Cash Reconciliations  and Cash Handling
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Cash Reconciliations and Cash Handling

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Cash Reconciliations and Cash Handling

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Cash Reconciliations and Cash Handling

WASBO Accounting Conference

March, 2016


Handling Cash

Cash may be the most vulnerable asset in your LEA. How do you safeguard your cash?

Timely reconciliation of your bank account provides a control mechanism to help protect your cash

For a control process to work effectively, segregation of duties is fundamental to reducing the risk of errors or intentional fraud



Handling Cash


possible, an organization must ensure that no one person has control over all aspects of any financial

transactionSegregation between who initiates, authorizes and approves purchasesSegregation between who receives cash, deposits and posts activity to the general ledgerSegregation between who prepares payment

request and who

approves payment



Handling Cash

No one employee should have access to both the cash and the related accounting records or to all phases of a transaction

When resources may not be available to increase staff size, the Board of Education and management should provide oversight and monitor the District’s operations.

Board approves monthly cash disbursementsBoard member or management reviews monthly

bank reconciliations



Segregation of Duties

Is the employee responsible for initiating


PO also responsible for reviewing and authorizing the PO?Compensating control may be a report listing all PO’s issued is generated and reviewed by an employee not involved in initiating PO’s


Segregation of Duties

Does the same employee who initiates or approves a PO also have authority to modify the vendor master

file, record goods as received or record invoices?

Individual who does the purchasing should not be involved in documenting what was received and invoiced or have the authority to modify the vendor master file


Segregation of Duties

Are the employees involved in receiving the goods also able to authorize the purchase; modify vendor master file; record invoices and returns?

Employees responsible for the receipt of goods should not be involved in the purchasing or cash disbursement process. A compensating control may be for an employee independent of the purchasing process check the bills of lading to the receiving reports


Segregation of Duties


the employee who matches the PO to the receiving document and invoice also involved in the purchasing or receiving process, vendor master file or

recording of purchases, payables or returns?Employees involved in recording the invoice in the cash disbursement system could perform the match of PO, receiving document and invoice


Segregation of Duties

Does the employee responsible for the Vendor Master File also record invoices, approve invoices, print checks, sign checks, execute wire transfers and authorize wire transfers

Compensating control may be to have someone independent of the disbursement process review a list of the Vendor Master File and any changes.


Segregation of Duties

Do employees responsible for approving invoices and payments also have the ability to record payables?

Compensating controls may be:

Review of cash disbursements by Board of EducationDual signatures


Segregation of Duties

Do employees responsible for recording vendor invoices also have ability to print or sign checks, execute electronic payments or wire transfers, distribute vendor checks

Sometimes the function of recording vendor invoices and disbursement of the funds cannot be separated. Steps should be taken to ensure that the person authorizing payments is not involved in cash disbursement


Segregation of Duties

Do employees that approve/sign or have access to checks or electronic payments also prepare, review or approve the bank reconciliation

Employees responsible for checks or electronic payments should not be able to do the reconciliation between the payments and the bank statement


Segregation of Duties

Can one person initiate and approve (release) a wire transfer?

Does the person approving

(releasing) wire transfers also prepare bank reconciliations, review and approve bank reconciliations, record invoices, modify vendor master file, review and authorize journal entries in the general ledger?

Should be segregated between two employees

The employee that is approving and releasing payment to a vendor should not have responsibility for modifying the vendor master file, recording invoices and journal entries or be involved in the bank reconciliation process


Handling Cash

Bank reconciliations should be prepared by someone who is not involved in the cash receipts or disbursement function if at all possible.

Bank reconciliations should be approved by supervisory level personnel who are not involved in the daily cash activities.



Cash Reconciliation

Why is reconciling bank statements essential?

Accounting records are complete and accurate

Ensure all cash transactions during the period have been captured in the accounting recordsAccounting records reflect actual activities that occurred during the periodCan detect bank errorsSafeguards assets



Cash Reconciliation

What are the risks of not reconciling cash?


Inaccurate financial reports to the BoardDecisions made on inaccurate informationAudit findingNo reconciling cashDPI monitoringUndetected




Cash Reconciliation

What are the risks of waiting for auditor to reconcile cash at year end?


Inaccurate financial reports to the BoardDecisions made on inaccurate informationAudit findingsNot reconciling cashMultiple adjustments at year endDPI

or Federal monitoring

Undetected fraud



Cash Reconciliation

Mismanagement of Federal funds

Tracking of Federal funds

Timely filing Federal grant claims (cash flow)Early detection of failing MOEBudget revisionsLoss of funds




Reconciling the bank statement


Basic process


Common Differences between the bank and general ledger

Checks issued but haven’t cleared the bank

Deposits in transit (posted to the g/l but not by the bank)

Wire transfers into the bank but not posted to the general ledgerWire transfers out not posted to the general ledger, for :Direct deposit of employee payrollPayments for payroll tax withholdingsSelf funded health plan benefit payments

Retiree stipends

Bank Charges

Investment earningsErrors in postings to general ledger


Items needed to prepare bank rec

Listing of outstanding checks

Identify the sequences of checks written during the month and compare against the bank statements identifying those that have not yet cleared

Compare the prior month listing of outstanding checks to the bank statement to determine if any are still outstanding; if so, include with current listing of o/sIdentify any deposits posted to the general ledger that have not yet cleared the bankDPI Aids Register---to identify all grant payments from DPI during the month not yet posted to the G/L









Aids Register snipit



Pooled Cash

A single cash bank account used for several different funds

Bank Rec process remains unchanged

Balance per bank after adjustments must agree to the combined balances of cash in the various fundsFund 10 + Fund 27 + Fund 99 is commonly pooledDebt service funds should have their own distinct bank accountsConstruction Fund 49-separate bank account is highly RECOMMENDED



Kathy Guralski, CPA

Assistant Director, School Management Services

608/264-9331Kathryn.guralski@dpi.wi.govGene Fornecker, CPASchool Finance Auditor, School Financial Services