By Maria Beelen, PMP – Manager, Financial Institutions Group

Whether your institution is about to go through a core software conversion or taking next steps in preparing for your next audit or regulatory exam, it may be time to take a deeper dive into your general ledger activity to make sure it’s reflecting the account accurately. 

A reconciliation reconciles the general ledger activity with a source report or document. A healthy reconciliation tells the story of the account. It includes the account’s purpose, the co-owning department, the transaction flow, reasonable time for items to resolve, and when items are considered aged and should be considered for write-off. In addition, any source documentation used in completing the reconciliation should be notated. This can be achieved by incorporating a text box or information box that can be updated and maintained by the reconciler. A reviewer, who may even be unfamiliar with the nature of the general ledger account or process, should be able to gain an understanding of the purpose of the general ledger. 

Navigating the reconciliation process can be complex. To help with your next review, below is a list of components you should ensure exist:

• The header includes:
  • Institution name
  • General ledger account name
  • General ledger account number
  • Date or period being reconciled
  • Date the reconciliation was completed
  • Name of reconciler
  • Name of reviewer
• The general ledger balance used in the reconciliation should be verified with the ending general ledger trial balance for the period.
• The report or statement balance referenced is in the reconciliation. Source documents substantiating a balance used in the reconciliation should be attached for easy verification.
  • Source document examples include:
    • Bank statements
    • Core system processing reports
    • Vendor settlement reports
    • Subsidiary or subledger reports (i.e. fixed assets, prepaids)
• The reconciling or outstanding items detailed in the reconciliation only includes the items representing the balance in the account and sum to the general ledger account balance. If there is a difference between these totals, the account should not be considered reconciled.
• In a clearing account, the items should clear. Without timing differences or carryover, these accounts should have a zero balance. Items which clear should be removed. These can be moved to a ‘Cleared Items’ tab for audit purposes.
• The reconciliation identifies items that are typical carryover items due to timing of settlements, etc. These should not be co-mingled with other reconciling items.
• The reconciliation includes clear dates for items identified to clear in the next period. Note: This should be a specific date and not be a general term such as “Clears in XX.”
• For reconciling items which do not have a clear date, there are comments or notes indicating where the item is in the resolution process. Follow-up comments or notes help the reviewer or auditor gain an understanding of how these items are being worked to resolve.

If the reconciliation includes all the components listed above, the story will unfold in front of the reviewer. If not, the reviewer is forced to ask additional questions and/or dig for more information. Reconciliations provide internal controls over critical balance sheet accounts. Accurate financial statements help management measure results and make informed business decisions that support achieving strategic business goals by providing a clear financial picture. Follow the steps above to ensure your reconciliations are accurate, reliable and comprehensive.

Ready to Get Started?

Navigating through a reconciliation is no easy feat. It requires thorough examination and pros who understand the ins and outs of each required component. Offering tailored accounting solutions, our Financial Institutions Group work alongside institutions to conduct thorough reviews of reconciliations to ensure they’re positioned for a successful next audit or regulatory exam.