The new Property Practitioners Act (the PPA) has brought about significant changes for business property practitioners, and it’s time to gear up for a crucial task—submitting to the Property Practitioners Regulatory Authority (PPRA). If you find yourself with questions and uncertainties about this process, worry not! In this blog post, we’ve got you covered.
We’ll address the most frequently asked questions about submitting to PPRA, shed light on the importance of accurate financial statements, and explain when a qualified chartered accountant’s audit might be necessary. Curious to unravel the mysteries of the submission process? Keep reading, and let’s get you ready for a seamless submission.
What You Should Know Before Submitting Your Financial Statements
As a business property practitioner, the process of submitting your financial statements can seem daunting, especially with recent changes brought about by the new Property Practitioners Act (PPA). To ease your worries and help you navigate through the submission requirements, we’ve highlighted some essential points you need to know:
1. Extended Submission Deadline
Previously, audit reports on trust accounts were due within 4 months of the estate agency’s financial year-end. But with the PPA in effect, the submission deadline has been extended to 6 months from the business property practitioner’s financial year-end. This gives you more time to ensure accuracy and compliance in your financial statements.
2. New Submission period
For property practitioners with a financial year end of 28 February 2023, the submission deadline is now 31 August 2023 instead of 30 June 2023. Be sure to adjust your timelines accordingly.
3. Revenue Determines Auditing Requirements
If your business property practitioner’s annual revenue reaches R2.5 million or more, the PPA mandates that your financial statements be audited. However, if you possess an exemption letter from PPRA for your trust account, an independent review of your financial statements will suffice.
4. Understanding the Audit Process
Financial statements need to be audited within six months of your financial year-end. While audited financial statements do not require submission to PPRA, they should be readily available if requested during an inspection.
5. No Need to Apply to PPRA for Independent Review
If you meet the requirements of an independent review according to the PPA and the Companies Act, you can proceed with an independent review without needing written permission from PPRA. This offers flexibility in the audit process.
6. Public Interest Score (PIS) Calculation
For those operating as companies, your PIS score determines whether your financials require auditing. The formula considers factors like the number of employees, third-party liability, revenue, and individuals with a beneficial interest in the company’s shares.
The PI Score calculation results serve several purposes, one of which is to determine whether a property business needs to undergo an audit as per the Companies Act or if its financial statements should be subject to an independent review. Moreover, companies that fall under the requirement for auditing according to the Companies Act or Companies Regulations, which includes companies with a certain PI Score, are subjected to enhanced accountability and transparency requirements outlined in Chapter 3 of the Companies Act.
According to the Company’s Act, the monetary measures in the PI Score can be impacted by inflation. Currently, the Companies Regulations do not consider this factor. Failing to reassess these measures periodically could lead to unintended consequences. The PI Score’s bar might become too low over time, resulting in excessive regulation for less significant entities. Moreover, the fact that the overall threshold has not been updated since 2011, despite considerable changes in entities’ turnovers, exacerbates this issue. It’s important to address this concern and implement a process for regular reassessment to maintain the effectiveness of the PI Score.
7. Only Certified Auditors
What happens if your auditor reports contraventions of the act when they submit the audit report? In that situation, you should expect to receive a compliance notice from the inspections department with any of the following fines which you need to pay if your auditor reports any of the below contraventions when they submit your audit report on trust accounts.Here are the fines you could potentially face:
- Trust account not properly referenced/designated as section 54(1) trust account – R7 500
- Trust accounting records not kept separate from business accounting records – R25 000
- Trust accounting records not reconciled and balanced on a monthly basis – R25 000
- Shortfall/deficits of trust monies – R25 000
- Practicing without a valid FFC – R25 000
You are likely to find yourself paying any of the above fines if you are not working with a qualified auditor.
What to Do if You Receive a Compliance Notice for Failure
Sometimes, despite having proof that your auditors submitted on time, you may receive a compliance notice for failing to submit an audit report. In such cases, follow these steps to rectify the situation:
Request an Auditor Resubmission: If you have evidence of timely submission, ask your auditor to resubmit the report on the Auditors Portal.Provide Proof: After the auditor’s resubmission, email proof of your original submission (before the deadline) and the new submission to firstname.lastname@example.org. This will enable the Inspections Department to reconsider the fine. Credit Note for Successful Reconsideration: Upon successful reconsideration, you will receive a Credit Note from the Finance Department. This will cancel the invoice, ensuring you don’t need to pay any fine.
What if You Can’t Afford the Fine? Can You Request a Payment Arrangement?
Unfortunately, requests for fine reduction will not be entertained, and no extensions for submission deadlines will be granted. However, there is an option for a payment arrangement:
Request a Payment Arrangement: If you can’t afford the fine, you can request a payment arrangement by emailing your request to email@example.com. The arrangement allows you to pay the fine over a period of 6 months. Acknowledgment of Debt: After a successful reconsideration by the Inspections Department, you will receive an Acknowledgement of Debt. Simply sign and email it back as part of the payment arrangement process.
The submission deadline is just around the corner, so it’s crucial to ensure everything is in order. At MGT, we’re here to help you get ready for submission. If you need assistance or have any questions, don’t hesitate to reach out to us at firstname.lastname@example.org.