THE CERTIFICATE OF COMPLIANCE
AND IMPROPER CERTIFICATIONS
By Martin Zukoff, CPA
and David C. Glebe, Esquire

---

Since January 1995, all Delaware lawyers have been required to respond to a detailed checklist as part of their annual Registration Statements filed with the Delaware Supreme Court (the "Checklist"). Prior to that time, Delaware lawyers merely had to certify to a single general statement that they were in compliance with Rule 1.15 of the Delaware Lawyers' Rules of Professional Conduct (the "Rules"). The Checklist now requires Delaware lawyers to answer several specific questions regarding their financial books and records, which must be answered "YES" or "NO", indicating their compliance or non-compliance with the Rules. The expectation was that by completing the Checklist every year, attorneys would become more aware of their recordkeeping obligations, and that the level of compliance, which was low, would increase.

In the audits of attorneys' books and records in the two years following the introduction of the Checklist, we found a disturbing situation - false or incorrect certification. Some attorneys have answered "YES" indicating that they were in compliance with specific provisions, when they were clearly not in compliance, and should have answered "NO". In the first full audit year, the rate of improper certification was 16%, and 25% for the last audit year. Also, for these attorneys, the lack of control, caused by their failure to perform the required monthly procedures reflected in the Checklist, frequently resulted in a loss of identity of client funds. In the first year's audits, of those who improperly certified, there were findings totaling $40,700 of unidentified client funds and $24,300 in the last audit year. These attorneys who are not in compliance, and are improperly certifying that they are in compliance, are failing to safeguard client funds entrusted to them.

When an attorney improperly certifies his or her compliance, whether by intentional falsification, carelessness or neglect, such conduct can bring about serious disciplinary consequences. Since the Delaware Supreme Court views this situation very seriously, the Office of Disciplinary Counsel will be notified of such improper certifications. All Delaware attorneys should be warned that the disciplinary sanctions for such conduct may also include the imposition of substantial monetary fines.

Some attorneys have stated that their bookkeepers mistakenly assured them that they were in compliance. Bookkeepers may not know what is required because they have never seen the Checklist and the attorney may not understand the provisions listed in the Checklist. Here are some suggestions which may help.

1. The recordkeeping provisions in the Checklist are designed to provide financial control over client and attorney funds. If you comply with all of these provisions, you will maintain control over your clients' funds and your own funds.
2. If you use a bookkeeper of accountant to maintain your books and records, give him or her a copy of the Checklist and have that person show you the reports, reconciliatons, etc. for each provision. If you use a secretary who doesn't have the bookkeeping knowledge, or if you handle your books and records yourself, and need help, call Marty Zukoff at 478-4734 for assistance.
3. The provisions listed on the Checklist which require monthly reports, reconciliations, etc., involve monthly procedures, You should review these documents every month. If these procedures are not done on a timely basis, you will not be in compliance, you will not have control, you will find it difficult to regain control, and you will not be safeguarding client funds.
4. If you have a problem, such as unidentified client funds, or if you are unable to reconcile cash in the escrow account to the total of client funds you're holding, or any other problem, call Marty. Don't wait until you are being audited. Also, if you call about a recordkeeping problem, it will not be considered as grounds for reporting the matter to the Office of Disciplinary Counsel.
5. Many attorneys ask for recommendations of the most suitable computer software for their law practice. There is inexpensive, user-friendly software that will help you operate your law practice and will facilitate the task of compliance. Call Marty if you would like a recommendation.
6. There will be NO CHARGE for any of the assistance noted above.

If there are any items on the Checklist which may not be self-explanatory or it is not clearly understood what is required, you can obtain a detailed explanation of each provision and a set of illustrated records and reconciliations by calling the Lawyers' Fund office at 577-7034.