Although departments may review their ongoing ledger activity on the university's accounting system and print the ledgers at any time, a formal reconciliation of the accounting records should be performed as soon as possible after the month closes. A reconciliation of the ledger consists of the following process.
Compare departmental records with the current month's transactions (encumbrances, charges, and deposits) listed on the department's ledgers. Ensure that the correct cost center or WBS element, general ledger account, amount, and so forth, were charged.
Verify the sponsor award amount and budget for sponsored projects. Also note the end date and ensure that charges occurred within the project period.
Ensure that all transactions appearing on the ledgers which are not supported by the department's records are accurate and authorized.
Provide the reconciled ledgers for the cost center/WBS element(s) to the department head each month.
Note: The department head may designate an exempt or non-exempt employee to perform the reconciliation.
Although a monthly reconciliation of the department's ledgers is an excellent control, the oversight and control value of the reconciliation is greatly diminished when performed by the same employee who, for example, entered the transactions or processed the invoice for items purchased by the department.
Whenever staffing allows, the duties of handling money and performing the monthly reconciliation of the department's cost center or WBS elements should be separated as follows. These duties should be further separated if sufficient staff are available.
Receipting Revenue. This employee should receipt the incoming revenue, complete the bank deposit ticket, enter the deposit information into the accounting system (or complete the Form T-33), and prepare the funds (cash, checks, and credit card receipts) for pick-up or delivery to the campus central cashier.
Ledger Reconciliation. An employee who has no responsibility for handling money received should reconcile the department's receipt book to the deposit document printed from the accounting system (or completed Form T-33) and ultimately to the departmental ledgers each month. The reconciliation should include verification that transactions written in receipt books were credited correctly to the ledgers.
Whenever staffing allows, the duties of processing payments and performing the monthly reconciliation of the department's cost center or WBS elements should be separated as follows. These duties should be further separated if sufficient staff are available.
Processing Payments. One employee should requisition and receive goods and process the invoice for approval.
Ledger Reconciliation. An employee who has no responsibility for requisitioning, receiving, or entering invoices to the accounting system should reconcile the department's accounts payable documentation (such as invoices, internal transfers) to the departmental ledgers each month.
The second important control in overseeing the department's financial records is the review and approval of the reconciled ledgers by an authorized approver. Just as reviewing a personal bank statement is a wise practice for ensuring the accuracy of transactions listed on the statement, management's review of the reconciled ledgers is an equally prudent business practice.
Review of the ledgers by an authorized approver for the department's cost center or WBS elements ensures oversight of all department funds. Not all transactions are configured to be processed through workflow in the accounting system; therefore, such a review helps ensure that all financial transactions are appropriate, accurately described, and properly recorded. This review also provides management with information about the status of budgets under their control.
Note: The authorized approver is normally the department head. The approver may delegate an exempt employee to review the department's ledgers, such as a business manager or principal investigator of a grant or contract. PIs should review their own ledgers.