05:07:00 Bank Reconciliation

PURPOSE

To outline the purpose and timeliness of preparing bank statement reconciliations.

POLICY

1. General Principles

   1. Bank reconciliations are an essential internal control tool and are necessary in preventing and detecting fraud.  They also help identify accounting and bank error by providing explanations of the difference between the accounting record’s cash balances and the bank balance position per the bank statement.

   2. The bank reconciliation ensures that all transactions posted on the bank statements have been reviewed and checked, thus reducing the probabilities of errors in the data used to prepare accounts.  Bank reconciliations also ensure completeness by helping to ensure that all payments and receipts that have gone through the bank account have also been recorded in the accounting records.  Any differences are identified and explained.

   3. This function requires a segregation of duties, which means that the person who performs the bank reconciliations should not also have access to the recording of transactions in the accounting records or processing of cash disbursements or receipts.  Any differences identified between the accounting records and the bank statements should be adjusted by a person other than the one doing the reconciliations.

II.   Definitions

1. Bank Statement:  A paper or electronic record of all financial activity for the prior month provided by each bank.

2. General Ledger:  The main accounting book of record for an entity which includes accounts for assets, liabilities, revenue, expenses, and fund balance.

3. Reconciling Item:  Any recorded activity on either the bank statement or the general ledger but not recorded in the other.  Examples include:

Bank not Book (—This is an unmatched bank line that represents a deposit/withdrawal that appears on a bank statement but not on the general ledger.)

Book not Bank (—This is an unmatched book line that represents a deposit/withdrawal on the general ledger but not on a bank statement.)

  D. Bank account reconciliation summary: A two page summary for each bank account that shows the bank balance, book balance, timing difference and all reconciling items.

 III.   Procedures     

1. A daily review of bank transactions is done within the accounting department by separate accounting personnel to look for unusual or unexpected transactions. A full reconciliation of all bank accounts is done on a monthly basis, to be completed no later than 30 days after the end of the month, and a documented review performed shortly thereafter.

2. Bank account reconciliations will be prepared by Budgeting & Business Services staff and approved by the assistant vice president for Business & Finance and vice president for Business & Finance. Their signatures on the bank account reconciliation summary will confirm that current procedures were followed and that the reconciliation accurately presents the status of the account at the bank as well as on the general ledger.

3. All reconciling differences should be identified and any necessary journal entries to resolve the differences should be posted no later than 90 days after the reconciliation is done. The bank should be contacted concerning any bank errors which should be resolved within 90 days. 07/19.