IOLTA 3-Way Reconciliation for Rule 1.15 and CTAPP Compliance
Monthly three-way reconciliations that match your trust journal, client ledgers, and bank statements so you can sign your CTAPP attestation and Rule 1.15 obligations without anxiety.
Law Firm Bookkeeping Articles and Resources
Trust accounting requires precision. Whether your firm manages a few retainers or hundreds of active cases, IOLTA compliance demands clear records and consistent verification. At Chief Bookkeeping Officer, we provide monthly IOLTA 3-way reconciliations following the California State Bar’s record-keeping format, which closely mirrors the requirements used by most other state bars.
What the 3-Way Reconciliation Verifies
An IOLTA 3-way reconciliation confirms that three data points agree:
-
The trust bank balance from your IOLTA bank statement
-
The trust liability balance within your books, which we maintain and reconcile each month
-
The total of all client ledgers showing funds held for each client or matter
In many firms, those individual client ledgers originate from practice management software such as Clio, MyCase, Casepeer, or FileVine. Our team confirms each ledger balance against both the firm’s books and the IOLTA bank statement to ensure all three sources align. This prevents overages, shortages, or commingling, all of which are key compliance risks under State Bar rules.
Why the State Bar Cares About 3-Way IOLTA Reconciliation
California’s Rules of Professional Conduct require attorneys to keep a trust account journal, individual client ledgers, and monthly three-way reconciliations that prove those records match the bank statement. This duty now sits in Rule 1.15, carried forward from the original 1993 trust-account standards.
Under CTAPP, the State Bar can ask for proof at any time. Firms must be able to show:
-
A complete trust account journal for each IOLTA or client trust account
-
Individual client ledgers that show every dollar in and out for each matter
-
Monthly three-way reconciliations with support for outstanding checks and deposits
-
Records retained for at least five years after disbursement
Our job is to keep those records clean, complete, and ready to hand over without a scramble.
How We Handle the Process
Each IOLTA reconciliation cycle includes a full set of working papers and reports formatted for the State Bar. You’re not just getting a spreadsheet; you’re getting a documented trail that shows exactly how every trust dollar has been tracked.
-
The IOLTA bank statement
-
The trust liability report from your books (which we build and maintain)
-
Client and matter-level data from your practice management software
Using the California State Bar’s Excel reconciliation template, we prepare client-by-client ledgers and confirm that totals match the trust and liability balances. Any discrepancies, such as uncleared checks, unrecorded deposits, or balance mismatches, are identified, corrected, and documented.
Integrated with Your Operational Bookkeeping
Our IOLTA 3-way reconciliation service runs alongside your firm’s operational bookkeeping. It can be included as part of your ongoing monthly engagement or added as a separate service for firms that already manage their operational books internally. This flexibility allows your firm to maintain full compliance while keeping day-to-day financial operations simple and structured.
What You Receive From Us Each Month
Each IOLTA reconciliation cycle includes:
-
A completed three-way reconciliation workbook in the California State Bar format, with bank, trust journal, and client ledger totals clearly matched
-
Updated client trust ledgers for every matter with activity that month
-
A schedule of outstanding checks
-
A list of any exceptions or troubleshooting items for the lead attorney's review
A Stronger Foundation for Compliance
The reconciliation process isn’t just about meeting bar requirements, it’s about protecting your clients and your firm. Clean trust records reduce the risk of compliance issues, simplify audits, and build confidence in your financial systems.
For firms that also want to streamline the operational side of their books, our QuickBooks Online Bookkeeping for Law Firms service extends that same structure across operating accounts, retainers, and case costs, ensuring every dollar is accounted for from trust to income.
Partner with one of our CBOs and let our team handle your firm’s bookkeeping and IOLTA 3-way reconciliation each month so you can stay focused on your clients. Schedule a consultation below or call us at 213-286-7502.
IOLTA Accounting Frequently Asked Questions
Yes. Under California State Bar Rule of Conduct 1.15 and its trust accounting recordkeeping standards, you’re required to complete and keep a written record of a monthly three-way reconciliation for each client trust account, even when the ending balance is $0. The State Bar’s guidance explains that you must maintain a written record showing that every month you reconciled the account journal, individual client ledgers, and the bank statement. CTAPP reinforces this by asking you to affirm that “a written, monthly reconciliation of the bank statement, client ledger, and account journal” is completed and maintained for each client trust account.
A $0.00 balance isn’t a free pass; it just means all client funds have moved through the account. The Bar still expects to see the monthly reconciliation and supporting records that prove every dollar was deposited, held, and disbursed correctly on the way to that zero.
Technically, any skilled bookkeeper or accountant can handle the workflow for a California Bar compliant 3-way trust reconciliation, but they should be specifically trained in the requirements of 1.15 of the Rules of Conduct. It has its own recordkeeping requirements, mandatory three-way reconciliations, and strict rules around when fees can be transferred, how costs are tracked, and what happens if there’s ever a shortfall or error. So in practice, your current bookkeeper could reconcile your trust activity but both the lead attorney of the firm and the bookkeeper should be aware of the repercussions of not performing the reconciliations correctly.
A three-way reconciliation not balancing doesn’t automatically mean your trust account is in trouble. It does mean you have to stop and figure out why. In fact, it’s very common to see temporary differences caused by normal items like outstanding checks that haven’t cleared yet or deposits that are still in transit. Those timing differences are expected and can be properly documented and supported.
The more uncommon reasons your trust reconciliation doesn’t balance could be:
-
Overpayments to vendors
-
Overpayments to clients
-
Overpayments to your firm
-
Underpayments from insurance companies
-
Transactions incorrectly attributed to different matters
-
Check fraud
If any of the above (or any other cause) leaves your trust account out of balance, that’s the point where you need to document the discrepancy on the 3-way reconciliation, then trace the underlying transactions until you identify and correct the exact source of the problem.
-
Yes. While a lot of our content talks about California, CTAPP, and Rule 1.15, we work with law firms in other states as well. The core of what we do, proper trust accounting, client ledgers, and true three-way reconciliations, is required in some form by almost every state bar, even if the rule numbers and terminology are different.
Law Firm Bookkeeping Resources
Law Firm Bookkeeping Articles and Resources
Schedule a Consultation
Ready to find out how your business having its own Chief Bookkeeping Officer can help?