Finding Text
Bank Reconciliations, Interfund Balances Reconciliations and Balance Sheet Account Reconciliations
Year ended June 30, 2024
Condition and Criteria: During the current year, although bank reconciliations were prepared on a regular basis, they were not reconciled to the District’s general ledger. In addition, the District carries interfund receivable and payable balances, however, amounts did not reconcile throughout the year. Differences that existed in cash and interfund balances had to be corrected after year-end. Lastly, we noted that the District does not perform reconciliations of assets and liability accounts during the year on regular or routine basis, including receivables, payables and withholding accounts.
Cause and Effect: The effect of not reconciling bank balances against the District’s general ledger balance and reconciling interfund balances is that reporting errors in posting cash receipts and cash disbursements can occur and not be detected or resolved in a timely manner. Without regular and routine reconciliation of asset and liability accounts balances (including cash and due to/due from accounts), a significant misstatement in the general ledger of the District would go undetected for extended periods of time. This could result in inaccurate or incomplete information which is ultimately utilized by management and the Board of Education in its decision making process throughout the year, including the establishments of annual budgets. Within the current audit, the lack of reconciliations resulted in significant audit adjustments.
Auditors’ Recommendation: We recommend that the District prepare bank reconciliations soon after the end of each month. As part of the reconciliation process the District’s general ledger cash balances should be compared against the bank reconciliation, with any differences being immediately investigated. Once complete, the bank reconciliation should be reviewed by someone independent of the preparer. In addition, a worksheet should be developed which reconciles interfund balances on a monthly basis. Any differences in the reconciliation process should be immediately investigated. We recommend that asset and liability accounts be reconciled on a regular and routine basis. Further, reconciliations should be reviewed by management to ensure their accurate and timely completion.
District’s Response: The District will ensure that bank reconciliations are prepared in a timely manner and verify that balances within the general ledger cash accounts agree to the bank reconciliation, along with ensuring that interfund balances reconcile and that balance sheet asset and liabilities are reconciled to supporting documentation.