Client Trust Account (IOLTA) Reconciliation - Arizona

CLIENT TRUST ACCOUNT (IOLTA) RECONCILIATION — ARIZONA

Account and Period Information

I. Purpose and Governing Rule

This worksheet documents the monthly three-way reconciliation of a client trust account maintained under ER 1.15 (Ariz. R. Prof. C. 42) and Ariz. R. Sup. Ct. 43. ER 1.15 requires the lawyer to hold client and third-person property separately and to preserve complete records. Rule 43 sets the operational trust-account requirements.

Reconciliation frequency. Ariz. R. Sup. Ct. 43(b)(2)(C) requires the lawyer or legal paraprofessional to make, or cause to be made, a monthly three-way reconciliation of (i) the client ledgers, (ii) the trust account general ledger or register, and (iii) the trust account bank statement.

Three-way reconciliation. A complete reconciliation requires that three independently derived balances agree as of the reconciliation date:

1. the adjusted bank balance (trust account bank statement, adjusted) (Section II(a));
2. the trust account general ledger / register (control / book) balance (Section II(b)); and
3. the sum of all individual client-ledger balances (Section II(c)).

II. Three-Way Reconciliation

(a) Adjusted Bank Balance

Deposits in Transit

Outstanding Checks

(b) Trust Account General Ledger / Register (Control / Book) Balance

(c) Sum of Individual Client-Ledger Balances

Three-Way Comparison — All Three Must Agree

☐ RECONCILED — all three balances agree
☐ NOT RECONCILED — complete Section IV

III. Client Ledger Schedule

IV. Exception / Variance Investigation

☐ No variance identified — the three balances agree to the penny.

☐ Variance identified. Amount of difference: $[____]

Items investigated:
☐ Bank error / unposted bank transaction
☐ Unrecorded deposit or disbursement
☐ Duplicate or transposed entry
☐ Math error on a client ledger
☐ Bank/merchant fee debited against principal
☐ Disbursement against uncollected funds
☐ Stale / outstanding check over 90 days
☐ Other: [________________________________]

Explanation and corrective action:

[____________________________________________________________]

[____________________________________________________________]

Date variance resolved: [__/__/____] Resolved by: [________________________________]

V. Arizona Trust-Accounting Compliance Checklist

☐ No commingling — only client/third-person funds are held, except the limited categories of lawyer funds expressly permitted by Rule 43(a) (bank service charges; merchant/credit-card fees; certain single-transaction earned fees/cost reimbursements withdrawn within a reasonable time; mixed funds with the lawyer's portion withdrawn when due)
☐ No negative client-ledger balances exist
☐ Earned fees / lawyer's portion of mixed funds withdrawn when due and legally available, within a reasonable time (unless disputed — then handled per ER 1.15(e))
☐ Advance/unearned fees and third-party funds remain in trust until earned/disbursed
☐ The account has NO overdraft protection (prohibited by Rule 43(a))
☐ Disbursements made only against collected funds (subject to the limited-risk exceptions in Rule 43)
☐ Each client/matter has a current ledger (date, amount, payor of each receipt; date, amount, payee of each disbursement; unexpended balance) (Rule 43(b)(2)(B))
☐ Monthly three-way reconciliation made or caused to be made (Rule 43(b)(2)(C))
☐ Trust records (bank statements, canceled pre-numbered checks, evidence of disbursements, duplicate deposit slips, client ledgers, general ledger/register, reports to clients) retained for at least five (5) years after termination of the representation (Rule 43(b)(2)(A), (D))
☐ The account is enrolled in IOLTA under Rule 44 (or a proper non-IOLTA individual interest-bearing account is used where funds can earn net interest for the client)
☐ Interest on the IOLTA account is remitted to the Arizona Foundation for Legal Services & Education

VI. Preparer and Reviewing-Attorney Certification

I certify that I prepared/reviewed this monthly three-way reconciliation, that it was performed in accordance with ER 1.15 and Ariz. R. Sup. Ct. 43, that all client and third-person funds are accounted for, and that no funds have been misappropriated or improperly commingled. Any variance has been documented in Section IV.

Preparer Signature: ________________________________ Date: [__/__/____]

Preparer Printed Name / Title: [________________________________]

Reviewing Attorney Signature: ________________________________ Date: [__/__/____]

Reviewing Attorney Printed Name / Bar No.: [________________________________]

Arizona Practice Notes

• Safekeeping rule. ER 1.15 (Ariz. R. Prof. C. 42) governs safekeeping; it must be read together with Ariz. R. Sup. Ct. 43 (trust accounts) and Rule 44 (IOLTA). Rule 43(a)(4) directs that a joint/mixed check be deposited into trust with the lawyer's portion withdrawn within a reasonable time.
• Reconciliation frequency. Rule 43(b)(2)(C) requires a monthly three-way reconciliation of the client ledgers, the trust account general ledger/register, and the bank statement.
• Record retention. Rule 43(b)(2)(A) and (D) require complete trust records, kept current, and preserved for five (5) years after termination of the representation.
• No overdraft protection. Rule 43(a) expressly prohibits overdraft protection on any trust account required by the rule. A non-sufficient-funds event on a trust account is reported to the State Bar and routinely triggers inquiry.
• IOLTA program. Administered under Rule 44 by the Arizona Foundation for Legal Services & Education (the Arizona Bar Foundation). Funds nominal in amount or held for a short time go into IOLTA; funds that can earn net interest for the client go into a separate individual interest-bearing trust account.
• Legal paraprofessionals. Arizona's licensed legal paraprofessionals are subject to the same Rule 43 trust-account duties; this worksheet applies to LP trust accounts as well.

Sources and References

• Ariz. R. Sup. Ct. 43 — Trust Accounts (Westlaw, current)
• State Bar of Arizona — ER 1.15 Safekeeping Property (best practices)
• Arizona Bar Foundation — Rule 43 / IOLTA bank forms