Best Practices: Financial Review and Reconciliation

• Provides guidance on the performance of financial review and reconciliation
  

• Accounts reconciliations performed monthly and sufficient documentation maintained to support account balances

• To ensure that accounts are reconciled in a timely manner and contain adequate documentation of expenses and revenues

• A. Financial Analysis - Reconciliations

  • Reconciliation of General Ledger Accounts - Monthly - Include reconciliation of general ledger accounts as part of month-end close procedures. Verify transactions and if correctly posted to the account.

    • Run UGA_GL_TRIAL_BAL_DEPT_FND_ACCT query in UGA Financials including all general ledger account balances, assign reconciliations to accounting/business office staff (preparers and reviewers). As new accounts are used/setup, CBO or equivalent will assign.

    • Location of supporting files (system and documents) and the period through which accounts have been reviewed.

    • Sign-offs by the Preparer of the reconciliation. Signoff includes date of preparer completion.

    • Signoff/date by Reviewer of the reconciliation. Reviewer should be supervisor or qualified accounting staff, knowledgeable of accounts assigned other than the preparer.

• Preparing Required Documentation - Prepare a separate work paper for each account to document the reconciliation. Consider including:
  • The account number, account name, purpose, a brief description of the debit/credit activity that normally processes through the account, the accounting period for which the analysis is being completed.
  • Activity for the period - presentation will be determined based on the nature of the account and the volume of the activity that is recorded monthly in that account.
  • Substantiation of the account's ending balance through review of underlying supporting documentation.
  • The date the reconciliation was completed.
  • A list of contact names, email addresses for questions relating to the account.
  • Keep account information updated for changes in processing and other information.
• Completing the Analysis - Perform the following activities after each month end close:
  • Confirm the opening balance with previous work papers, or that balance was zero if this is a new account.
  • Review the activity posted to the account to ensure that detail items are:
    • Properly classified to the account,
    • Authorized in accordance with University policies, State and Federal laws and regulations, and specific sponsor or donor requirements or restrictions, and,
    • Within the guidelines of the stated purpose of the account.
  • Ensure that all expected charges, receipts, or other activity appears in the account.
  • Take appropriate actions to record necessary adjustments.
  • Take immediate action to resolve errors or discrepancies noted during the reconciliation process and follow up to ensure that errors are corrected.
  • Maintain copies of supporting documentation for activity processed for the account.
  • Confirm the ending balance per the reconciliation agrees to the general ledger balance.
• Reviewing the Analysis - Submit the account analysis for review. The reviewer verifies that:
  • Analysis includes all of the funds within this balance sheet account
  • Ending balance agrees to the general ledger
  • Ending balances are substantiated within supporting documents
  • All activity is appropriate and reasonable.
  • Reconciling items noted have been adequately explains with actionable items noted
  • Adjustments or corrections, if necessary, have been initiated.
  • The account (fund and reporting category) has been assessed for the need to retain.
• Retaining Documentation - Supporting documentation for detail items comprising the balance in the account should be retained until open items have cleared. Supporting documentation for items relating to period activity (Accounts Receivable records, Vendor Invoices, Cash Receipts, Journal Entries, etc) in the account analysis should be kept in accordance with record retention guidelines.

Figure: Understanding how to identify and resolve discrepancies for account reconciliations.

B. Financial Analysis - Fluctuation/Variance Analysis

• Perform fluctuation/variance reviews/analysis (monthly or quarterly) using appropriate thresholds and perform reviews on fluctuations (current year over prior year actuals; YTD/MTD and Actual over Budget fluctuations) exceeding thresholds, documenting explanations for those accounts exceeding thresholds. Preparer and reviewer to be assigned by CBO/business office.
• Useful UGA Financials Queries:
  • UGA_GL_TRIAL_BALANCE: Provides summarized actual amounts by each ChartField combination within selected fiscal year, accounting period, and ledger. Useful for any kind of account, including assets, liabilities, fund balance, revenue, and expense accounts.
  • UGA_GL_TRIAL_BAL_ACCT_FUND: Provides summarized actual amounts by account and fund within selected fiscal year, accounting period, and ledger. Useful for any kind of account, including assets, liabilities, and fund balance, revenue and expense accounts.
  • UGA_GL_TRIAL_BAL_DEPT_FND_ACCT: Provides summarized actual amounts by Department, Fund, and Account within selected fiscal year, accounting period, and ledger. Useful for any kind of account, including assets, liabilities, and fund balance, revenue and expense accounts.
  • UGA_GL_Transactions: All Actual transactions for selection
  • UGA_KK_DEPT_EXP_REV_BALS: Departmental budget balances - both revenue and expenses (includes current budget, encumbrances, actual expenditures and remaining budget balance)

• Financial System Reconciliation Procedures

• OneSource Training Library course: Financial Review and Analysis

• Reference: Financial Review and Analysis Procedures

• Reference: Financial Review and Analysis Guide

• Quick Reference Materials for Practitioners

Contributed by Lisa Catanese

Last updated 03/03/2020