Members’ funds allocated by medical schemes to their members’ savings accounts are trust property in terms of the Financial Institutions (Protection of Funds) Act 2001 (FI Act) and must be accounted for separately.

Section 35(9)(c) of the Medical Schemes Act provides that the liabilities of the medical scheme must include the amounts standing to the credit of members’ personal savings accounts. Section 4(4) of the FI Act requires trust property to be kept separate from the assets belonging to the institution and that this is reflected in its books of account.

When the members’ contributions to their savings accounts are paid to the medical scheme the money is mixed together with the other cash that the medical scheme receives. The scheme holds the cash for those members. The balance sheet of the medical scheme must show that a particular amount is designated as being due to members for their savings account. The balance sheet must designate, in a manner consistent with generally accepted accounting practice, the extent to which the cash holdings are held on behalf of members for their savings accounts.

Funds of this kind should be classified as reserves described in a way that is left to the medical scheme. This ensures the separation of the members’ savings account funds from the assets of the medical scheme and protects them against creditors.

The case is Registrar of Medical Schemes v Genesis Medical Scheme.