Policy and Procedures for Bank Reconciliations



Policy and Procedures for Bank ReconciliationsBACKGROUND INFORMATIONThe reconciliation of all bank accounts in a timely manner is a key component of good controls over cash. The reconciliation of the bank balance with the book balance (i.e., general ledger) is necessary to ensure that:All receipts and disbursements are recorded, which is an essential process for ensuring complete and accurate monthly financial statements;Checks are clearing the bank in a reasonable timeframe;Items reconciled are appropriate and are being recorded;Fraudulent claims can be discovered and investigated; andReconciled cash balance agrees to the general ledger cash balance.This document provides two (2) samples of a PHA bank reconciliation policy and associated procedures.Sample 1 – PHA with a Fee Accountant. This sample provides an example bank reconciliation policy for a PHA who contracts with a fee accountant for monthly accounting services.Sample 2 – PHA without a Fee Accountant. This sample provides an example bank reconciliation policy for a PHA that performs all accounting functions in house.PHAs can simply cut and paste either sample or portions of both samples into their policy and procedures documents and modify as needed.ITEMS FOR CONSIDERATIONIn the review of the samples, the PHA will need to take their specific situation into consideration when modifying the bank reconciliation policy and procedures to suit their PHA.The following provides the major assumptions that were used to develop the sample policy and procedures and applies only to PHAs that use a fee accountant.Assumption – The fee accountant prepares all bank reconciliations for the PHA.Assumption – The fee accountant will prepare financial statements for the PHA on a monthly basis, which would require that bank reconciliations are completed monthly.Assumption – PHAs using a fee accountant would not have a finance director and therefore, the Executive Director would review the bank reconciliations for reasonableness.SAMPLE 1 – BANK RECONCILATION: PHA WITH A FEE ACCOUNTANTBANK RECONCILIATION POLICYThis policy applies to all PHA programs, including federal and non-federal, and programs subject to partnership agreements, regulatory agreements, and/or financial agreements, unless specifically noted in the above-mentioned agreements.Bank statements are provided directly to the Fee Accountant monthly. Each bank account will be reconciled by the fee accountant by the 15th day of the following month. Bank discrepancies will be communicated by the fee accountant to the Executive Director for resolution with the bank. The bank reconciliations will be provided with the monthly fee accounting reports.BANK RECONCILIATION PROCEDURESBank ReconciliationBank statements will be made available directly from the bank to the fee accountant, by mail or electronic access each month for the preparation of the bank reconciliation. This approach allows the financial data to be provided to the fee accountant in a timely manner and provides a level of internal controls so that the PHA cannot alter information on the bank statement.Bank reconciliations are prepared by the fee accountant on a monthly basis.The Fee Accountant provides the completed bank reconciliations to the PHA as part of the monthly fee accounting reports.Review of Bank ReconciliationThe Executive Director will review the completed reconciliation reports to ensure that there are no questionable transactions, outstanding checks, or deposits in transit.The Executive Director will initial and date the bank reconciliation, which will indicate that the review was completed and any follow-up action, if needed, was appropriately taken. Written documentation of follow-up action and resolution is retained with each bank reconciliation for auditing purposes.A copy of the bank reconciliation will be given to the Board of Commissioners as part of the monthly board reporting package. The Board of Commissioners will review the bank reconciliation and ensure that there are no deposits in transit which spans more than one (1) month.Other key items that should be considered during the monitoring of the bank reconciliation by both the Executive Director and Board of Commissioners include the following:The actual activity in the bank account matches the intended use of each bank account.The number and amount of deposits in transit. Large number of deposits or large amounts in transit may indicate fraud.Year End Review for Outstanding ChecksThe PHA will retain a copy of all bank reconciliations in accordance with the PHA’s record retention policy.At the end of the fiscal year, the bank reconciliations should be specifically reviewed by the Executive Director. Any outstanding checks that have been dormant for more than one (1) year for payroll checks and three (3) years for tenant refunds and payments for goods or services may need to be voided by the PHA.The Executive Director will provide the list of any voided checks to the fee accountant so that a journal entry can be made to the financial statements and the bank reconciliations can be updated.Outstanding checks that meet the definition of unclaimed property by the state will be remitted to the state as outlined in the state’s unclaimed property rules and guidance.SAMPLE 2 – BANK RECONCILATION: PHA WITHOUT A FEE ACCOUNTANTBANK RECONCILIATION POLICY This policy applies to all PHA programs, including federal and non-federal, and programs subject to partnership agreements, regulatory agreements, and/or financial agreements, unless specifically noted in the above-mentioned agreements.Each bank account will be reconciled by the 15th day of the following month. Bank discrepancies will be communicated to the Executive Director or Finance Director for resolution with the bank within five (5) working days of the bank reconciliation. Posting discrepancies will be documented and corrected in the accounting system within five (5) working days of the bank reconciliation.BANK RECONCILIATION PROCEDURESBank ReconciliationEach bank account will be reconciled and certified by the individual performing the actual bank reconciliation. The individual(s) signature and date will accompany the actual bank reconciliation.The signed and dated bank reconciliation certifies that:The reconciliation has been reviewed for discrepancies, andThe reconciled balance matches the general ledger.It is preferred to have the bank reconciliations prepared within the PHA’s accounting system, but an Excel format is acceptable. Similarly, it is preferred that the bank reconciliations be prepared using an electronic copy of the bank statements in the case where the PHA’s accounting system permits the electronic reconciliation of the account.Review of Bank ReconciliationsThe Finance Director will review the completed reconciliation reports to ensure that there are no questionable transactions, outstanding checks, or deposits in transit, prior to providing to the Executive Director.The completed bank reconciliations, along with the bank statements will be submitted to the Executive Director for review and approval.The bank statements will be reviewed by the Executive Director for the following:The timeliness of tenant deposits;That HUD funding is being drawn down on a regular basis;Verify that checks match the actual expenditures incurred;The actual activity in the bank account matches the intended use of each bank account; andThe number and amount of deposits in transit. Large number of deposits or large amounts in transit may indicate fraud.The Executive Director will initial and date the bank reconciliation, which will indicate that the review was completed and any follow-up action, if needed, was appropriately taken. Written documentation of follow-up action and resolution is retained with each bank reconciliation for auditing purposes.Year End Review for Outstanding ChecksThe PHA will retain a copy of all bank reconciliations in accordance with the PHA’s record retention policy.At the end of the fiscal year, the bank reconciliation should be specifically reviewed by the Finance Director. Any outstanding checks that have been dormant for more than one (1) year for payroll checks and three (3) years for tenant refunds and payments for goods or services may need to be voided by the PHA with the approval of the Finance Director.The list of the approved voided checks will be provided to the general ledger accountant for the recording of a journal entry to the financial statements and updates to the bank reconciliations.Outstanding checks that meet the definition of unclaimed property by the state will be remitted to the state as outlined in the state’s unclaimed property rules and guidance. ................
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