Additional thoughts on bank reconciliations

Local churches normally have extremely tight staffing. This is not news to anyone.

Small churches and small parachurch ministries usually can get the bank reconciliations completed, do so accurately, and usually finish on a timely basis. I won’t go into detail on how to prepare a bank rec because I think everyone has that nailed.

Let’s take a moment to discuss the best practice for bank reconciliations. Then we’ll look at the reality and what could be done to improve controls.

Obviously reconciling the bank accounts is a very import task. Ideally the reconciliation would be prepared by someone other than the bookkeeper and the people signing checks. This is because if something weird surfaced, the person seeing that weirdness would be able to ask the appropriate questions of the appropriate person.

Ideally, someone would review the reconciliation. Best way would be for that someone to be different from the persons doing the bookkeeping, signing checks, and preparing the reconciliation. Often though, this will be the business manager or controller.

So ideally there would be four people involved: bookkeeper, business manager (who signs checks), person preparing the bank reconciliation, and someone to double-check the reconciliation.

Now for the reality.

In a local church there will not be four separate people around who have the financial skills to do those tasks. It’s not going to happen. The reality is the bookkeeper will do the reconciliations and they will rarely be double checked by anyone.

Can anything be done to bring some better internal controls into the equation?

How about having someone outside the routine accounting process look at the bank statements before the finance team sees them? Someone who has a reasonable knowledge of what is happening in the church can quickly look at the canceled checks and bank statement to see that things are functioning reasonably normally. This is not a detailed review. This is not a full reconciliation of the bank account. This is just a light once-over to make sure things make sense.

This could be done by the board treasurer, an elder, or any astute business person who knows what is happening in the church and take a few minutes to browse through the bank statement.

Another thing the church could do is have someone with financial knowledge merely look at the bank reconciliation when it is done. What does this accomplish? For starters, it verifies that something was actually done. Second, a very brief scan would reveal whether it was just slapped together.  You know, that fabled “plug” or “WITTB” as a reconciling item means it was not actually reconciled. (WITTB means ‘what it takes to balance’!).

Even if the person scanning the reconciliation is a check signer, it would add some strength to the controls over cash.

Those are the two ideas that go into the cartoon. Maybe you can give them a try.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: