Reconciliation Best Practices

May 22, 2014

Tricia CookBudget & Fiscal Director

Research and Economic DevelopmentMontana State University

2

What Does “Reconcile” Mean in Accounting Terms? • In accounting, reconcile means to compare two sets

of records to make sure they are in agreement• Most common type of reconciliation that most people

are familiar with is a bank reconciliation where you compare a bank statement to your own records

• At MSU, most of us will be reconciling our departmental financial records to Banner

3

What is the Purpose of Doing Reconciliations?

• Verify accuracy of transactions • Identify and resolve errors in a timely manner• Confirm accuracy of fund balances • Maintain integrity of University’s accounting records

so the information can be relied on for decision making

• Ensure compliance with university, state and federal regulations, circulars and cost accounting standards

4

How Often Should Reconciliations be Done?

• Normally, departmental funds should be reconciled monthly

• Special circumstances such as very high volume or high risk activity may require more frequent reconciliations

• Must balance effectiveness and efficiency

5

Who Reconciles and What is Required?

Reconciling should be performed by someone with sufficient knowledge to:• Compare transactions appearing on financial reports

to departmental records • Identify, investigate and resolve any unknown or

unexpected transactions• Identify and correct coding errors, such as erroneous

account codes

6

Who Reconciles and What is Required (cont.)?

• Identify expected transactions that have not yet occurred and resolve problems

• Report irregularities to appropriate authorities

7

How to Segregate Duties?• “Significant transactions” should not be controlled from

start to finish by the same person • Significant transactions are large dollar amounts and

transactions that are inherently more risky, such as cash handling and p-card transactions

• Separating responsibilities for revenue collection and/or bill payment from reconciling is one way to accomplish segregation of duties

• If not possible, strong review procedures are necessary

8

What Departmental Financial Records are Needed?

Source documents supporting initiation and approval of transactions• Cash receipts, invoices• P-Card reports, BPAs, Corrections• Purchase Orders, Contracted Services Agreements• Hospitality Forms, Travel Authorizations• CatBooks/AgBooks, Quicken, QuickBooks, etc.

9

What Banner Finance Reports are Used?

• Also know as SAIS Finance Reports, MSU SwitchBoard Reports, etc.

• https://sais.montana.edu/cgi-bin/msu_sb_v3.pl• Use your Banner User ID and Password to login

10

Finance Reports for Reconciling General Ops

Run by Index, fiscal year and month• Operating Ledger Summary – Banner Form FGIBDST• Operating Ledger Transactions – Banner Form FGITRND• Payroll Report – Banner Form NHIDIST

Reconcile to the Budget, YTD Expenditures, and Encumbrances on the Operating Ledger Summary

11

Finance Reports for Reconciling General Ops

12

Finance Reports for Reconciling Designated

FundsRun by Index, fiscal year and month• Operating Ledger Summary – Banner Form FGIBDST• Operating Ledger Transactions – Banner Form FGITRND• Payroll Report – Banner Form NHIDIST

Run by Fund, fiscal year and month• General Ledger – Banner Form FGITBSR

13

Finance Reports for Reconciling Designated

Funds (cont.)

Reconcile to the Budget (if applicable), YTD Expenditures and Encumbrances on the Operating Ledger Summary

Reconcile to the Cash in Treasury and/or the

Fund Balance on the General Ledger

14

Finance Reports for Reconciling Designated

Funds (cont.)Reconcile to the budget (if applicable), YTD expenditures and encumbrances on the Operating Ledger Summary

Reconcile to the Cash in Treasury or the Fund Balance on the General Ledger

15

Finance Reports for Reconciling Designated

Funds (cont.)Reconcile to the budget (if applicable), YTD expenditures and encumbrances on the Operating Ledger Summary

Reconcile to the Cash Balance or the Fund Balance on the General Ledger

16

Finance Reports for Reconciling Grants

Run by Index, fiscal year and month• Inception to Date – Banner Form FRIGITD• Operating Ledger Transactions – Banner Form FGITRND• Payroll Report – Banner Form NHIDIST

Reconcile to the Budget, ITD Expenditures and Encumbrances on the Inception to Date report

17

18

Other Helpful Finance Reports

Operating Ledger Transactions (FY)

Operating Ledger Transactions ITD

Operating Ledger Transactions (Month by Month)

Payroll Report (FY)

Payroll by Index or Org

Encumbrance Detail Salary

Billed Scholarships

19

20

21

Who Should Review Reconciliations and What is

Required?Performed by someone with sufficient responsibility and authority to:• Ensure reconciliations are completed in a timely

manner and errors are satisfactorily resolved• Review and evaluate fund activity and balances• Principal investigators should review their grant reports• Department head is ultimately responsible

22

How are Reconciliations Documented?

Need to maintain a record of:• When reconciliation was done and by whom• Resolution of any errors• Proof of review by supervisor, principal investigator,

department head, or whatever makes sense in your organization

23

Who to Contact with Questions?

• Your HR Payroll Tech regarding salary, benefits and payroll encumbrances

• UBShelp@montana.edu regarding revenue transactions, BPAs, P-Card transactions, account codes, etc.

• The originating department regarding auto-bills• The Budget Office regarding general operating or

designated budgets• Your OSP fiscal manager regarding budgets and

allowable costs on grants

24

Questionsand

Discussion??