Concept and Framework
Guidelines and Best Practices:
Authorization
Documentation
Reconciliation
Security
Separation of Duties
Resources
Resources for Internal Controls
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Reconciliation
Definition:
Reconciliation is the process of comparing transactions and
activity to supporting documentation. Further,
reconciliation involves resolving any discrepancies that may
have been discovered.
Purpose:
The process of reconciliation ensures the accuracy and
validity of financial information. Also, a proper
reconciliation process ensures that unauthorized changes
have not occurred to transactions during processing.
Concepts and Best Practices
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Key Concept
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Best Practice
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Accuracy of activity:
A good internal control system provides a mechanism to
verify that transactions and activity are for the correct
purpose and amount, and allowable.
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For each type of activity consider documenting the
particular information from source documents that is to be
compared to the appropriate report. This assists to ensure
that transactions are valid and are correct in purpose.
(example: determine that for travel reimbursement source
documents, the traveler name, destination, purpose of the
trip, etc. will be matched to the monthly financial report)
Ensure that transactions have been properly authorized.
Especially, if the source documents are paper based, review
for potential changes to the document between approval and
processing of transactions.
Ensure that all transactions are allowable.
See more specific information: Budget
Activity
Reconciliation Process
Guidelines
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Error correction
Errors and discrepancies, intentional or unintentional,
should be detected, investigated and resolved in a timely
fashion.
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Verify the recording of transactions in a timely manner.
Review source documents to assure they are processed and
posted in a timely manner by the processing department. If
not, follow up with the appropriate central office or
processing department.
Document a plan for the research and correction of errors or
discrepancies of each type of transaction or activity.
Communicate these processes and procedures with the
appropriate staff.
Establish expectations for timeliness of error correction.
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Matching to the source
The oversight of any transaction is strengthened by the
process of matching
source documentation of the transaction to the appropriate
reporting documentation or reporting tool.
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See Budget
Activity Reconciliation Process Guidelines
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Documenting the process and completion
Reconciliation processes are most effective when they are
consistent and thorough. Employees involved in the
reconciliation process should be knowledgeable and clear on
their responsibilities and expectations.
It should be clear to an external reviewer when a
reconciliation has been completed.
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Be consistent with reconciliation processes. Changing the
reconciliation process often leads to undiscovered
inaccuracies and potential fraud.
Reconciliation should be documented clearly to verify that a
review has been done.
The reconciliation process and procedures should be
documented clearly and communicated. Consider documenting:
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The steps in the process
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Who performs each step
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Expectations regarding timeliness
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A mechanism for providing proof that all activity
has been reviewed and reconciled
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A procedure for error correction.
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