bank Journal.”

3.  Clients’ Trust Ledger: subsection 18(3) of By-Law 9

Every time you record a trust receipt or payment in the trust receipts journal or trust disbursements journal, you must also record the receipt or payment for the specific client in the clients’ trust ledger, and calculate the unexpended balance for that client.  This way you always know exactly how much you have in trust for each client.

Record every deposit to your trust account in the name of the client on whose behalf you received it. Do not put any of your, or your firm’s money, such as a float to cover bank charges, in your trust account. There should be no trust ledger accounts in your name, your firm name, or any other name such as “miscellaneous”, “suspense”, or “unknown”, that is not a client’s name. Each client’s receipts, disbursements and balance are listed separately so you know how much you have in trust for each client. For convenience, most firms set up separate client trust ledger accounts for each separate matter for the same client so there will be a separate card or account for each client matter. Together, these accounts make the clients’ trust ledger. You may keep copies of individual client trust ledger accounts for each client in the client files, but you must keep the entire ledger as part of your accounting records.

Sample:

Paula Paralegal
Client Trust Ledger

Account: PIPER, Jane - re: small claim court

Date 2014 Particulars Receipts Disbursements Balance in Trust
Jul 12 Retainer - re: small claim court 300.00   300.00
Jul 30 Transfer to general Invoice # 0118   282.50 17.50
Aug 9 Retainer - re: small claim court 125.00   142.50
Aug 16 Notice of garnishment   100.00 42.50

 Account: SAID, Ali - re: summary charge

Date 2014 Particulars Receipts Disbursements Balance in Trust
Aug 16 Fine advance 600.00   600.00
Aug 23 Fine payment   500.00 100.00
Aug 23 Transfer to general Invoice # 0119   100.00 0.00

 Account: SILVER, David - re: small claim court

Date 2014 Particulars Receipts Disbursements Balance in Trust
Aug 18 Retainer - re: small claim court 100.00   100.00
Aug 27 Filing defendant claim   75.00 25.00
Aug 30 Transfer from S. Silver 10.00   35.00

 Account: SILVER, Susan - re: traffic

Date 2014 Particulars Receipts Disbursements Balance in Trust
Aug 3 Retainer - re: traffic 100.00   100.00
Aug 5 Parking ticket payment   90.00 10.00
Aug 30

Transfer to D. Silver

 

10.00

0.00

4.   Trust Transfer Record: subsection 18(4) of By-Law 9

Whenever trust funds are moved from one client’s trust ledger account to another client’s trust ledger account you must record the transfer and explain the purpose of the transfer.

Sample:
Paula Paralegal
Trust Transfer Journal*
Date 2014 From Client To Client Amount Reason
Aug 30 Susan Silver - re: traffic David Silver -
re: small claim court
10.00 Unused retainer, completed matter; on Susan Silver’s written direction

* In this example, Susan Silver’s traffic matter is now over and she has already been fully billed for the services provided. She provided written instruction to Paula Paralegal to transfer her remaining retainer balance from the traffic matter to her son’s account for the small claim court matter that Paula Paralegal is also handling. A trust transfer entry is required for transfers between clients but not for matters for the same client, although you should get the client’s instructions before transferring the client’s funds to another matter for that client.

5.   General Receipts Journal: subsection 18(5) of By-Law 9

For each amount you receive in your practice that is not trust money, record:

  • date you received the money
  • method by which you received the money
  • person from whom you received the money
  • amount you received.

Sample:
Paula Paralegal
General Receipts Journal
Date 2014 Funds Received From Amount Method of Payment
Jul 2 ACME Bank - re: Bank Loan 2,500.00 Bank Draft
Jul 7 Stephen Bell - re: Inv # 0116 400.00 Cheque
Jul 12 Angela Finelli - re: Inv # 0117 169.50 Cheque
Jul 30 Transfer from trust - re: Piper, Inv # 0118 282.50 ET # 0081
Aug 16 Stephen Bell - re: Inv # 0116 100.00 Cash
Aug 23 Transfer from trust - re: Said, Inv # 0119 100.00 ET # 0082
Aug 30

Stephen Bell - re: Inv # 0116

65.00

Cash

6.   General Disbursements Journal: subsection 18(6) of By-Law 9

For every payment you make in your practice that is not a trust payment, record:

  • date you made the payment
  • method you used to make the payment, for example: cheque, bank draft
  • number of the document you used to make the payment, for example: cheque number, bank draft number
  • amount of the payment
  • person to whom you made the payment.

Sample:
Paula Paralegal
General Disbursements Journal
Date 2014 Method /
Ref  #
Paid To Particulars Amount HST Paid Total Paid
Jul 2 Cheque #51 Lucy Landlord Rent 1,000.00 130.00 1,130.00
Jul 12 Cheque #52 ABC Office Supplies Stationary 200.00 26.00 226.00
Jul 26 Debit from account Acme Bank Service Fees 20.00 2.60 22.60

Aug 3

Cheque #53

Lucy Landlord

Rent

1,000.00

130.00

1,130.00

7. Clients’ General Ledger

By-Law 9 does not require this record, but it is useful for keeping track of all the expenses, invoices and payments for each client in one convenient record so you know how much each client owes you. As with the client trust ledger, the details of each separate client matter are usually posted to a separate card or account. We also recommend that you reconcile your general account(s) monthly.

Sample:

Paula Paralegal

Client General Ledger

Account: BELL, Stephen - re: small claim court

Date 2014

Particulars

Expenses Paid

HST

Fees

Payments from Client

Balance Owed

Jul 2

Fees – Inv # 0116

 

65.00

500.00

 

565.00

Jul 7

Client Payment

 

 

 

400.00

165.00

Aug 16

Client Payment

 

 

 

100.00

65.00

Aug 30

Client Payment

 

 

 

65.00

0.00

Account: FINELLI, Angela - re: traffic

Date 2014

Particulars

Expenses Paid

HST

Fees

Payments from Client

Balance Owed

Jul 2

Fees – Inv # 0117

 

19.50

150.00

 

169.50

Jul 12

Client Payment

 

 

 

169.50

0.00

Account: PIPER, Jane - re: small claim court

Date 2014

Particulars

Expenses Paid

HST

Fees

Payments from Client

Balance Owed

Jul 26

Fees – Inv # 0118

 

32.50

250.00

 

282.50

Jul 30

From Trust

 

 

 

282.50

0.00

Account: SAID, Ali - re: summary charge

Date 2014

Particulars

Expenses Paid

HST

Fees

Payments from Client

Balance Owed

Aug 17

Fees – Inv # 0119

 

13.00

100.00

 

113.00

Aug 23

From Trust

 

 

 

100.00

13.00

Account: SILVER, Susan - re: traffic

Date 2014

Particulars

Expenses Paid

HST

Fees

Payments from Client

Balance Owed

Aug 30

Fees – Inv #0120

 

6.50

50.00

 

56.50

8.         Fees Book: subsection 18(7) of By-Law 9

When you invoice your clients, you can either record the information in a Fees Book or keep a copy of each invoice in chronological (date) order in a billings file. Many legal service firms keep both records. A ringed binder with tab dividers for each month works well for the billings file. If you keep a Fees Book, record the following information:

  • fees charged to the client
  • other billings charged to the client
  • date of billing
  • client who is billed.

Sample:

Paula Paralegal

Fees Book

Date 2014

Inv #

Client

Fees Billed

Disbursements Billed

HST Billed

Total Billed

Jul 2

0116

Bell - re: small claim court

500.00

0.00

65.00

565.00

Jul 2

0117

Finelli - re: traffic

150.00

0.00

19.50

169.50

Jul 26

0118

Piper - re: small claim court

250.00

0.00

32.50

282.50

Aug 17

0119

Said - re: summary charge

100.00

0.00

13.00

113.00

Aug 30

0120

Silver, S - re: traffic

50.00

0.00

6.50

56.50

* No trust ledger accounts were created for Angela Finelli or Stephen Bell as no money is being received in trust for them.  Paula Paralegal is simply billing these clients as services are being rendered, with no advance of a money retainer.

 9.    Trust Bank Reconciliation, Client Trust Listing, and Trust Comparison: subsection 18(8) of By-Law 9

The trust comparison compares:

      a)   your reconciled trust bank balance

      b)   your client trust listing total.

These two amounts must be the same. This is one of the most important trust records and you must complete it by the 25th of each month for all trust funds you held at the previous month’s end. You should correct any trust shortages immediately and correct any bank or posting errors before the next month end.

For the trust reconciliation:

  • Check off all of the returned or imaged cheques on the trust bank statement for the previous month, noting any discrepancies in the amounts.
  • From your trust disbursement journal, identify any cheques you have issued that do not show as cleared on the bank statement; these are your outstanding cheques.
  • List the outstanding cheques by cheque number, date of issue, and amount, then total the amount.
  • From your deposit book, check off all deposits on the bank statement noting any discrepancies in the amounts.
  • List any deposits for the previous month, by date and amount, that are not recorded on the bank statement; these are your outstanding deposits.
  • List any bank errors and/or posting errors individually by date of occurrence and provide a brief explanation; a copy of any supporting documentation, such as a bank memo, should be attached to your reconciliation.
  • From the balance on the trust bank statement, subtract the amount of the outstanding cheques, add any outstanding deposits, and adjust for any bank and posting errors to calculate your reconciled trust bank balance.

For the client trust listing:

  • From the clients’ trust ledger, identify any client for whom you held trust funds at the previous month end.
  • List the client names in a logical order, with the unexpended trust balance for each client as at the previous month end.
  • Include the last activity date for each client’s trust balance on the client trust listing to help you to monitor inactive or dormant amounts.
  • Total the client trust listing.

Document the comparison of your reconciled trust bank balance with the client trust listing total. If these two amounts are not the same, you must find and correct the discrepancy.

Sample: 

Paula Paralegal
Trust Bank Reconciliation as at August 31, 2014 

Mixed Trust Account:
Balance per Bank Statement                                                                                                                         $    643.50   
     Less:  Outstanding Cheques (see list below)                                                                                             575.00
     Plus:  Outstanding Deposits – 31Aug14                                                                                                            0.00

     Plus:  Bank Error – 11Aug14                                                                                                                                   9.00
     Chq# 012     cleared as $99.00 s/b $90.00,
                             corrected 28Sep14 by bank credit memo

Reconciled Mixed Trust Bank balance at Aug 31, 2014                                                                     $    77.50


Outstanding Cheques:
     Cheque #                                     Date                                                 Amount      
     014                                                 23Aug14                                          $500.00

     015                                                 27Aug14                                               75.00
Total Outstanding Cheques:                                                               $575.00

 

Client Trust Listing as at Aug 31, 2014
(from clients’ trust ledger balances)
File Name                                                                    Last Activity Date                                                        Amount
PIPER, Jane
                                                                16Aug14                                                                               42.50
SAID, Ali                                                                        23Aug14                                                                                 
0.00
SILVER, David                                                             30Aug14                                                                               35.00
SILVER, Susan                                                            30Aug14                                                                                  0.00
Total client funds in trust:                                                                                                                                  $  77.50
Total trust liabilities to clients at Aug 31, 2014                                                                                $    77.50

Trust Comparison as at Aug 31, 2014
Total Reconciled Trust Bank Balance                                                                                                                        $    77.50
Total of unexpended balances per Clients’ Trust Ledger                                                                                $    77.50
Date Prepared:                                        Sept. 21, 2014
Date Reviewed:                                       Sept. 25, 2014

Signature:                                                     P. Paralegal   
 

Regardless of who prepares the trust comparison, you should make it a habit to review the trust comparison and all supporting documentation by the 25th of each month to make sure:

  • the comparison has been completed on time
  • all client trust funds are included: mixed, pass book, GICs, term deposits, etc.
  • bank statement, passbook, GIC, term deposit etc. balances are correct
  • the arithmetic is correct
  • reconciling items, e.g. bank errors, posting errors, are cleared each month and are explained and supported by documentation
  • stale dated cheques, i.e. cheques that have been outstanding for more than 6 months, are reversed, the client liability reinstated in the clients’ trust ledger and the cheque reissued if appropriate (Note that bank clearing rules state that a cheque more than six months old may be cashed so check your financial institution’s policy to determine whether you should put a stop payment on a trust cheque before reissuing it.)
  • there are no overdrawn client trust ledger accounts
  • the amounts in trust for each client are correct
  • any client trust ledger accounts that have not had any activity in the previous 12 months are followed up with a status review.

Keep in mind the trust account is for your clients’ money, so if you do not receive trust funds in your legal services practice you do not need to open a trust account. But if you do have a trust account, you must prepare a trust reconciliation and trust comparison every month; even if the trust account has been inactive or if there is a zero balance in the trust account.

You may wish to review “Reconciling a Trust Account” https://www.lso.ca/paralegals/practice-supports-and-resources/topics/managing-money/trust-accounts/reconciling-a-trust-account.

10.   a) Detailed Duplicate Trust Account Deposit Slip: subsection 18(10) of By-Law 9

By-Law 9 requires you to deposit any trust money you receive immediately into your trust account. You should record the following information on all your copies of trust deposit slips:

  • date you deposit the funds
  • your firm’s name if it is not preprinted
  • your bank account number if it is not preprinted
  • source of each receipt
  • related client
  • amount.

You should also ensure that the teller stamps each deposit slip. If you use an automated teller machine, attach the ATM receipt to the corresponding deposit slip.

Sample:

BANK OF ONTARIO
Deposit slip
Credit Account of: Paula Paralegal, Trust Account
 
Date: 2010-08-30                          “Teller Stamp”                 Depositor initials: PP
Transit #: 54321                                                                            Teller initials:  ABC
Account #: 1234567890

Cheques and Credit Card

Vouchers

Details

Cash

 Jane Piper

 

 

x     $5

 

 

re small claim court

125

00

x   $10

 

 

 

 

 

x   $20

 

 

 

 

 

x   $50

 

 

 

 

 

x $100

 

 

 

 

 

                    x

 

 

 

 

 

                    x

 

 

 

 

 

  coin

 

 

 

 

 

Cdn Cash Total

 

 

Total ►

125

00

 

Credit Card Vouchers

and Cheques Forwarded

►       125

00

10. b) Detailed Duplicate General Account Deposit Slip: subsection 18(10) of By-Law 9

You should record the following information on all your copies of general deposit slips:

  • date you deposit the funds
  • your firm’s name if it is not preprinted
  • your bank account number if it is not preprinted
  • source of each receipt
  • related client, if applicable
  • amount.

You should also ensure that the teller stamps each deposit slip. If you use an automated teller machine, attach the ATM receipt to the corresponding deposit slip.

Sample:

BANK OF ONTARIO
Deposit slip
Credit Account of: Paula Paralegal, General Account
 
Date: 2010-08-30                          “Teller Stamp”                 Depositor initials: PP
Transit #: 54321                                                                             Teller initials:  ABC
Account #: 1234567890                                
 

Cheques and Credit Card

Vouchers

Details

Cash

 From Trust Account

 

 

x     $5

 

 

re Said - inv #119

100

00

x   $10

 

 

 

 

 

x   $20

 

 

 

 

 

x   $50

 

 

 

 

 

x $100

 

 

 

 

 

                    x

 

 

 

 

 

                    x

 

 

 

 

 

  coin

 

 

 

 

 

Cdn Cash Total

 

 

Total ►

100

00

 

Credit Card Vouchers

and Cheques Forwarded

►            100

00

11.       Duplicate Cash Receipts Book: section 19 of By-Law 9

For each cash receipt you receive in your practice, prepare a duplicate cash receipt with:

  • the date you received the cash
  • the name of the person who gave you the cash
  • the amount of cash received
  • the name of the client for whom you received the cash
  • the file number if any
  • your signature or that of your authorized designate
  • the signature of the person who gave you the cash.

It is always advisable to sequentially number any accounting documents so your receipts should be numbered.

Give one copy of the receipt to the person who gave you the cash and keep one copy with your accounting records. You may also want to prepare the receipt in triplicate and keep the third copy in the client file.

By-Law 9 requires you to use reasonable efforts to obtain the signature of the person who gives you the cash. You should be wary of accepting cash from someone who does not want to sign a receipt.

Keep in mind that your staff may be reluctant to accept responsibility for receipt of cash payments. If you decide to make it a policy of your firm not to accept cash, or cash over a certain amount, be sure to notify potential clients in writing before accepting their retainers.

Sample:

                                                 DUPLICATE CASH RECEIPT                                      
                    #0001

Date_________________


Rreceived from___________________________ the amount of $__________________

 

On behalf of__________________________________________ for file #___________

 

_________________________________         ___________________________________________________

Signature of payor [person paying cash]          Authorized signature on behalf of [name of legal services firm]

12. a)     Client Identification and Verification (individual client) - s 23 By-Law 7.1

 Sample:

 

Paula Paralegal

VERIFICATION OF IDENTITY

(For use where the client or the third party is an individual)

Name:                            Kim Kirby                                                                                              

Address:                        456 Avenue Rd Anytown ON Z9Y 4V3                                       

Phone No:                    (789) 456-0123                                                                                   

Business Address:    N/A (retired)                                                                                          

Business Phone No: N/A (retired)                                                                                        

Occupation(s)             Retired real estate agent                                                                                                                                

 

Original Document Reviewed – Copy Attached

X  Driver’s Licence

  Birth Certificate

  Passport

  Other (specify type)                                                                     _________                               

Meeting Date Identity Verified:                Aug 30, 2014_________________________

Identity Verified By (Name of Person):  Sandy Secretary                                                     

Date File Reviewed by Paralegal:             Aug 30, 2014                                                 __   _

Name of Paralegal:                                         Paula Paralegal                                                     

12. b)     Client Identification and Verification (organization) - s 23 By-Law 7.1

Sample:

 

Paula Paralegal

VERIFICATION OF IDENTITY

(For use where the client or the third party is an organization)

Name:                               Peter Piper Pickles                                                                         

Business Address:       456 Avenue Rd Anytown ON Z9Y 4V3_______________                                 

Business Phone No:    (321) 654-0987                                                                                
Incorporation or Business Identification No.: 12131415 Ontario Inc                 

Place of Issue of No:                           Ontario                                                                      

Type of business or Activity:           Produce wholesaler and retailer                   

Person Authorized to Instruct

Name:                        Peter Piper______________________________________

Position:                   President____________________________­___________

Phone No.:              (321) 654-0987 ext 1__________________­____________

 

Original Document Reviewed – Copy Attached

X  Driver’s Licence

  Birth Certificate

  Passport

  Other (specify type) __________ ________________________

 

Names and Occupation(s) of Directors

Peter Piper, farmer_____________________________________________

Jackie Jones, electrician________________________________________

Ricky Ricardo, musician_________________________________________

_____________________________________________________________

 

Names, Addresses and Occupation(s) of Owners or Shareholders owning a 25% interest or more of the organization or shares in the organization

Peter Piper, 456 County Rd Anytown ON Z9Y 4V3, farmer, 51%______________

Peter Piper Jr, 456 County Rd Anytown ON Z9Y 4V3, farmer, 49%____________

_________________________________________________________________

_________________________________________________________________

 

Original Document Reviewed – Copy Attached

 X Certificate of Corporate Status

  Annual Filings of the Organization (specify type) _______________________

  Partnership Agreement

 Trust Agreement

  Articles of Association

X  Other (specify type)                         Business Names Registration                                

 

Meeting Date Identity Verified:                           Aug 30, 2014_____________________

Identity Verified By (Name of Person):            Sandy Secretary__________________

Date File Reviewed by Paralegal:                      Aug 30, 2014_____________________

Name of Paralegal:                                                  Paula Paralegal__________________

 

13.       Valuable Property Record: subsection 18(9) of By-Law 9

This record is required to record trust assets other than money. The record should show, as a minimum, the following details:

  • the name of the beneficial owner or owners
  • a description of the property
  • the date the property came into the paralegal’s possession or trust control
  • the name of the person who had control of the property immediately before the paralegal took possession
  • the value of the property
  • the date that the trust was terminated by delivery or transfer of the property to, or on the direction of, the beneficial owner or owners
  • the person to whom possession of property given.


Properties to be included:

Instruments registered in the paralegal’s name in trust:

  • stocks, bonds or other securities in bearer form
  • jewellery, paintings, furs, collector’s items or any variety of saleable valuables
  • any property that a paralegal can convert, on his/her own authority to cash.

 

Properties not to be included:

Term deposits, deposit receipts, savings accounts or similar deposit accounts maintained for individual clients at chartered banks or registered trust companies. These are trust monies and must be recorded in the financial accounting records.

Sample:

Paula Paralegal

Valuable Property Record

Client

Description of Property

Date Received

Received From

Value of Property

Given To

Date Given

BELL, Stephen

pearl coloured necklace

01May14

BELL, Stephen

530.00

BELL, Allison

16Jun14

SILVER, Susan

silver coloured jewellery

02Jun14

SILVER, Susan

475.00

 

 

FINELLI, Angela

collector plates

07Jun14

FINELLI, Angela

320.00

 

 

Appendices

By-Law 9
       Form 9A -  Sample Completed Form 9A
Sample Letter of Direction to a Financial Institution
Report on Opening or Closing a Trust Account
Internal Control Self-Assessment Guide
Use of Credit Cards in The Paralegal Practice

Monthly Financial Review Checklist 

 

Sample Completed Electronic Trust Transfer Requisition Form (Form 9A)

ELECTRONIC TRUST TRANSFER REQUISITION
Requisition #ET0081
 
Amount of funds to be transferred: $282.50
Re:                   PIPER small claim court
Client:            Jane Piper
File No.:         08-47
Reason for payment: Fees ($250.00) and HST ($32.50) billed to client
Trust account to be debited:
           Name of financial institution:            Bank of Ontario
           Account number:                                    123456789
           Name of Recipient:                                 Paula Paralegal, General Account
Account to be credited:        
           Name of financial institution:            Bank of Ontario
           Branch name and Address                  20 Downtown St., City, ON Z9Y 2T2
           Account number:                                     987654321
 
Person requisitioning electronic trust transfer: Paula Paralegal
Jul 30, 2014                                                                        Paula Paralegal  
Date                                                                                        Signature
Additional transaction particulars:
           Person entering details of transfer:
           Name:       Sandy Secretary                                Sandy Secretary                       
                                                                                                    Signature
           Person authorizing transfer at computer terminal:
           Name:       Bobby Bookkeeper                            Bobby Bookkeeper                   
                                                                                                     Signature

Use of Credit Cards in The Paralegal Practice

Paralegals may enter into agreements with financial institutions that offer credit card services subject to certain conditions.
 
The definition of “money” in By-Law 9 includes “credit card sales slips” and provides that credit card sales slips like other money received into trust, must be deposited to your trust account not later than the following banking day.


Conditions

Accounts from which Discounts and Services Charges are to be Deducted

Any credit card agreement that you enter into must provide that all service charges, discounts and other fees payable by you to the financial institution are to be deducted from your general account and that no such charges are to be deducted from the trust account.  You should note that most financial institutions offering credit card services require the opening of accounts at one of their branches. If you open a trust account with a financial institution to facilitate the use of a particular credit card, the financial institution must be directed to pay interest on the funds held in trust to The Law Foundation of Ontario.

Confidentiality  

The sales slip may show your name or your firm name and your address, the necessary code numbers, and date.  The nature of the services provided must not be indicated, but only the words “legal services” plus a file number and a dollar amount.  Details of the services are to be provided to the client in the usual way.

Amount Must Be Shown  

You must not accept a charge card sales slip unless the amount of the charge has been inserted at the time the client signs the sales slip.

Payment of Retainers

The words “trust account” must appear on the original credit card sales slip and the credit card sales slip must be presented for deposit in the appropriate trust account in accordance with By-Law 9.  Normal accounting procedures are then to be followed in transferring the funds from trust to general.  Any refund is to be made by credit card voucher.  All service charges are to be deducted from the general account and the client must receive full credit for the face amount of the credit card invoice.  The credit card company’s discount or fee is a cost of carrying on practice and is not to be charged to the client.
 
The procedures of some credit card companies place you in conflict with provisions in By-Law 9.  Some credit card companies require merchants to designate only one account into which credit card payments are to be deposited.  Additionally, the discount or fee charged by the company is automatically debited from this account.
 
This process will not permit you to receive by credit card both retainers and payments for billed fees and/or disbursements.  Subsection 2(1) of By-Law 9 requires you to deposit funds received in trust (e.g. retainers) into an account designated as a trust account.  Meanwhile, subsection 8(2) of By-Law 9 prohibits the deposit into trust, funds that are received by you on account of fees for which a billing has been delivered. Consequently the use of one account for both purposes is not permissible.
 
Additionally, as with bank charges, the discount or fee must be withdrawn from your general account.
 
You are urged to canvass this issue with credit card companies that you are using or contemplating using. If the company imposes the above restrictions, you can only designate your general account and thus may only receive payments for billed fees and/or disbursements.

 

Telephone Authorizations

We are asked from time to time whether it is acceptable to take a client’s card number over the telephone and process payment of the account that way.  It could be acceptable provided you have rendered the account before doing this. It is always preferable to have the best possible paper trail in any financial dealings, and the signature of the client on the sales slip is obviously the best proof one could have of the client’s agreement to use this service.
 
The issue also arises as to whether it would be acceptable to renew a retainer in this way.  It is suggested that you would not wish to put yourself at risk of having the client deny that permission was given for this type of transaction and that if it is contemplated that retainers would be renewed by telephone permission, this arrangement should be clearly set out in the written retainer.  In fact we would suggest having the client specifically initial the paragraph of the retainer that would permit this arrangement.  Reference should then be made to the paragraph headed “Payment of Retainers” set out above, and the procedure therein followed.  It is emphasized that the “paper trail” is for your protection as much as for the protection of the client, and you are urged to take care in your use of credit cards so that misunderstandings do not arise between your firm and the client.

Monthly Financial Review Checklist
 
Month reviewed  
Date reviewed  
Reviewed by  
Notes/Reminders
in tickler
 
 

 
Records Reviewed:
  • Bank Issued Trust Account statements OR Personally verified accuracy of copies against online bank records
  • Reconciliation of Trust Account Bank Balance to trust bank journal balance
  • Client Trust Listing as at month end – including balance held and last activity date
  • Record of Comparison of reconciled trust account bank balance and client trust listing total
  • Bank issued General Account statements OR personally verified accuracy of copies against online bank records
  • Reconciliation of General Bank Balance record
  • Cancelled Cheques.
 

Records confirmed to be appropriate in form and content:

  • trust reconciliation was prepared by the 25th day of the month

  • math was correct (not necessary if prepared using accounting software – but re-check if excel based)
  • balances on reconciliation agree with supporting documentation
  • balance held in trust as per the books and records, match the trust account bank statement adjusted for outstanding cheques,  deposits and posting/bank errors (if any)
  • bank errors and posting errors are cleared each month and supporting documentation was attached to reconciliation and comparison
  • no trust or general cheques are outstanding for more than 6 months.  If trust, stop payment if necessary, client liability reinstated in clients’ trust ledger, cheque re-issued if appropriate. If general, ascertain why cheque still outstanding and reverse
  • no overdrawn client trust ledgers found (if so, immediate repayment is necessary, even if out of licensee’s own funds)
  • no overdrawn general account, without appropriate overdraft coverage found
  • amounts held for each client are correct
  • no client trust ledgers found where no activity for more than 12 months (if so, consider if funds are held for legitimate reason, take steps to either bill or return to client – conduct a file review to ascertain status).

Work in Progress Review:
  • any unbilled disbursements for clients with trust fund balance (if so, transfer and bill in due course)
  • any unbilled disbursements (if so, consider sending an interim account)
  • any WIP (if so, consider sending an interim account)
  • any client files with no activity for over 30 days (if so, conduct a file review and consider providing a status report to client)
  • any client files that should be closed
  • any negative unbilled disbursements – effectively these are amounts to the credit of the client and should be applied against billings or sent to trust – sometimes they are caused by account write offs that have been posted incorrectly, but they need to be  looked at.

Accounts Receivable Review:
  • any accounts receivable over 30 days
  • initiate reminder notices or phone call to client according to office policy – enter reminder in tickler system for follow up
  • any accounts that should be written off or listed as doubtful debts – (get your HST back!)
  • any accounts that should be assessed
  • any negative balances – same as negative unbilled disbursements above.

Budget Review:

  • income reviewed and compared to budget
  • expenses reviewed and compared to budget
  • consider need for adjustment to proposed expenses
  • unexpected expenses considered.
    
Terms or Concepts Explained