In August 2025, ALTA updated its Best Practices framework to include Pillar 4.2 — a set of requirements that moved escrow trust account reconciliation from a periodic exercise to a daily operational mandate. The language is specific. The expectations are clear. And most agencies are not yet in compliance.
This isn't a summary of the framework. This is a working guide to what Pillar 4.2 actually requires, where most agencies fall short, and what a compliant daily reconciliation workflow looks like in practice.
What Pillar 4.2 requires
The updated framework mandates three things for every escrow trust account:
Daily reconciliation of receipts and disbursements. Not weekly. Not monthly. Every business day, the agency must reconcile the bank statement against the book balance and the trial balance. The three-way match must be documented, and any discrepancies must be identified and tracked.
Segregation of duties. The person performing the reconciliation must be independent of the person with signing authority or disbursement authority on the trust account. This is a structural requirement — it can't be satisfied by a policy memo that says “we separate these responsibilities.” The separation must be enforced operationally.
Audit trails that support every control. Every reconciliation must produce a record that includes what was compared, what matched, what didn't, who performed the reconciliation, and when. These records must be retained and available for examination by underwriters, DOI examiners, and auditors.
Where most agencies fall short
The majority of title agencies reconcile monthly — not daily. They do it in Excel, with one person handling both reconciliation and disbursements. The “audit trail” is a spreadsheet saved to a shared drive. When the underwriter examiner arrives and asks for the reconciliation from March 14th, the scramble begins.
This was tolerable under the old framework. Under 4.2, it's a finding.
The specific failure modes are predictable:
Frequency. Monthly reconciliation means that by the time you identify a discrepancy, it's 30 days old. The transaction context is gone. The person who processed it may not remember the details. What should have been a five-minute resolution becomes a multi-hour investigation.
Segregation. In a small agency, the person who writes checks is often the same person who reconciles the account. Pillar 4.2 doesn't make exceptions for agency size. The requirement is structural — if the same person can disburse and reconcile, the control doesn't exist.
Documentation. An Excel spreadsheet with a date stamp is not an audit trail. An audit trail records who performed each action, what they compared, what they found, and what they did about it. It must be contemporaneous — created at the time of the reconciliation, not reconstructed afterward.
What daily reconciliation actually looks like
A compliant daily reconciliation workflow has four steps, and every one must be completed and documented every business day:
1. Pull the data. Obtain the current bank statement (or bank feed), the book balance from your escrow software, and the trial balance (the sum of all open client ledgers). These three figures are the inputs to the three-way match.
2. Run the three-way match. Compute the adjusted bank balance (bank statement plus deposits in transit minus outstanding checks). Compare it to the book balance. Compare the book balance to the trial balance. All three must agree. If they don't, identify the specific transactions causing the variance.
3. Resolve exceptions. Every discrepancy must be investigated and resolved — or documented with a resolution plan and timeline. Pillar 4.2 doesn't require zero exceptions. It requires that every exception is identified, explained, and tracked to resolution.
4. Document and store. The reconciliation record must include the three balances, the adjusted bank balance computation, the list of matched transactions, any exceptions identified, the resolution or resolution plan for each exception, the identity of the person who performed the reconciliation, and the date and time. This record must be retained and accessible.
The time problem
The most common objection to daily reconciliation is time. A manual three-way reconciliation takes one to two hours per trust account. An agency with three trust accounts is looking at three to six hours of reconciliation work every day — before anyone opens a file, takes a call, or schedules a closing.
This is why most agencies don't do it. The math doesn't work with manual processes. Two hours per account per day, times three accounts, times 260 business days, times $35 per hour for a competent bookkeeper — that's over $54,000 a year in reconciliation labor alone.
The time problem is a process problem, not a compliance problem. The standard doesn't care how long it takes. It cares that it gets done.
Automation changes the math
An automated reconciliation platform connects to your bank feed and your escrow software, pulls the data every morning, runs the three-way match, identifies exceptions, and produces the documented record. The agency owner's morning workflow becomes: open the briefing, review the results, confirm or act on any exceptions, move on.
Daily reconciliation that took two hours becomes a 30-second review. The documentation is produced automatically. The segregation of duties is enforced by the platform — the person reviewing the reconciliation cannot also disburse. The audit trail is contemporaneous because the system creates it at the time of reconciliation, not after the fact.
This is what Pillar 4.2 compliance looks like operationally. Not a new hire. Not a new spreadsheet. A system that does the work, documents the work, and enforces the controls — every day, without exception.