This section presents procedures to be used by State agencies in performing monthly bank reconciliations. The difference between the cash book and bank statement balances of an account may be due to: checks issued but not yet cleared by the bank (outstanding checks); deposits recorded but not yet sent to the bank (deposits in transit); unrecorded bank charges and credits; or recording errors.
Agencies must reconcile the bank and book balances of all accounts to determine the reasons for any differences and to correct any errors in the accounts. An employee not involved in recording receipts and disbursements must perform the reconciliation within 5-7 days of each month-end to safeguard assets, check the accuracy and reliability of agency-maintained accounting data and permit the timely reporting of account balances to the Commissioner of Taxation and Finance for publication in the New York State Register (discussed below). Documentation of the reconciliation must be retained for audit purposes.
Any format, which clearly shows the balances being reconciled and the details of all reconciling items, is acceptable. Bank statements often contain an outline for performing the reconciliation.
Broadly defined, a reconciliation is a comparison of different sets of data to one another, identifying and investigating differences, and taking corrective action, when necessary, to resolve differences. Reconciling monthly bank account statements to agency accounting records is an example of reconciling one set of data to another. This control activity helps to ensure the accuracy and completeness of transactions that have been posted to an agency's accounts. To ensure proper segregation of duties, the person who approves transactions or handles cash receipts should not be the person who performs the reconciliation.
A critical element of the reconciliation process is the resolution of differences. It does not do any good to note differences and do nothing about it. Differences should be identified, investigated, and explained - corrective action must be taken. If an unidentified withdrawal (e.g. bank debit) is posted to an agency's account, then the reconciler should immediately contact the bank to ascertain the reason for the unidentified charge. Where appropriate, bank personnel should reverse the bank charge or an adjusting entry should be made to the agency's accounting records. Reversals by bank personnel must be confirmed to the following months bank statement. Similarly, agency deposits not shown on the monthly bank statement must be investigated and a determination made that the deposit was posted to the account in the month immediately following the reconciliation period.
All bank account reconciliations should be documented and approved by management.
1. Forward unopened bank statements directly to the employee who will perform the reconciliation.
2. Compare the total of the returned checks to total charges on the statements and examine check signatures and endorsements on a test basis.
3. Compare deposits listed on the bank statements to deposits in transit on the prior reconciliation and to records of deposits made since the last reconciliation. Deposits not recorded by the bank should be listed as deposits in transit. Compare, on a test basis, the date the deposit was recorded in the cash book to the date shown on the bank statement.
4. Arrange returned checks in numerical order and compare to outstanding checks from the prior reconciliation and to the record of disbursements made since the last reconciliation. Checks not returned by the bank should be listed as outstanding checks.
5. List any charges or credits shown on the bank statements that have not been recorded in the cash book.
6. Subtract total deposits in transit, add total outstanding checks, and add or subtract bank credits and charges to the cash book balances. The result should equal the balance shown on the bank statement.
When the balances have been reconciled and the nature of the reconciling items are known, the following steps must be taken:
1. File returned checks in numerical order with previous checks and sequentially account for all checks. All recorded checks must be examined and any checks, other than outstanding checks, missing from the sequence must be investigated.
2. Review documentation for any check outstanding for more than 90 days. Agency responsibilities and disposition of the proceeds of uncashed checks is explained in greater detail in Section 7.0500 of this Volume.
3. Have unrecorded bank charges or credits posted to the cash book as of the date of the reconciliation. Bank charges and credits must be treated consistently, e.g. deposited checks returned because of insufficient funds are recorded as reductions to revenue, not as disbursements. Further, a process must be initiated to collect good funds from the maker of the check and cancel the goods or services that the returned check was intended to pay for.
4. All monthly reconciliations should be reviewed and signed by a supervisor that did not participate in the reconciling function.
5. Outstanding checks must be written-off after one year of the date of issuance pursuant to the procedures governing the disposition of uncashed checks as published in the Controls and Special Procedures Manual, Uncashed State Checks, Volume XI, Section 7.050. All questions concerning the disposition of uncashed checks should be directed to the Office of Unclaimed Funds. Information and phone numbers concerning stale checks can also be found on the Unclaimed Funds link located on the OSC home page:
6. Internal Controls related to processing of cash receipts and disbursements are outlined in OSC's Controls and Special Procedures Manual, Vol. XI. Agencies should read and follow these procedures to safeguard and account for cash activity.
MONTHLY REPORTING OF BALANCES IN STATE ACCOUNTS
Pursuant to §107 of the State Finance Law, the Commissioner of Taxation and Finance is required to publish in the State Register, on or before the last day of each month, a detailed statement of the balance(s) on deposit in any bank under the administrative control of any state officer or board. This includes, but is not limited to: agency revenue collection accounts, cash advance accounts, custodial accounts (e.g. inmate funds, patient accounts, etc.), agency funds, etc.
In order to ensure compliance with this statutory requirement, agencies must obtain and reconcile bank statement balances and provide the reconciled bank account balance(s) to the Commissioner of Taxation and Finance. The preferred method of reporting data and balances is by e-mail (case sensitive) in an Excel worksheet:
Treasury-State Register Reporting@tax.state.ny.us
Monthly Reports of Balances in State Accounts delivered via an overnight delivery service should be addressed to:
Commissioner of Taxation and Finance
NYS Division of the Treasury
110 State Street - 2nd Floor
Albany , N.Y. 12207
Monthly Reports of Balances in State Accounts sent through the US Postal Service should be addressed to:
Commissioner of Taxation and Finance
NYS Division of the Treasury
P.O. Box 22119
Albany , N.Y. 12201-2119
Questions concerning the filing of the Monthly Reports of Balances in State Accounts may be directed to the Division of the Treasury at 518-474-5472.
ANNUAL REPORTING OF BALANCES IN STATE ACCOUNTS
The State's accounting and financial reporting system under the control of OSC provides for the collection, summarization and reporting of unique financial data and information maintained at State agencies. Financial data and related information is required to ensure full and proper disclosure in financial statements prepared in accordance with generally accepted accounting principles (GAAP).
In March each year, a secure website for the Agency Financial Reporting Package (AFRP) is activated on the OSC website for the purpose of gathering financial data which has not been entered into the State's CAS as of the closing date specified in sections of the AFRP. The secure website for reporting agency sole custody account balances will be activated for agencies to use to report reconciled bank account information needed for the State's annual financial statements and allows agencies and public authorities to key necessary information directly on the Internet using information derived from monthly bank reconciliations. The sole custody data is collected in a database which assists in the generation of the State's required financial statements. Additional information about annual reporting of sole custody account balances is provided in Section 4.0600 of this volume.
Monthly bank account reconciliations contribute immeasurably to complete, accurate and timely filing of required sole custody bank account information which typically is due within 30-45 days of fiscal year-end.
Late filing or failure to report sole custody monthly and annual reports is characteristically the result of poor internal controls and will result in increasing the agency risk assessment used by State auditors to assess strength of agency internal controls, closure of the account and a report of material weakness will be sent to the agency Internal Control Officer.