Accounting for Funds
Accounting for Customers and Principals Funds
Not only are there bonding requirements but members also need to be sure that they satisfy legal requirements in handling customers and principals funds.
Legal Requirement for handling customers’ funds
The “Civil Aviation (Passenger Agents’ Commission Regime) Notice 1983” (“the Notice”) lays down certain requirements to be met by those who act as passenger sales agents or airlines.
Members should make themselves aware of those requirements.
The Notice includes the following requirements relating to customer/airline funds
“The agent is not to pay money received in respect of travel arranged by the agent into any bank account into which there is at any time paid any money that is not received in respect of travel arranged by the agent, and
All money received by the agent in respect of travel on the services of the carrier, or in respect of any relating services (including any commission withheld by the agent in accordance with a manner of transacting business on behalf of the carrier agreed with the carrier) shall, as soon as is practicable after its receipt, be paid into a bank account, and shall
1. remain the property of the carrier, and
2. be held in trust for the carrier” until it has been satisfactorily accounted for to the carrier.
Bonding Requirement for handling customers’ funds
It is a TAANZ Bonding requirement that members at all times keep customers and principals funds separate from the funds of the member (refer to Bonding Criteria).
The following points are to assist members in understanding the requirements:
1. All money received from clients in advance of the issue of tickets should have a numbered receipt issued and be banked within 2 days of receipt into a separate bank account in the name of the agent titled Client Travel Account or some similar descriptive title.
2. The funds may be held in interest bearing and term deposit accounts and other investments prescribed in the Bonding Criteria.
3. Any such account as mentioned in 1 and 2 must be used exclusively for client funds.
4. All deposits to the client account must remain in the client account until:
(a) They are paid to principals on whose behalf they have been received, or
(b) They are refunded to the client who paid.
5. Any such accounts must not be subject to a right of set off or any other encumbrance, including any floating charge.
6. Commission earned is not to be withdrawn until the balance has been paid to principals on whose behalf it has been received.
7. Disbursements from the Client Travel Account on behalf of a customer who has not lodged funds (e.g. sale on credit) is not permitted. Such disbursements should be made from the “general” or “working” bank account of the agent. As a practical arrangement payments may be made from the general bank account to the client travel account to cover payments to principals in advance of receipt of funds from clients.
8. Use of client funds to finance loans or advances to relating parties or others does not comply with the conditions for maintaining a client account. The TAANZ Board may authorise deposits with a party other than a bank where strict security requirements are met.
9. The client accounts and the liability for client funds held should be clearly identified on the statement of financial position or in the notes to the accounts.
Problems have arisen in the past where members have had funds in a bank account to cover client funds but the account has not been clearly designated as holding consumer and airline funds. In such circumstances receivers and banks have claimed the funds to cover the overdraft and debts of the business and claims have arisen against the TAANZ Bonding Fund.
In such an event the member’s liability under the bond would be called up even though the member considered that the client funds were protected.
It is in the interest of members to be able to demonstrate that they have made it clear to their bankers that certain accounts hold monies which do not belong to the member company – they are held in trust.
