Trust accounting pilot program may be ready for board action in March
Trust accounting pilot program may be ready for board action in March
Senior Editor
A six-month test program involving up to 10 law firms for a new trust accounting system aimed at eliminating technical problems on complying with Bar trust accounting rules could be ready for Board of Governors’ approval in March.
The program could have several additional unexpected benefits, including increasing IOTA income for The Florida Bar Foundation.
Board Parliamentarian Andy Sasso, who chairs the Special Committee on Trust Account Solutions, told the board at its January 20 meeting that the committee had worked extensively the previous two days on the program, including with the Program Evaluation Committee.
FIS Global, a Fortune 500 international banking services company, is assisting the special committee in developing the trust accounting program.
The meetings “really unlocked a lot of additional benefits that this trust accounting program can provide not only to members of The Florida Bar but also potentially to The Florida Bar Foundation and also got us a lot closer to, at the next meeting of the Board of Governors, seeking approval of a six-month pilot program where approximately 10 law firms will use this trust accounting program,” Sasso said.
“The ultimate goal is providing any member of The Florida Bar who is interested with a trust accounting system that as long as the attorney puts the correct information in the system when making a deposit and the correct information in the system when making a withdrawal, that their trust account will always be in compliance with the technical requirements of Rule 5 of the Rules Regulating The Florida Bar.”
Sasso said the meetings showed there may be additional benefits besides helping members comply with technical trust accounting rules and reducing disciplinary actions in the Bar’s grievance system for purely technical violations of trust accounting standards, which would save money for the Bar.
“We also learned it may increase IOTA funds to The Florida Bar Foundation, because of the way this program will work,” he said. “It will bundle the IOTA funds, which will increase the actual interest that will be paid.”
“That’s a critical component. It’s not just reducing discipline and saving our attorneys some money but hopefully enhancing what the Foundation is able to get,” Bar President Bill Schifino said.
Sasso said the IOTA revenues could go up by 10 to 25 percent. An additional benefit is it will increase FDIC protection on the trust account deposits, which is an additional benefit for clients. Currently, trust accounts for individuals that exceed $250,000 are at risk if a bank fails, but that would be avoided under the proposed system.
“It also would provide the ability of law firms to build in more protections in their law firms to prevent employee theft by setting up passwords and not having blank check stock in their offices. It also would record every keystroke for every transaction, so, if there was ever a problem, the law firm would be able to go back and track exactly what happened,” Sasso said.
“What we’re trying to achieve is a software program that would be totally integrated with the attorney’s IOTA bank account so that, again, there wouldn’t be any need to try to reconcile with what the attorney has in his or her office with the monthly bank statement,” he added. “All of that would be done automatically.”
Sasso said he expects to have a more complete presentation for the board’s March meeting, and that presentation could be adapted as an educational presentation for attorneys interested in participating in the program.
Young Lawyers Division President-elect Zack Zuroweste, who serves on the special committee and handles the trust accounting for his three-lawyer firm, said the proposed trust accounting program would be a boon for small law firms and lawyers setting up their own firms. Even with a small charge for each account using the system, he said lawyers would save hours of attorney time that they could use for billable work.
The Bar now provides assistance to lawyers on trust accounting, Zuroweste said, but it can be confusing and hard to find, particularly if there is a problem.
“There are spreadsheets; there are ledger cards; but it takes many hours every year to complete those to make sure you are in compliance,” he said. “This program would eliminate all of that time, so although there would be some cost associated with it, it would save billable-hour attorneys like me a lot of time in completing those tasks each month. It would also ensure that for lawyers who make mistakes, they do not withdraw too much money from their trust account. It would be a safeguard to prevent that.”
John Berry, director of the Bar’s Lawyer Regulation Division, said the program should help a wide variety of lawyers and law firms. He noted that other states that have random audits of law firm trust accounts — which he said he does not advocate for Florida — find widespread minor, unintentional technical violations.
“I can’t imagine there are too many people here who went into the law because of the excitement over the ability to be able to take over a trust account and keep track of your ledger cards,” Berry said.
He said about 15 percent of the trust accounting grievance cases handled by the Bar involve theft. The remaining 85 percent are technical problems with maintaining the accounts or an innocent mistake was made.
“Even people with good intentions, good lawyers, if their trust account gets messed up, they get scared,” Berry said. “If their trust account gets messed up and all of a sudden there are money problems, then. . . they can try to take care of it in a way that’s going to get them in more trouble. This is an opportunity not to just catch people with bad intention. . . but it’s also to help the best lawyers in the state.”
Bar President-elect Michael Higer said he’s confident the program will help law firms, reduce cases in the Bar grievance system, and have the additional benefit of increasing Foundation revenues, because consolidating banks involved in the program will allow negotiating lower service fees on IOTA accounts.
Preliminary estimates are it could cost the Bar $25,000 for the six-month test, but Higer said that would be money well spent.
“We’ll find out where the kinks are, and we ought to get it off the ground as soon as we can,” he said.
