Attorney Trust Account Reconciliation: IOLTA Compliance Guide
Complete guide for attorneys managing IOLTA trust accounts. Monthly reconciliation requirements, State Bar audit preparation, three-way verification, and automated bank statement conversion.
TL;DR - Quick Summary
You're an Attorney Managing 30 Client Trust Accounts
It's the first week of the month. Your IOLTA (Interest on Lawyers' Trust Accounts) statement just arrived - 47 pages showing deposits and disbursements for 30 active client matters. You need to reconcile this against your client ledger cards to verify that every penny of client money is accounted for.
Your State Bar requires monthly three-way reconciliation: Bank statement balance must equal your trust ledger balance, which must equal the sum of all individual client balances. Any discrepancy triggers an investigation. You're spending 15 hours each month manually comparing PDF bank statements to your QuickBooks or Clio trust accounting records.
The problem: Your bank sends PDF statements, but your accounting software needs CSV or Excel format for automated reconciliation. You're manually retyping hundreds of transactions, introducing errors that could trigger State Bar disciplinary action. Trust account violations are the leading cause of attorney suspensions nationwide.
This guide shows attorneys how to convert IOLTA bank statements from PDF to CSV/Excel, automate three-way reconciliation, prepare for State Bar audits, and reduce compliance time by 90%.
IOLTA Trust Account Requirements
What is IOLTA?
IOLTA (Interest on Lawyers' Trust Accounts) programs exist in all 50 states to fund legal aid for low-income individuals. Attorneys must deposit client funds into IOLTA accounts when:
- Retainers: Unearned fee advances held until work is performed
- Settlement proceeds: Funds received on behalf of clients before distribution
- Escrow deposits: Real estate earnest money, security deposits
- Court costs: Filing fees, deposition costs paid from client funds
- Third-party funds: Money belonging to opposing parties or non-clients
Trust Account vs Operating Account
| Feature | Trust Account (IOLTA) | Operating Account |
|---|---|---|
| Ownership | Client funds only (never firm money) | Law firm business funds |
| Reconciliation | Monthly three-way reconciliation required | Standard business reconciliation |
| Record retention | 5-7 years (varies by state) | 3-7 years (standard tax records) |
| Audit risk | State Bar random audits (2-5% of firms/year) | Standard business audits only |
| Violation consequences | License suspension, disbarment, criminal charges | Tax penalties, business issues |
State Bar Compliance Rules
Every state has strict trust account rules (typically Rule 1.15 of Professional Conduct). Common requirements include:
- Separate accounts: Trust funds must never mix with firm operating funds
- Monthly reconciliation: Complete three-way reconciliation within 30-60 days of month-end
- Client ledgers: Maintain individual records for each client's trust balance
- Transaction documentation: Support every deposit/withdrawal with client file records
- Immediate deposit: Client funds must be deposited "promptly" (usually 1-5 business days)
- Overdraft protection prohibited: Trust accounts cannot have overdraft lines of credit
- Dishonored deposit reporting: Banks must report NSF deposits to State Bar
Trust Account Violation Statistics
- Disciplinary actions: 42% of attorney discipline cases involve trust account violations (ABA data)
- Common violations: Commingling (mixing trust/operating funds), improper withdrawals, failed reconciliation
- Consequences: 1-year suspension (first offense), disbarment (repeat offenses or theft)
- Prevention: Monthly reconciliation catches 94% of errors before they become violations
Three-Way Trust Account Reconciliation
What is Three-Way Reconciliation?
State Bars require attorneys to verify trust account accuracy using three independent sources:
- Bank statement balance: Ending balance on official bank statement
- Trust ledger balance: Balance in your accounting software (QuickBooks, Clio, PCLaw)
- Client ledger total: Sum of all individual client balances
Rule: All three numbers must match exactly. If they don't, you must identify and correct the discrepancy before performing any trust account transactions.
Monthly Reconciliation Workflow
| Step | Manual Process | Time Required | Automated Process |
|---|---|---|---|
| 1. Get bank balance | Download PDF statement, note ending balance | 5 min | Same (5 min) |
| 2. Extract transactions | Manually type or copy-paste from PDF to Excel | 3-5 hours (30+ clients) | 2 min (PDF to CSV) |
| 3. Import to accounting software | Manually enter each transaction to trust ledger | 2-3 hours | 10 min (CSV import) |
| 4. Match client ledgers | Compare each client balance to transactions | 4-6 hours (30 clients) | 1 hour (automated matching) |
| 5. Verify totals | Sum client balances, compare to bank/ledger | 30 min | 5 min (formula) |
| 6. Document reconciliation | Print reports, sign certification | 30 min | 15 min |
| TOTAL | - | 10-15 hours | 1.5-2 hours |
Example: 30-Client Trust Account Reconciliation
Sample Reconciliation (October 2024)
- Bank statement ending balance: $247,582.33 (October 31, 2024)
- Trust ledger balance: $247,582.33 (per QuickBooks)
- Client ledger balances: 30 clients = $247,582.33 total
- Result: ✓ All three balances match - reconciliation complete
- Documentation: Print reconciliation report, attorney signs, file in trust account records
Common Discrepancy Causes
- Outstanding checks: Check written but not yet cleared bank
- Deposits in transit: Deposit made but not yet posted by bank
- Bank fees: Monthly service charges, wire fees not recorded in ledger
- Data entry errors: Transposed numbers, wrong client ledger entry
- Commingling: Firm money accidentally deposited to trust account
- Unauthorized withdrawals: Client withdrew funds without attorney approval
State Bar Audit Preparation
State Bar Audit Requirements by State
| State | Audit Frequency | Record Retention | Format Required |
|---|---|---|---|
| California | Random (2-3% of firms/year) | 5 years | Excel/CSV preferred |
| New York | Random + complaint-driven | 7 years | Spreadsheet required |
| Texas | Cause-based (complaint triggers) | 5 years | Excel/CSV accepted |
| Florida | Random (3-5% of firms/year) | 6 years | Spreadsheet format |
| Illinois | Random + NSF deposit reports | 7 years | Excel/CSV required |
What State Bar Auditors Review
During a trust account audit, State Bar investigators examine:
- Bank statements: All trust account statements for audit period (usually 12-36 months)
- Trust ledger: Master trust account ledger showing all transactions
- Client ledgers: Individual balance records for each client matter
- Reconciliation reports: Monthly three-way reconciliation documentation
- Deposit slips: Supporting documentation for all deposits
- Check registers: Copies of all checks written from trust account
- Client files: Matter-specific records showing source/purpose of each transaction
Audit-Ready Documentation Checklist
Complete Trust Account Audit Package
- Bank statements: PDF originals + CSV exports for entire audit period
- Reconciliation reports: Monthly reports for all months (attorney-signed)
- Client ledger summary: Spreadsheet showing all active client balances
- Transaction detail: CSV export with columns: Date, Client, Amount, Purpose, Check#
- Supporting docs: Scanned deposit slips, check images, wire confirmations
- Client correspondence: Letters authorizing trust withdrawals
- IOLTA certification: Annual interest reporting form (if applicable)
Be Audit-Ready in 2 Hours, Not 2 Weeks
Convert 12-36 months of trust account statements to CSV in minutes. Import to QuickBooks or Excel for instant State Bar compliance reports.
Automated Bank Statement Conversion Solution
How Attorneys Use Bulk Conversion for Trust Accounts
- Download monthly statements: Log into IOLTA account, download PDF statements for reconciliation period
- Bulk upload: Select all PDFs (up to 25 files with Business plan), drag-drop to converter
- Download CSV/Excel: Receive converted files with columns: Date, Description, Withdrawals, Deposits, Balance
- Import to accounting software: Upload CSV to QuickBooks, Clio, PCLaw, or Excel
- Run reconciliation: Use software's trust reconciliation feature to perform three-way match
- Archive records: Save PDFs + CSV to matter management system for State Bar retention requirements
Integration with Legal Accounting Software
Converted CSV files import directly to popular legal accounting platforms:
- Clio Manage: Trust accounting module accepts CSV import (Map: Date → Transaction Date, Amount → Debit/Credit)
- QuickBooks: Use "Import Bank Transactions" to upload trust account CSV
- PCLaw: Trust ledger CSV import feature (File → Import → Bank Transactions)
- Smokeball: Trust reconciliation accepts CSV format
- MyCase: Trust accounting CSV import (Admin → Trust Accounting → Import)
- Excel/Google Sheets: Manual three-way reconciliation using spreadsheet formulas
Example: Solo Attorney with 15 Active Clients
Monthly Trust Reconciliation Workflow
- Clients with trust balances: 15 active matters
- Monthly transactions: ~40-60 deposits/withdrawals
- Old workflow: 8 hours manual reconciliation (typing transactions, matching ledgers)
- New workflow: 5 min PDF to CSV conversion + 90 min import/reconciliation = 1.5 hours total
- Time saved: 6.5 hours/month = 78 hours/year
- Value: 78 hours × $300/hour = $23,400 annually
- Cost: Professional plan $49/month × 12 = $588/year
- ROI: 3,879% ($23,400 / $588)
Monthly Compliance Workflow
Best Practice: First-Week-of-Month Reconciliation
Establish a consistent monthly routine to maintain compliance:
- Day 1-3 of month: Download prior month's bank statement (available ~2 business days after month-end)
- Day 3: Convert PDF to CSV, import to accounting software
- Day 4-5: Complete three-way reconciliation, investigate any discrepancies
- Day 6: Print reconciliation report, attorney signs, file in trust records
- Day 7: Update client matter files with current trust balances
Quarterly Review Schedule
| Quarter | Review Tasks | Time Required |
|---|---|---|
| Q1 (Jan-Mar) | Review 3 months of reconciliations, verify all signed, check for stale balances | 2 hours |
| Q2 (Apr-Jun) | Contact clients with balances > 12 months old, plan distributions | 3 hours |
| Q3 (Jul-Sep) | Mid-year audit prep: verify all reconciliations complete, organize records | 4 hours |
| Q4 (Oct-Dec) | Year-end reconciliation, IOLTA interest reporting, archive records | 5 hours |
Stale Client Balance Management
Many states require attorneys to escheat (turn over to state) client funds held for extended periods without contact:
- Dormancy period: 1-5 years without client contact (varies by state)
- Notice requirement: Certified letter to last known client address
- Escheatment: If client doesn't respond in 30-60 days, turn funds over to state unclaimed property division
- Tracking: CSV exports make it easy to sort by last transaction date and identify stale balances
Best Practices for Trust Account Management
Daily Trust Account Habits
10 Rules for Trust Account Safety
- 1. Never commingle: Keep trust and operating accounts completely separate
- 2. Deposit promptly: Client funds in trust within 1-2 business days of receipt
- 3. Document everything: Every transaction tied to specific client matter
- 4. Client authorization: Get written approval before any trust withdrawal
- 5. Monthly reconciliation: Complete by 10th of following month (no exceptions)
- 6. Segregate balances: Maintain individual client ledgers for each matter
- 7. No personal use: Never use trust funds for firm expenses (even temporarily)
- 8. Verify balances: Before disbursing, confirm sufficient client balance
- 9. Report interest: File annual IOLTA interest reports to State Bar
- 10. Archive records: Retain bank statements and reconciliations for 5-7 years
Software Integration Tips
- QuickBooks setup: Create separate Chart of Accounts category for trust (Class: Trust Account)
- Clio mapping: Use "Client Trust" account type, enable three-way reconciliation reports
- PCLaw configuration: Set up client trust ledger cards for each matter
- CSV import: Always verify imported transactions match PDF statement totals before saving
- Backup: Export trust ledger to CSV monthly, save to cloud storage (redundancy)
Red Flags to Watch For
- Negative client balances: Indicates withdrawal before deposit cleared (serious violation)
- Frequent transfers: Moving money between trust and operating accounts (commingling risk)
- Large discrepancies: Reconciliation variance > $100 (investigate immediately)
- Missing documentation: Transactions without supporting client file records
- Delayed reconciliation: More than 60 days since last reconciliation (State Bar red flag)
Protect Your License with Automated Reconciliation
Professional plan handles monthly reconciliation for solo/small firms. Business plan supports multi-attorney practices. Cancel anytime.
Frequently Asked Questions
Can I import converted CSV to Clio or QuickBooks?
Yes - both platforms accept CSV bank statement imports. In Clio: Trust Accounting → Reconciliation → Import Bank Transactions. In QuickBooks: Banking → Upload Transactions → Select CSV file. The converter formats columns (Date, Description, Amount) to match standard import requirements.
What if my bank uses a non-standard PDF format?
The AI parser handles 50+ bank formats including regional banks and credit unions. If your bank uses an unusual layout, the system may prompt for manual verification of key fields (date, amount columns). Most IOLTA accounts at major banks (Chase, Bank of America, Wells Fargo, US Bank) convert with 99%+ accuracy.
How do I reconcile if I have multiple trust accounts?
Some states allow separate trust accounts for different practice areas (e.g., litigation trust, real estate trust). Convert each account's statements separately, then reconcile individually. Your accounting software should support multiple trust accounts - create separate ledgers and reconciliation reports for each account.
Can I use this for State Bar audit preparation?
Absolutely - this is a primary use case. When the State Bar requests 12-36 months of trust records, convert all PDF statements to CSV, import to Excel, and create a master transaction log showing: Date | Client Matter | Check# | Deposit | Withdrawal | Balance. Print this with supporting bank PDFs for audit submission.
What plan do I need for monthly reconciliation?
Professional plan ($49/month, 1,000 pages) handles most solo/small firms with 1-2 trust accounts, ~20-40 pages per month. Business plan ($89/month, 2,000 pages) supports larger firms or year-end audit prep requiring 12+ months of statements at once. Average trust account statement is 15-25 pages.
How long should I retain converted CSV files?
Retain both PDF originals and CSV exports for your state's record retention period (typically 5-7 years). Store in encrypted cloud storage or matter management system. The CSV files are useful for creating audit reports years later even if accounting software changes.
Can this prevent trust account violations?
Automated reconciliation catches 94% of errors before they become violations. By importing bank transactions to accounting software, you get automatic variance detection, negative balance alerts, and client ledger mismatches. Monthly reconciliation within 30 days is the #1 way to avoid State Bar discipline.
Do I still need to keep PDF bank statements?
Yes - always retain the original PDF statements from your bank. The CSV is a working copy for reconciliation and software import, but State Bar auditors want to see official bank statements with letterhead and account numbers. Keep both PDFs and CSVs for the full retention period.
Reconcile Your Trust Account in 2 Hours, Not 15
Professional plan: $49/month for solo/small firms. Business plan: $89/month for multi-attorney practices. Start protecting your license today.