IOLTA Account Reconciliation Checklist

Monthly reconciliation of your IOLTA Account is a vital component of regulatory compliance and client trust. At stake are not only your firm’s financial records, but also its professional reputation and risk exposure.

Consistent, documented reconciliation helps you to prevent errors, detect misappropriation early, and demonstrate diligence in the event of an audit or client dispute. It also ensures that your clients’ funds remain fully protected and properly segregated.

Having a reliable checklist and internal process can make this critical function more manageable, especially for firms juggling multiple client accounts or delegating bookkeeping tasks.

In this article, we’ll walk through a comprehensive IOLTA reconciliation checklist that helps you stay compliant, reduce ethical risk, and ensure your records are audit-ready at all times.

Preparation and Documentation

Before you begin reconciliation, it’s essential to organize and verify the foundational details of the account. Accuracy at this stage sets the tone for the entire process; if your documentation is poorly categorized, even the most diligent reconciliation can produce misleading results.

This is especially important for law firms that manage multiple trust accounts or delegate reconciliation responsibilities to non-attorney staff.

Start by clearly identifying the specific IOLTA account being reconciled. This includes:

• Firm Name
• Bank Name
• Account Name
• Last 4 Digits of Account Number
• Statement Period (Month and Year)

These basic identifiers not only help keep monthly reports organized but also support compliance in jurisdictions where reconciliation forms are submitted to the state bar.

Even in states without mandatory reporting, documenting these details each month builds a strong audit trail and prevents confusion when reviewing records months later.

Next, collect all documents that provide a full picture of trust account activity during the reconciliation period. These records serve as the basis for your three-way reconciliation and must be kept in good order:

• Checkbook register or trust account journal: This is the running log of transactions in and out of the trust account. It should reflect every deposit and disbursement made, ideally in chronological order.
• Client ledgers and client balance list: These show activity for each individual client, including their running balance. They’re critical for confirming that no client has a negative balance.
• Bank statement with canceled checks or check images: Use this to verify the bank’s record of all deposits and withdrawals for the month.
• List of outstanding deposits: These are deposits made before the end of the statement period but not yet cleared by the bank.
• List of outstanding disbursements: This includes checks or electronic payments issued before month-end that have not yet cleared the account.
• Client ledger summary with balances: A consolidated view of all client balances, often used to double-check the total funds held in trust.
• Administrative/bank charges ledger (if applicable): If your jurisdiction allows law firms to keep a nominal amount in the trust account to cover bank charges, that amount should be tracked separately.

Once these materials are assembled, you’re ready to begin the reconciliation. But don’t underestimate this step as many errors are caught or avoided entirely simply by ensuring you’re working from a full and accurate set of records.

Firm Record Balances

With your documentation ready, the next step is to verify your internal records, starting with the trust account journal or checkbook register. These firm-maintained records should provide a detailed, chronological account of all trust account activity.

Accuracy here is essential; if your register doesn’t match what the bank has on file or what your client ledgers reflect, reconciliation will fail and discrepancies may go unnoticed.

Begin by reviewing the ending balance in the trust account journal or checkbook register for the reconciliation period. This figure should represent the total amount of client funds held in trust as recorded by your firm.

Then, confirm that the journal includes all the data points required for compliance. At a minimum, every entry must clearly show the following:

• Client name or matter ID
• Date
• Amount
• Payor/payee
• Purpose of transaction
• New balance

These fields are often required by professional conduct rules, such as RPC 1.15B or your jurisdiction’s equivalent. A register that omits these elements could expose your firm to compliance risks and make it difficult to track funds accurately.

Once you’ve confirmed that your trust journal is both complete and up to date, you can move on to reviewing individual client ledgers and verifying that the total funds held for all clients align with your register and bank statement.

Client Ledgers

After verifying your trust account journal, turn your attention to the client ledgers. These ledgers are the backbone of trust accounting. They reflect the firm’s obligations to each individual client and must be accurate to the cent.

In a proper reconciliation, the total of all client ledgers must match the trust account journal and the adjusted bank balance. Any mismatch signals a potential problem that requires immediate attention.

Start by calculating the total of all positive client ledger balances as of the last day of the reconciliation period. Each ledger should represent the full history of funds held, received, and disbursed on behalf of a single client or matter.

It’s critical that no client ledger shows a negative balance. A negative balance usually indicates that the firm has disbursed more funds than were available for that client, essentially borrowing from one client to pay another, which is a serious ethical violation.

If any negative balances appear, document them with an explanation and outline the corrective actions being taken. Once balances are confirmed, review the details within each ledger. Each entry should clearly show:

• Date
• Purpose
• Amount
• Check number (if applicable)
• Payor/payee
• Updated balance

Each of these data points is essential for transparency and for demonstrating compliance with trust accounting rules such as RPC 1.15B(a)(2). Missing or inconsistent entries not only make reconciliation difficult but could also raise red flags in an audit or ethics review.

Firm Funds for Bank Charges (If Allowed)

Some jurisdictions permit firms to deposit a small amount of their own funds into a trust account to cover unavoidable bank charges. If your firm does this, those funds should be tracked in a separate administrative ledger, not blended with client money. You should:

• List the amount of firm funds deposited for bank fees.
• Confirm that the amount is minimal; just enough to cover typical monthly charges, and that it complies with applicable rules (such as Rule 1.15(c)(1) in some states).

Tracking these details carefully ensures that client funds remain untouched and that your firm stays within the narrow bounds of permissible administrative use.

Bank Record Balances

Once your internal records have been reviewed and verified, the next step is to reconcile them against your bank’s records.

This is where you identify any timing differences or missing transactions by comparing the trust account’s actual activity, as recorded by the bank, to your own documentation.

A proper bank reconciliation not only confirms the accuracy of your records but also helps catch bank errors or fraudulent activity before they become bigger problems.

Start by reviewing the ending balance on the bank statement for the reconciliation period. This figure represents the trust account’s balance according to the bank, as of the last business day in the month.

Next, make adjustments to account for timing differences, including transactions that were recorded in your firm’s books but have not yet cleared the bank:

• Add outstanding deposits: These are client deposits that your firm recorded before the statement cut-off date but that haven’t yet appeared on the bank statement. Be sure to attach a list that includes dates, amounts, and the source of each deposit.
• Subtract outstanding disbursements: These include checks or electronic payments that were issued and recorded in your trust journal, but have not yet been processed by the bank. Again, a detailed list of each disbursement should be included.

Once you’ve made these adjustments, calculate the adjusted bank statement:

Adjusted Bank Balance = (Bank Statement Ending Balance + Outstanding Deposits) − Outstanding Disbursements

This adjusted balance represents what the bank would reflect if all transactions had cleared by the statement date.

It's a key figure in the three-way reconciliation and must match both the total client ledger balances and your firm’s trust account journal. If it doesn’t, further investigation is required to locate the source of the discrepancy.

Cross-Verification

After reviewing your firm’s internal records and reconciling the bank statement, the final step in the reconciliation process is to confirm that all three sources of truth align.

This is known as a three-way reconciliation, and it is the gold standard for trust accounting. It ensures that what the bank reports, what your firm records, and what you hold for each client all agree. At this stage, compare the following figures:

• The ending balance from the checkbook register or trust account journal
• The total of all individual client ledger balances
• The adjusted bank statement balance

These three numbers should be identical. If they match, it indicates that the trust account is fully reconciled and that funds are properly accounted for. However, if any of these figures differ, your reconciliation is incomplete.

If the balances do not match, you must investigate and identify the source of the discrepancy. Common issues include:

• Data entry errors in the journal or client ledgers
• Deposits recorded in one record but not another
• Misapplied payments or disbursements
• Bank errors, such as duplicate charges or missing deposits

Whatever the cause, it must be resolved before the reconciliation can be considered complete. Once you’ve found the error, document both the discrepancy and the corrective action taken.

Cross-verification is the most crucial point of the reconciliation process, it’s where small mistakes become visible. Taking the time to double-check the numbers and resolve inconsistencies now can save your firm from much larger problems later.

Review & Certification

Once all records have been reconciled and verified, the reconciliation process must be formally documented and reviewed.

Whether the reconciliation is performed by in-house staff, an external bookkeeper, or a dedicated trust accounting team, final review and certification must rest with a licensed attorney. That responsibility cannot be delegated.

If someone other than the attorney completes the reconciliation, their role must be clearly documented. This includes their:

• Name
• Position
• Signature
• Date

Capturing this information creates a reliable paper trail that shows who was involved and when the work was done. It also provides context in the event of future questions or investigations.

The final step belongs to the attorney. Even if the reconciliation was prepared by another staff member, the attorney bears ultimate responsibility for the accuracy and completeness of the trust account records. The attorney must review the entire reconciliation packet, including:

• The trust journal/checkbook register
• All client ledgers and summaries
• The bank statement and any outstanding items
• Any explanations or corrections made during reconciliation

Then, the attorney must complete the certification with:

• Name
• Bar Number
• Signature
• Date

By signing, the attorney is formally acknowledging their ethical obligation to ensure all discrepancies have been identified and resolved in a timely manner. This step is a core requirement under most versions of Rule 1.15 and a central part of protecting client funds.

An accurate, fully certified reconciliation gives your firm a defensible record of compliance and a clear chain of responsibility. It’s the final layer of protection in the trust accounting process.

Additional Required Steps in Some States

Trust accounting rules vary from state to state, and while the core principles remain consistent, the procedural requirements can differ significantly. Some jurisdictions, like Washington and North Carolina, require law firms to retain standardized monthly reconciliation forms.

These forms often include space for the attorney’s certification, details about who prepared the report, and documentation of any discrepancies and resolutions. Other states take a broader approach, requiring only that firms maintain accurate records under Rule 1.15 or its equivalent, without mandating specific forms.

Regardless of your jurisdiction, the obligation to personally review the reconciliation and all supporting documents falls squarely on the attorney.

Additional Notes

Even if day-to-day reconciliation tasks are delegated to administrative staff or an outside bookkeeper, the ethical responsibility for oversight rests solely with the attorney. Delegation does not eliminate liability.

Lawyers must personally review the trust account reconciliation, confirm the accuracy of the records, and ensure that all client funds are properly accounted for. The monthly review process is a crucial opportunity to catch errors early, before they lead to overdrafts or audit findings.

Firms should also keep track of who prepared each reconciliation and clarify their level of authority. If the preparer is a non-lawyer, it’s important to document that fact and indicate whether that individual has check-signing authority over the trust account.

Additionally, any discrepancies identified during the reconciliation process should be resolved within 10 days and thoroughly documented.

These small procedural details, when tracked consistently, form a strong foundation for trust account compliance and show your firm’s commitment to ethical accountability. Don’t wait for a bar audit to tighten your processes. Use these guidelines proactively, not retroactively.