Cashiers update – Prompt closure of client files

One of the most disconcerting things found during SRA Accounts reviews is the number of client files that have not been closed down in a timely manner (SRA Guideline 4.8). This indicates poor internal control and lack of adherence to the firm’s procedures, both of which are vital to the success of a firm.

The common obstacle preventing files from being closed down is where there are old balances being held on both office and client ledgers. Office balances are usually irrecoverable disbursements not written off, and client balances are where no attempt has been made to return the monies to the rightful owner promptly (Rule 14.3), or, when their whereabouts are unknown, they have not been dealt with under Rule 20.2 (under £50) and Rule 20.1(j) (over £50).

The provisions for dealing with residual balances were brought into force in July 2008, and the SRA are likely to be of the opinion that four years is sufficient time for firms to have cleared these matters, and they will also not be expecting to see any new ones.

Another reason for these being left is that the Fee Earners mistakenly believe it is the Cashier’s responsibility!

It is recommended that the Cashier issues a client matter listing of balances, both on office and client ledgers, at each month end to every Fee Earner, for review. Each Fee Earner should be looking for the following:

a)      funds held in client account that should be transferred to the office account to pay for fees and/or disbursements paid (Rule 17.3);

b)      funds held in client account that should be returned to the client promptly (Rule 14.3);

c)      irrecoverable disbursements that should be cleared from the office ledger (SRA Guideline 4.8);

d)      review of retentions on client ledger to ensure the client has been informed, in writing, of how much and why (Rule 14.4);

e)      review of retentions on client ledger, that have been held for nearly one year, to ensure that the client has been informed again of how much and why (Rule 14.4);

f)       closure of ledgers and files in a timely manner (SRA Guideline 4.8).

It is also recommended that should any Fee Earner fail to respond to these monthly reports, it should be referred to and addressed by the COFA in the first instance, and if necessary by the partners/directors, who are ultimately responsible.

For any further information please contact Karen Hain or a member of the Professional Practices team on 01772 821021.