The program is called State Bar’s Interest on Lawyers’ Trust Accounts, or IOLTA. It takes the interest earned from client funds held by attorneys, and uses that money to help the poor afford legal services.
Because of significant growth in real estate transactions in recent years, the fund has grown from $3 million in revenue in 2018 to more than $16 million in 2024.
The State Bar administers the fund and typically gives grants to organizations like Legal Aid of North Carolina and the North Carolina Justice Center. But that all came to a halt last summer, when the legislature froze the payments.
Lawmakers brought IOLTA leadership to a hearing in October and questioned whether the grants were going to appropriately non-biased organizations.
While the audit says grants were awarded properly, there was insufficient monitoring after grants went out. In a statement about the audit, State Auditor Dave Boliek said, “Attorneys in North Carolina have no choice but to allow the North Carolina State Bar’s IOLTA program to take interest from their trust accounts. As our audit shows, IOLTA grants are going to organizations with clearly partisan, political agendas. With IOLTA’s revenues and grant payments surging, it’s incumbent that the flow of dollars is met with additional scrutiny to ensure proper use.”
The audit itself, however, didn't use such strong language. It does list all the grantees, which include some immigration support groups and other entities that were questioned by lawmakers in October, but the audit itself does not judge the merit of those decisions. Instead, it says, "We found the grant award process complied with current requirements, but IOLTA did not have adequate monitoring practices in place and consequently lacked reasonable assurance that the millions of dollars awarded to select organizations were used for allowable, approved, and intended purposes."
IOLTA Executive Director Mary Irvine said the program is happy to comply with the auditor’s recommended monitoring requirements. "the focus from the report, from my perspective, is in the areas of outcomes based goals and reporting and then stricter monitoring procedures that they would like us to work on strengthening," she said.
She said her organization is looking forward to the end of the funding freeze. "We want to be able to get back to the work of serving North Carolina communities with legal information and legal support that they critically need. And we are hopeful that the updates that we're making to follow this audit process will really allow us to move towards, back towards that goal," she said.
The freeze is set to end June 30 — but Irvine says it will take several months for funds to be released as IOLTA starts the awards process again. The freeze was damaging: NC Legal Aid had to close nine offices across the state due to a lack of funding, and an estimated 8,000 fewer clients received services from the organization.
