# IOLTA trust accounting and three-way reconciliation > How Otto holds client funds against the case they belong to, reconciles bank statement to book balance to client ledgers, and handles NSF and remittance. - Source: https://ottoforfirms.com/platform/trust-accounting/ - Publisher: Otto — https://ottoforfirms.com - Updated: 2026-07-26 - Status: in attorney review. Served noindex and excluded from the sitemap; do not cite as settled. **In review — not indexed.** This page describes what Otto does and is readable in full. It stays out of search until it has been reviewed, because a product claim about a compliance control is a claim somebody will hold us to. [The Otto platform](https://ottoforfirms.com/platform/) Otto keeps client money in an IOLTA trust ledger attached to the case it came from and reconciles three ways — bank statement, book balance, and the sum of the client ledgers — with every posting written to the same audit trail as the rest of the work, so reconciliation evidence exports inside the exam package. ## Key facts - Three-way reconciliation compares the bank statement, the book balance and the sum of the individual client ledgers, and records the date it last balanced. - Four transaction kinds: payment in, remittance out, cost recovery, and NSF reversal. Each carries the account or client it belongs to and a memo naming the instrument. - A returned draft is one event with three consequences — the ledger reversal, the retry schedule, and the NSF letter — each written to the trail rather than done by hand in three systems. - Remittance statements assemble from the ledger: gross collected, costs recovered, commission at that client's rate, net remit. - Advanced costs are tracked per account — filing fee, service of process, skip trace, writ fee — each marked recovered or not. - Judgment interest accrues per diem from the entry date at the rate recorded on the judgment, so the payoff figure is computed rather than quoted from a spreadsheet. ## What does three-way reconciliation mean here? Three numbers that must agree, shown together with the date they last did. The bank statement balance for the trust account. The book balance the firm's own ledger says is there. And the sum of every individual client ledger, which is the number that answers whose money it is. Two of the three agreeing is the failure mode the exercise exists to catch — a trust account can balance to the bank and still be wrong about which client is owed what. Otto shows all three and the last-reconciled date on the same panel as the balances themselves. TODO: verify the state bar requirement this is modelled on, and state whether Otto performs the reconciliation or presents the evidence of one performed elsewhere. ## What happens when a payment bounces? A returned draft posts as a reversal transaction against the trust ledger, flags the payment plan, schedules the retry, and queues the notice — and each of those is written to the audit trail from the one event rather than being three tasks that may or may not all get done. The plan carries its own state after that: current, NSF, broken, or completed, with the note explaining which and why. A plan that misses two consecutive drafts is marked broken and the promise-to-pay follow-up is queued. What Otto does not do is decide whether to restructure the plan or accelerate; that is a step in a scheduled work plan, awaiting a person. ## How does a remittance statement get built? From the ledger, in one action. Gross collected for the period, costs recovered, commission calculated at the rate recorded for that client, and the net remittance. The statement carries a status — sent with its method and date, scheduled, or pending partner approval — so the approval step is visible rather than being an email nobody can find. Generating a statement is an audited event carrying the client, the period and the net figure. Assembling these by hand across a ledger and a spreadsheet is the task firms most often describe as their largest recurring time sink, which is why it is a button here. ## Are advanced costs tracked per account? Yes, as a cost card on the account: each advance with its label, amount, date and whether it has been recovered. Filing fees, service of process, skip-trace charges and post-judgment writ fees all sit on the same card, so the question of what the firm is out of pocket on a file is answerable without reading a general ledger. Recovery flows back through the trust ledger as a cost-recovery transaction tied to the account it came from, and shows on the remittance statement as costs recovered rather than being netted invisibly against commission. ## How does this reach the audit package? Because the ledger writes to the same audit trail as everything else, reconciliation evidence is inside the export rather than being assembled alongside it. That matters for the exam-sample case specifically: one of the columns an examiner asks for is the trust posting for each payment and the remittance it landed on, which in a split system is a manual join between a case record and an accounting package. TODO: confirm which trust artifacts are included in the exported package today, because the shipped export enumerates event, compliance, custody, rights and call files and this page should not imply a trust file it does not produce. ## What is built today? A seeded ledger, deterministic against a fixed demonstration date. The three-way panel balances because the seed data balances, not because a bank feed was fetched and matched — there is no bank connection in this build, and no reconciliation engine that would detect a break. The transaction kinds, the plan states, the cost cards, the per-diem judgment accrual and the statement arithmetic are all real code over that data. Read the screen as a model of the workflow, not as evidence of a reconciled account. --- This page describes Otto, not the law, and is not legal advice. Otto applies rules that have been written down correctly; it does not warrant that using it results in compliance with any statute, regulation or contract. Where a rule is named here, confirm it against the primary source and your own counsel before relying on it.