In October of last year, the Supreme Court of California approved a proposal to establish a program that would protect client trust accounts from misconduct (New California Rule of Court 8.5.5). The program, called the Client Trust Account Protection Program, or CTAPP, went into effect January 1st, 2023. The first reporting deadline is already on the horizon, leaving attorneys and  law firms scrambling and at risk for penalties if they are not able to complete CTAPP’s required submissions by January 31st, 2023. 

We have all the details about what you can expect; what you must provide; and most importantly, how to prevent these new regulations from slowing down your business. For those interested in learning more, we highly recommend you watch this MCLE with David C. Carr, and read the Client Trust Accounting Handbook.

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What are the new requirements?

CTAPP requires attorneys in the State of California to disclose key trust accounting reports on an annual basis. For lawyers who do not handle client trust accounts, they must declare so on the CTAPP Screening and Self-Assessment form. For those who are responsible for the management and handling of client trust accounts, there are additional steps to follow.

The goal of this new program is to be proactive in the detection of client trust accounting misconduct before defalcations happen. It is aimed at regulation as opposed to discipline.

Step 1: CTAPP Screening and Self-Assessment Form

Regardless of whether you manage client trust accounts or not, you must complete this step of the CTAPP process. The CTAPP Screening form must be completed annually by all attorneys in the State of California, and comprises three main components: a trust account certification; a trust account registration; and a self-assessment.

The first section of the screening form will ask for your history managing IOLTA or other interest-bearing trust accounts over the previous period (in this case, the past year).

In the next section, you will complete a registration of each CTA and/or IOLTA that you maintained during the reporting period.

The final step is a twelve-question self-assessment to determine whether you are properly upholding your fiduciary duties when it comes to client trust account management.

To reduce friction during this step of the CTAPP submission, it is crucial that you keep up-to-date records on your general journal, client ledgers, bank statements, and monthly reconciliations.

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Step 2: Compliance Review

Based on your screening form and other State Bar criteria, you may also be selected to complete and submit a CTA compliance review. This review must be conducted by a Certified Professional Accountant and will be paid at your expense.

If you are selected for a compliance review, providing accountant-ready reports from your legal accounting software is the best way to move through this stage efficiently and reduce the amount of time a compliance audit will take. 

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Step 3: Additional Actions

Additional actions are only necessary if you the CTAPP compliance review concludes that additional actions need to be taken. Your client trust accounting practices may be investigated further by way of an audit; you may have to complete mandatory corrective action; or in the worst case scenario, you could suffer disciplinary action.

The best way to avoid this is by reviewing your client trust accounting duties and regulations, and ensuring that your trust accounting software is proactively keeping you and your law firm in compliance.

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What this means for your firm:

The CTAPP submission will be fast and easy if you and your law firm are following all of the State Bar’s client trust regulations; including the creation and maintenance of a client ledger report, account journals, bank statements, and a record of any canceled checks.

Now, it is more important than ever to review the relevant requirements surrounding client trust accounting. The Handbook on Client Trust Accounting for California Attorneys is essential reading for any lawyer who is responsible for client trust funds.

Having the right legal accounting software can make all the difference when it comes to a smooth CTAPP submission and avoiding any unwanted penalties. Finding the reports and information that the CTAPP registration requires can be extremely time-consuming and downright frustrating depending on the software and processes you have in place. As a result, most attorneys and law firms don’t keep detailed enough records. 

Not every accounting software is able to provide support for CTAPP requirements. Law firms should look for specialized legal accounting software like Soluno which can complete 3-way monthly trust reconciliations in a flash; has full compliance with trust and IOLTA requirements; and generates accountant-ready reports in minutes if a compliance review occurs. 

If you’d like to know more about how Soluno can help you manage your client trust accounts and streamline your CTAPP submission, request a demo today.

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