How to Prepare for a Florida Bar Trust Account Audit

Few letters make an attorney more anxious than notice that The Florida Bar wants to review the firm’s trust account records. A trust account review can happen for a number of reasons, including a client complaint, a bounced trust check, or a broader investigation. Whatever the reason, the firm will need to produce organized, complete, and accurate records.

The good news is that the best audit preparation is simply good monthly trust accounting. A firm that maintains its records properly throughout the year will be in a far stronger position than one that tries to reconstruct months of activity after receiving a request.

Why Might The Florida Bar Review a Trust Account?

Trust account reviews may be triggered by several events, such as:

• A client or third-party complaint about funds
• An overdraft or returned item on a trust account
• A trust account shortage reported by the lawyer
• Concerns raised during an unrelated disciplinary matter

Many banks that hold Florida attorney trust accounts are required to notify The Florida Bar when a trust check is presented against insufficient funds. Even a single overdraft can lead to questions about the firm’s records.

What Records Does a Florida Law Firm Need to Keep?

The Rules Regulating The Florida Bar set out minimum trust accounting records and procedures. While attorneys should review the current rules directly, the records generally include:

• Bank statements for every trust account
• Deposit records showing the source and client for each deposit
• Canceled checks or check images
• Records of wire and electronic transfers
• A cash receipts and disbursements journal
• Individual ledgers for each client or matter
• Monthly reconciliations comparing the bank, the journal, and the client ledgers
• Closing statements and fee agreements
• A written trust account plan for firms with more than one attorney

Florida trust accounting records generally must be kept for at least six years after the conclusion of the representation.

What Do Reviewers Typically Look For?

A trust account review is focused on one main question: is every client’s money accounted for? Reviewers often look closely at:

Three-way reconciliation

Do the adjusted bank balance, the trust journal, and the total of all client ledgers agree each month? Are reconciliations completed on time and supported by documentation?

Negative client balances

A negative balance on a client ledger suggests that the firm used money belonging to another client.

Commingling

Is firm money sitting in the trust account beyond what the rules allow? Are earned fees being moved to operating promptly?

Fee transfers

Can each transfer from trust to operating be tied to a specific client, invoice, and earned fee?

Unidentified or old balances

Are there funds in trust that cannot be traced to a client, or balances on closed matters that have sat untouched for years?

Disbursement documentation

Are settlement and other disbursements supported by closing statements and client authorization?

How Can a Law Firm Prepare Before a Review?

The most useful preparation happens long before any letter arrives.

Complete every monthly reconciliation

Missing or late reconciliations are among the most common findings. Each month should have a completed, reviewed three-way reconciliation on file.

Resolve discrepancies immediately

Differences should be investigated and documented when they are found, not carried forward.

Keep client ledgers current

Every deposit and disbursement should be posted to the correct client ledger when it happens.

Clean up old balances

Small leftover balances on closed matters, stale checks, and unidentified deposits should be researched and resolved.

Organize records by month

A firm that can produce a complete monthly file, with the statement, journal, client ledgers, and reconciliation together, makes the review process faster and less stressful.

Document the firm’s process

Know who records transactions, who reconciles, who signs checks, and who reviews the reports.

What Should a Firm Do if It Finds a Problem?

If an internal review uncovers a shortage, an error, or months of missing reconciliations, the firm should address it right away. That may involve reconstructing records, correcting ledger postings, and replacing any shortage with the firm’s own funds.

Florida’s rules require a lawyer who replenishes a trust account shortage with personal funds to promptly notify The Florida Bar’s lawyer regulation department. Attorneys facing a significant trust accounting problem should consult ethics counsel as soon as possible.

A bookkeeper experienced with legal trust accounts can help rebuild records and bring reconciliations current, but the attorney remains responsible for the trust account.

Trust Account Review Readiness Checklist

• Monthly three-way reconciliations completed and reviewed
• No negative client balances
• Every deposit tied to a client
• Every disbursement supported by documentation
• Every fee transfer tied to an invoice
• No unexplained firm funds in trust
• Old balances and stale checks investigated
• Records retained for the required period
• Written trust account plan in place for multi-attorney firms

Get Help Preparing Your Trust Account Records

A&W Associates provides IOLTA account management, three-way reconciliation, and trust account cleanup services for law firms in Wesley Chapel, Tampa, and throughout the Tampa Bay area. Whether your records are current or several months behind, we can help you organize them and keep them ready for review.

Contact A&W Associates to learn more.

This article is provided for general informational purposes and does not constitute legal advice. Attorneys should review the Rules Regulating The Florida Bar and consult appropriate legal or ethics counsel regarding any trust account review or investigation.