Subcontract Retention Trust Accounts Management
Overview:
To better protect Subcontractors' retention funds the legislation in New Zealand and Australia (Western Australia and Queensland so far) requires these funds to be kept in Retention Fund Trust Accounts.
Managing these trust accounts can be time-consuming and complicated, leading to potential non-compliance and financial risks for head contractors.
To comply with these regulations, head contractors are required to:
Establish and maintain a trust account for all subcontractors' retentions. This can either be a Bank Account (New Zealand & Australia), or a Financial instrument which is normally provided by an insurance company (New Zealand only).
Report to subcontractors regularly (monthly in Australia and at least once every 3 months in NZ) with the details of the historic Payment Certificates and Retetion balance on all their subcontracts with details of what is being held and where.
Provide subcontractors with the details of each Trust Account on the Claim Payment Certificate and Payment Schedules.
Benefit for our Workbench Clients:
Reduce manual work, and time.
Compliance with legislation.
Improved relationship and trust with Subcontractors. Transparency.
The impact of non-compliance can be extremely costly for the company, and also penalties for Directors.
How to manage Retention Trust Accounts in Workbench:
Retention Trust Accounts
A maintenance screen is available to create and maintain a list of Trust Accounts or Financial Instruments that can be assigned to each Subcontract.
Type: Pre-installed types Subcontract Retention Trust Account and Subcontract Retention Financial Instrument. New ones may be configured in Lookups with type = SubcontractRetentionTrustAccountTypes
Trust Account/Instrument can be marked as inactive to prevent it from being selected in Subcontracts.
Editing of Trust Account details is disabled once it has been used in a Subconract Claim. If any details change, a new one can be created with the updated details, and assigned to the Subcontract. Each approved subcontract claim.
GL Retention Liability Account: This is optional. When a Subcontract Claim is batched, the retention amounts are coded to the DR GL Account (liability account) on the Retention Control Job (ZRET). However, when using Retention Trust Accounts, a different GL account specific to that Trust Account can be specified in the Subcontract Retention Trust Account if required, and the system will use this one instead. A GL Account on a Retention Trust Account is not mandatory, and the system will falback to using the GL on the ZRET Job if this is left empty.
The GL Accounts need to be first created in the GL Accounts list, and then they will be selectable in this column.Retention Liability GL Account on RTA or ZRET jobGL Trust Cash Account: This is the GL account for the Trust Bank Account (asset), and it is only used to validate if a Retention Release has been paid from the correct Bank Account. This validation is required for projects that must have Project Trust Accounts only. Is not use for coding any transactions at all. See Project Trust Accounts Management for more details.
Description and Trust Account Details will be displayed in the Payment Schedule report and in the Balance Statement report, to indicate subcontractors where the retention funds are kept.
Subcontracts
There is an optional field for Retention Trust Account on the Subcontract tab in a Subcontract. If this field is populated, details of the Retention Trust Account will appear in the SUbcontrac Claim reports listed further down on this page.
Edit is controlled with 'Edit Retention Trust Account details on Subcontract' permission.
Permission is included by default in Administrator and Finance roles.
Any edits on the Trust account on the Subcontract are audited and saved on the EventLog.
Retention Trust Accounts on a Subcontract can also be set from the Subcontract Retention Management screen, to reduce time and for better visibility on what Subcontracts require to be updated.
Subcontract Claims
The Retention Trust Account (RTA) field is inherited from the Subcontract. This RTA field will reflect the current Subcontract RTA until it is locked at approval.
Unapproving a subcontract claim will refresh and get the latest RTA from the subcontract.
Reports
Subcontract Claim reports:
There are two of the standard reports that can be printed from a subcontract claim have the Retention Trust Account details in them.
These can be sent to the subcontractors as a Payment Certificate or Payment Schedule:Subcontractor Payment Certificate (wbSubcontractClaim003 ). Print report from each Subontract Claim. Trust account details will only display if the Subcontract has a Retention Trust Account.
Subcontractor All in One Report (wbSubcontractClaim005). Print report from each Subontract Claim. Trust account details will only display if the Subcontract has a Retention Trust Account.
Subcontract Reports:
Subcontract Retention Statement under Subcontract Reports. It can be executed by Subcontract or Subcontractor and includes all retentions on each Subcontract Claim for each subcontract and the Retention Balance per subcontract and per Job. This is the same report that is used for Retention Balance Statement reporting to Subcontractors from the Subcontract Retention Management screen, where these reports can be emailed to all selected subcontractors in bulk.Only includes Subcontracts with Retention balance (not = $0).
Only includes certified Subcontract Claims.
Only includes subcontracts with a Retention Trust Account in it.
Databases with NZD local currency will display the following additional text:
”This is a report on retention money withheld from you as party B under subpart 2A of the Construction Contracts Act 2002. You may inspect the accounts and records that section 18FC of that Act requires us to keep in relation to retention money withheld from you.”
Retention Balance reporting to multiple Subcontractors:
The legislation requires that Subcontractors be reported of their Retention periodically. Workbench enables Head Contractors to send these Retention Balance reports with all the details of the Retention Trust Accounts in bulk.
In the Retention Management screen, on the Retention Reporting tab, all Subcontractors will be listed.
Retention Balance column may differ from the total Retentions held in Trust in the Retention Balance Statement report:
The Retention Balance column includes ALL subcontract claims, regardless of their status. However, the Retention Balance statement only includes retentions from claims that have been certified and transfered into the Trust Account.
To verify these figures you can use the Subcontract Claims screen and use filters accordingly (i.e. search for a specific subcontractor and use the claim status filters).
How to generate and send Retention Balance reports:
The check box on the left must be ticked to select the Subcontractors that will have the report generated.
Then click on the [Generate] button. The Report column will be updated with a link to the latest report just generated.
Each report generated is attached on File attachments in each Company record.
A Created date will be updated with today’s date.
To review the report generated open the link on Latest Report and view the report.
Once happy with these reports select the Subcontractors that need reports to be sent and click on the Bulk Send button.
The Sent column will be updated with the date the report was sent.
The email is sent to the email on the Commercial Contact on the Company record for the subcontractor. There is an email template for this called Notification - SubconRetentionStatement, and ca be edited and modified.
Email statuses can be checked on Lists/ Emails List or an Admin user can check them (regardless of who sent them) from Emails Status List under Administration/System Admin/Email Status List. Search by date or email subject.
There is an optional step which can be used to flag the generated report as Reviewed. To do this, after generating the report and reviewing the pdf, select the record that you want to indicate that has been reviewed and click on the Review button. This step is not enforced.
The report sent to subcontractors is in the same format as the Retention Balance Statement (described above), and it only contains information about the particular subcontractor to which the report is being sent:
The Commercial contact of each subcontractor company will be used as the contact to send the Retention statement.
For bulk emailing, if using Office 365, it is safer to set Control Parameter 'Office 365 Bulk Email' = No, to force the emails to be sent using Sendgrid, our SMTP server, rather than Office 365, as this does not support sending emails in bulk very well.
Next Steps:
FAQs:
Process Flow: