Monthly IOLTA Trust Account Reconciliation
Monthly close workflow for a law firm's IOLTA trust account, run by the firm administrator and signed off by the managing partner. Covers transaction review, three-way reconciliation, exception handling, and Rule 1.15 documentation.
Pre-Reconciliation Setup
-
Pull the IOLTA bank statement
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.
Collects file -
Check for overdraft notices from the bank
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.
Collects list -
Lock the trust ledger to new postings
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.
Transaction Review
-
Tie retainer deposits to client ledgers
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.
-
Verify earned-fee transfers to operating
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.
-
Confirm advanced costs match disbursements
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.
-
Review stale outstanding checks
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.
Three-Way Reconciliation
-
Run the three-way reconciliation report
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.
Collects list -
Investigate variance between the three balances
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.
Collects number Collects paragraph -
Check every client ledger for negative balance
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.
Collects list
Exception Handling
-
Cure the negative client ledger balance
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.
-
Escalate suspected commingling to the managing partner
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.
Sign-Off and Recordkeeping
-
Managing partner signs the reconciliation
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.
Collects signature Collects date -
File the reconciliation packet to permanent 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.
-
Confirm whether annual IOLTA compliance is due
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.
Collects list -
File the annual state bar trust compliance certificate
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.
Use this template
Copy it to your account, customize the steps, and run it with your team in minutes.
Browse hundreds of free templates across every team and industry.
Back to template libraryRelated templates
More workflows your team can run.
Run Monthly IOLTA Trust Account Reconciliation with your team
Customize the steps, assign roles, set a schedule, and keep a complete record for every run.