Reconciliation of Financial Activities

Properly Trained Reconcilers

Employees who perform financial reconciliations should have an accounting background and should be properly trained. See the Resources section at the end of this webpage for links to various training resources, reconciliation job aids, and standard monthly reports which can assist the reconciler through their reconciliation process.

Timely Reconciliations

It is essential to perform reconciliations on a timely basis to help ensure that any discrepancies are quickly identified and corrected. To be in compliance with good business practices, we strongly encourage monthly reconciliations.

Segregation of Duties

To properly safeguard system resources and to help mitigate the risk of fraudulent activity, it is important to ensure a proper segregation of duties in the reconciliation process. This means that the person who performs the reconciliation should not have access to processing the transactions which are being reconciled. This ensures an independent review and reconciliation of the transactions which are being processed.

In situations where segregation of duties is not possible (such as in a small department), units should implement mitigating controls, such as a review of financial activity by an independent person at a higher level (such as a department having someone at the college level perform the necessary reconciliations).

Tracing Banner Transactions to Source Documents

In order to ensure the legitimacy of each Banner transaction, it is beneficial to trace each Banner transaction to the related source document (such as a receipt or deposit form). This helps identify situations where a Banner transaction may differ from the source document, such as when a vendor may have charged an incorrect or duplicate amount. This tracing process helps ensure the accuracy of Banner transactions and helps identify any erroneous transactions which may require further attention.

Monitor and Reconcile Balances and Transactions in both the Operating Ledger (OL) and the General Ledger (GL)

When performing reconciliations, the typical process is to reconcile OL transactions (such as expenses, revenues, fund transfers, and encumbrances) to the source documents (such as receipts or deposit forms). However, in addition to reconciling OL transactions, it is also important to monitor and reconcile the activity within the GL. This would include monitoring and reconciling transactions and balances in GL account codes such as cash, accounts receivable, inventory for resale, accounts payable, unearned revenue, etc. By reconciling both the OL and the GL, you are helping to ensure the accuracy of your entire set of financial statements (and not just the OL).

For example, when reconciling your GL transactions, you may notice that your receivable balance is stagnant and hasn't changed in over a year, or that you have a non-normal balance in one of your liability account codes. Either of these issues would necessitate further investigation to see what the cause of the stagnant or non-normal balance might be, and to address the issue once you identify the cause of the problem.

Reconcile Any Shadow Systems to Banner

Many units maintain shadow systems to manage their financial activity on a daily basis. While this is allowable, it is essential in these scenarios to ensure that all shadow system activity is reconciled to Banner, which is the University of Illinois System’s official system of record. Any discrepancies between your shadow system and Banner must be addressed and rectified on a timely basis, to ensure that all of your financial activity is properly accounted for within Banner (and not just your shadow system). Since we are audited against Banner (not shadow systems), it is essential that Banner contains all necessary financial information.

Resolve Discrepancies Identified During the Reconciliation Process

During your reconciliation process, you may identify discrepancies which need addressed (such as duplicate charges from a vendor, misclassified transactions, revenue deposited to an incorrect C-FOAP, expenses recorded to an incorrect account code, etc.) Once these discrepancies are identified, it is important to investigate and correct these discrepancies on a timely basis. By resolving all discrepancies identified during the reconciliation process, you are helping to ensure the overall accuracy of the system’s financial statements. See below for examples:

• If a transaction was recorded to an incorrect C-FOAP (such as to an incorrect fund code, an incorrect organization code, an incorrect account code, or an incorrect program code), then a Journal Voucher (JV) should be processed to reclassify the transaction to the proper C-FOAP.
• If a vendor overcharged the system for an expense, then you would need to pursue that discrepancy with the vendor to ensure you are refunded from the overpayment.
• If a transaction appears in your shadow system (if applicable) and does not appear in Banner, then that transaction would need to be investigated to see if it is legitimate. If so, you would need to ensure that the transaction is properly recorded within Banner on a timely basis.