query: triple reconciliation trust account

Excellent query. I hadn't thought about discussing the process of reconcilation of the trust or escrow account. Remember, the money in this type of account is "other people's" money. It's a great responsibility. Triple reconciliation is the only way to be sure the funds all match up to individual transactions AND bank records.

First, let's just remind everyone that double reconciliation is what you do for any bank account reconciliation. Just follow the guidelines you receive from your bank if you're not sure how to do it. You know, comparing your register balance against the bank statement and accounting for any uncleared deposits or checks. All accounting software will guide you through this most critical step.

Once your trust or escrow account is reconciled to the bank account, you can do the third step, checking to make sure each transaction is tied to the money and there are no loose ends. Each title transaction should balance to zero. Any shortages must be covered and any balances accounted for.

I use Quicken for all my escrow accounts. After the bank reconciliation, we run an escrow trial balance. In Quicken each title filename is the "class". We run a summary transaction report and subtotal each class. Be sure the date parameters are set to include the earliest date.

You want each file to equal zero. That means checks and deposits balance and there is no shortage or overage in the title file. In Quicken you will see at the end of the report a subtotal for any "unclassed" transactions. Check these first and make certain each transaction is tied to its file or class.

Once you have every transaction tied to a file, verify the overages against real escrow balances. If you are holding $1000 for taxes on a title file, you should see $1000 instead of zero for that file. Any unaccounted overages should be resolved. Before you refund money to the consumer, make certain it's not there for some other reason. Once you have issued a refund check, it's hard to ask for the money back. When you are certain the money is not needed, refund the excess to whomever it belongs.

Shortages must be dealt with immediately. Identify the error, cover the shortage with funds from your operating account, then send an invoice to whoever owes you money.

You must make sure you check the bank reconcilation report for uncleared checks and deposits. Resolve anything more than 120 days old. Pay special attention to uncleared payoff checks, tax payments and recorder checks.

Good post closing procedures for confirmation of funding and issuance of any checks will help enormously.

If you've never done a triple reconcilation, the first time will seem like a huge job. Do it yourself. Only someone totally familiar with office procedures and title can understand the components. Once you have your account in order, make time to resolve the account each month. Even with good procedures in place you will be surprised how many problems will surface. Better to fix them sooner than later.