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What's a Proper Reconciliation?
Wednesday, November 9, 2016 6:25 AM

Cheryl Ehmann, AVP Staff Analyst, Credit Union Resources

What is a proper reconciliation? Well, that depends on the account! Here’s the rundown in alphabetical order. Keep this list handy!

Accounts Receivable
Accounts receivable reconciliations should list all outstanding items with the date of occurrence. Do not use a beginning balance and list the activity for the month. If all outstanding items are listed, you can easily see if something is not clearing timely.

Accrued Expenses
A subsidiary ledger should be maintained for accrued expenses detailing activity in each account, and should be agreed to the general ledger monthly.

Allowance for Loan Losses
A subsidiary ledger should be maintained for Allowance for Loan Losses, detailing all activity in that account. The subsidiary ledger should be agreed to the general ledger monthly.

ATM Cash
ATM Cash should be reconciled daily, or at least when replenished. The totals on the tape pulled from the machine should be agreed to the general ledger balance. Often transactions occurring between the processing cutoff for the ATM and the processing cutoff for the credit union’s core processor are a reconciling item.

Bank Accounts
The reconciliations for bank accounts should list all outstanding items with the date of occurrence to ensure items are clearing timely. As a general rule, items other than outstanding checks should clear by the next month. Deposits in transit should be listed individually with the date they were posted to the general ledger. Outstanding checks should be listed individually with the date they were written. There should not be any unidentified differences. The reconciliations should be signed and dated by the preparer and by the reviewer. This will help ensure they are being prepared timely.

Cash Accounts
Other cash accounts should list all outstanding items. Teller cash should be supported by a list of ending cash in each teller drawer. This is often created by the EDP system but not necessarily agreed to the general ledger balance.

Fixed Assets
A subsidiary ledger for fixed assets detailing all items on hand should also be maintained and agreed to the general ledger monthly.

Investment Reports
Investment reports provided to the board of directors should be agreed to the general ledger control accounts monthly.

Loans and Shares
Loans and shares should be balanced daily. Some EDP systems do this automatically and generate a report. Often you need to do this manually. Agree the total of the member trial balance to the general ledger accounts.

NCUSIF Deposit
The NCUSIF deposit can be supported by the share insurance statement. If necessary, this can be printed from the NCUA website.

Other Assets
Reconciliations for Other Assets should list all outstanding items with the date they occurred.

Other Liability Accounts
Reconciliations for other liability accounts, such as suspense accounts, should list all outstanding items with the date of occurrence.

Payable Accounts
Reconciliations for payable accounts should list all outstanding items with the date they occurred. A total for safe deposit box key deposits should be agreed to a list of outstanding boxes.

Prepaid and Deferred Expenses
A subsidiary ledger should be maintained for prepaid and deferred expenses that details the cost and amortization of each item. The subsidiary ledger total should be agreed to the general ledger total monthly.

Repossessed Collateral
Repossessed collateral should have its own reconciliation, even if it's included on the member trial balance to the general ledger. The reconciliation should list the outstanding balance for each member, along with the date of repossession and the date of the sale of collateral, if any. This will help ensure that losses are being recognized in a timely manner.

Reserve and Undivided Earnings
Activity should be scheduled for reserve and undivided earnings accounts. Net income closings should be agreed to the Income and Expense Statement. Reserve transfers should be reviewed for accuracy. Prior period adjustments should also be reviewed for accuracy.

If you maintain all this information on a monthly basis, you will have few pending issues, and your Supervisory Committee Annual Review with be as smooth as glass.