Are You Ready For The COFA?
Who should be the COFA?
By 1st January 2013 all firms needed to have appointed a COLP (compliance officer of legal practice) and a COFA (compliance officer of finance and administration). So virtually all firms have made the appointments and slowly there is a growing recognition that this is more than a title and that they are responsible roles which require time and skill if they are to be carried out properly.
In small firms, the senior/managing partner often performs both roles and the roles are therefore being performed by the most senior people in the firm. In larger firms, the COLP is often the risk partner who may not have the necessary authority to ensure that everything that needs to be done is being done. In larger firms, the COFA tends to be one of the Finance Partner, the Financial Director or Practice Director. While these might be appropriate people to do the role it is essential that they have authority to get things done and that they have access to all information, which historically may not have been the case.
So what must the COFA do now?
The COFA takes primary responsibility that the firm is complying with the SRA Accounts Rules. The COFA will need to ensure that there are written procedures for handling client money, that both accounts staff and fee earners have had training on these rules and that all breaches are recorded in a breaches register. The COFA will need to review this register frequently and report material breaches to the SRA at once. It will be interesting to see what happens when the reporting accountant does the next audit, particularly if the auditor identifies and reports breaches which have not been picked up by the COFA. Equally, if the COFA is the Practice Director or Finance Director then such a COFA might find it difficult to report one of the partners to the SRA.
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The other core role of the COFA is to make sure that the firm remains financially viable and assesses and manages all risks which might question the financial viability of the firm. The COFA must therefore maintain a risks register and document what procedures are in place to manage these risks. The COFA will probably need to have a series of meetings with colleagues to identify the main risks and to establish the necessary control mechanisms. There are all sorts of risks which might be significant such as the loss of key clients, the loss of key staff, failure to comply with regulatory requirements, negligence claims, poor lock up management, failure to meet client service expectations, IT failure, fire risk etc.
Is external help required?
The COFA role cannot be delegated outside of the firm. However, many firms will benefit from making use of external support. This might be provided through the delivery of training or through assistance in the identification and documentation of the necessary processes. Some firms may want to appoint a non-executive director with a financial background to provide support for the COFA and to ensure that the firm is doing everything that is required.
It will be interesting over the next 12 months to see how firms develop this role and to see what the SRA really expects of the COFA.
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