Monthly IOLTA Trust Account Reconciliation

Download the prior month's IOLTA statement directly from the bank portal — never use a forwarded copy. Save the PDF to the trust-accounting folder in NetDocuments or your DMS using the firm's monthly naming convention.

Most state bars require IOLTA banks to report any overdraft directly to disciplinary counsel. Confirm with the bank that no notices were issued for the period — even a one-day negative on a single client ledger triggers a Rule 1.15 inquiry.

In Clio Trust, CosmoLex, or Tabs3 Trust, set the period-end lock so no backdated entries can be posted to the month being closed. Backdated entries after reconciliation are the most common source of next-month variance.

For each deposit on the bank statement, confirm a matching client ledger entry exists with the correct matter number. Unallocated deposits parked in a suspense ledger are a Rule 1.15 violation if left more than a few days.

Each transfer from IOLTA to the operating account must trace to a posted, client-approved invoice. Pull the pre-bill, the invoice sent, and the transfer date. Transfers ahead of invoice = commingling; transfers without an invoice on file are an audit finding.

Filing fees, expert invoices, transcript charges, and process-server bills disbursed from trust must each have a vendor invoice in the matter file. Disbursements without backup are the #1 finding in random bar audits.

Any trust check outstanding more than 90 days needs follow-up — contact the payee, void and reissue, or escheat per state unclaimed-property rules. Stale checks distort the bank balance and break the three-way tie next month.

Generate the report from the trust module. The three balances — adjusted bank balance, trust book (general ledger) balance, and sum of all client ledgers — must tie to the penny. Any difference is the reconciliation.

Common causes: a deposit posted to the wrong client ledger, an earned-fee transfer entered in trust but not in operating, bank fees mistakenly charged to IOLTA (the bank should reverse), or a backdated entry that slipped in before lockout. Document the cause and the journal entry that resolves it.

Run the negative-balance report by client matter. A single client ledger below zero — even one penny — is a Rule 1.15 violation, regardless of whether the aggregate IOLTA balance is positive. One client's funds cannot be used to cover another's.

The cure is firm operating funds deposited to the client's ledger to bring it back to zero or positive — not a transfer from another client. Document the cure with a memo to the file and a journal entry. Notify the managing partner the same day.

If review surfaces operating funds in trust, trust funds in operating, or transfers without invoice support, escalate immediately. The firm's malpractice carrier and ethics counsel should be looped in before any corrective journal entry is booked — a clumsy correction can compound the problem.

Partner sign-off attests that the three-way tie was reviewed, exceptions were resolved, and Rule 1.15 was satisfied for the period. Most state bars expect partner-level review monthly and treat unsigned reconciliations as missing records.

The packet — bank statement, three-way report, client ledger detail, journal entries, signed cover sheet — is retained per state bar minimums (commonly 7 years for trust records). Store in the read-only trust-accounting archive, not the working folder.

Most state bars require an annual trust-account compliance certificate filed once per year (often with bar dues renewal). If this month's close coincides with the annual filing window, trigger the annual filing step.

Submit through the state bar's member portal. Most jurisdictions require certification that the firm maintains an IOLTA at an approved depository, performs monthly three-way reconciliation, and retains records per the state schedule. Late filing in many states triggers an automatic non-compliance hold on bar membership.