At October 2022 Convocation, the Benchers approved amendments to the Rules resulting in changes to the annual reporting requirements for firms with trust accounts. These Rule amendments to Part 16 and Part 9 facilitate a shift in the approach to trust safety procedures and reflect changes that have already been successfully implemented in other Canadian jurisdictions and are aimed at: modernization and the improvement of risk mitigation strategies, cost reduction for members, and increasing audit capacities. The goal of this shift in approach is to support the Law Society in providing proper and consistent oversight over lawyers’ trust accounts, and to ease the burden on firms with “right-sized” and focused regulatory oversight where appropriate.
As the Law Society continues to look for improvements and modernize the approach to lawyers’ Trust accounts, a thorough review was conducted which included an evaluation of the Accountant’s Report (TA-5 or TA-5R) requirement. It was identified that firms with trust accounts shoulder a significant expense associated with the completion of the TA-5/TA5-R. The Benchers recognized that the public would be better protected and the needs of firms would be better met by eliminating the TA-5/TA5-R process and reallocating the funds spent by firms to fund an additional full-time Law Society Auditor. These changes will result in enhanced support for law firms on trust safety matters and a significant majority of firms will experience substantial savings.
Through a survey of Designated Representatives, it was identified that firms pay on average between $1,700 – $6,500 (overall average cost of $3,850) every 1-3 years for the completion of the TA-5/TA5-R (some firms were granted an exemption from filling the Accountant’s Report every year though no firms could be exempted for longer than 2 years).
To get an accurate idea of the costs incurred by the firms in completing the Accountant’s Report, a brief survey was sent to the Designated Representatives of firms with trust accounts asking the following questions:
The survey had an excellent response rate of 45% providing a large sample size across all firm size demographics. The survey data demonstrated that the average costs for firms in completing the Accountant’s Report across all firms is $3,850.
Summary of survey responses:
Given the averages, and the number of firms required to complete the Accountant’s Report on an annual basis, it is estimated that a total of nearly $1 million is expended by law firms in Saskatchewan at least over every three years in order to have the Accountant’s Report completed.
The survey demonstrates that implementing a yearly Trust Safety Administration Fee of $500 to support enhanced risk management practices in lieu of the costs incurred by firms in completing an Accountant’s Report would have the following cost effects for firms:
a) the fee would be cost neutral for approximately 11%;
b) there may be a cost increase for 10% or less; and
c) cost savings would be experienced by approximately 79%.
It was determined that the public interest, and the objectives of the trust safety program could be better served by eliminating the Accountant’s Report. Replacing those substantial firm expenditures with a $500 annual Trust Safety Administration fee payable to the Law Society, will allow for more streamlined reporting processes and an increase in the timeliness of the audit processes, enabling the Law Society and firms to be more proactive in the prevention of issues, reducing risk for firms and resulting in overall better protection of the public.
As we shift to a modernized approach to trust safety regulation, as the Designated Representative of your firm you can expect:
Although the majority of firms will experience cost saving benefits from the shift in approach and removing the Accountants Report, the Law Society recognizes that the annual Trust Safety Administration Fee may result in financial hardship in some circumstances. As such, the Law Society is establishing criteria for which a firm may be exempt from this fee in limited circumstances. Please contact us at email@example.com for further details.