Law Business Essentials

Performing bank reconciliations is a key control and a very important record that ensures bank account balances are equal to client ledger account balances. Additionally, the information contained in a reconciliation enables the law firm to determine whether there were any errors made receiving or disbursing funds or posting transactions to their accounting records.

Monthly reconciliations must be done for all trust accounts (Rule 119.37(1)), including SIBAs, even if the account had no transactions. You must prepare a trust reconciliation every month even if you have no transactions during the month and no funds in trust. 

If you have not received a bank statement for an inactive trust account, contact the financial institution and ask for a zero-balance bank statement for that month or a letter confirming that the bank account had no transactions for the month in question. If the financial institution will not issue a statement or letter, a copy of the previous month’s statements should be kept on file for the month in question to show that the balance did not change for that period.

A trust bank reconciliation is a three-way reconciliation between:

• The trust assets (ie. the bank balance, adjusted for cheques and deposits that have not yet cleared);
• The trust liabilities (ie. the client trust listing which includes records for each client); and
• The book balance (ie. the trust journal which includes all receipts and disbursements).

For further guidance on this topic, view the How To Review a Trust Bank Reconciliation resource on our website. 

A law firm must reconcile its trust accounts no later than the end of the following month (Rule 119.37(1)). The reconciliation of each trust account must include (Rule 119.37(2)):

• A summary which shows a comparison between:
• the total of the bank balance of each trust account of the law firm, as recorded by the approved depository;
• the total of the bank balance noted in each trust account journal of the law firm; 
• a listing of the trust balance for each client and matter; and
• any identified unreconciled differences, together with the reasons for and steps taken to correct any differences once identified. 
• A detailed report for each trust account that includes a listing of:
• all cleared cheques;
• all cleared deposits;
• all uncleared cheques, including outstanding cheques itemized by date, cheque number, payee and amount;
• all uncleared deposits, including deposits in transit;
• all adjustments and errors, including their description; and
• any other items necessary for the reconciliation, including all details and explanations for each item. 
• A listing of the trust balance for each client and matter, noted on each trust ledger, including the date of the last transaction noted on each trust ledger;
• A chronological trust account journal for each trust account showing: 
• All receipts of trust money including:
• the date on which the trust money is received;
• the source of the trust money;
• the form in which the trust money is received;
• the amount of trust money received;
• the receipt number; and
• the client name and file number. 
• All withdrawals and transfers of trust money including all transfers between client trust ledgers including:
• the date on which the trust money is withdrawn or transferred;
  
• the name of the recipient of the withdrawal or transfer or the payee of any payment associated with the withdrawal;
• the amount of the withdrawal or transfer;
• the cheque or transfer number; 
• the client name and file number; and 
• in the case of transfers between client trust ledgers, the client name and file number for both the source and destination of the trust money. 
• The running balance of the total amount in the trust account. 
• A report showing all transfers of trust money between client trust ledgers. 
• All transfer documents signed and dated by a lawyer showing the date the transfer was approved, the date of transfer, source file, destination file and amount. 
• A bank statement for each trust account. 
• The original, printed copy or digital image of all negotiated cheques.  
• Electronic banking transaction confirmations and records. 
• Evidence of the review and oversight of the monthly reconciliation records, including the dates on which the reconciliation was prepared and reviewed.

• must continue to review trust ledgers for any client matters that have been inactive for more than two years and maintain a monthly record of the review; and 
• following two years of inactivity on a client matter, may make an application to submit any trust money associated with the client matter to the Society.

Your internal office procedures regarding trust reconciliations should include:

• aligning the date of trust account statements with the calendar month;
• diarize when the statements are available from your approved depository;
• diarize the date of the monthly reconciliation; and
• include a policy according to which all staff members know that any errors or differences must be brought to your attention immediately, so that you can correct or reimburse trust balances, as necessary.