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August 2015

This is the time of year where we all are confronted with important tasks like bank reconciliations that have to be done before the audit begins.  I hear this from many government financial officers:

If you are behind on your bank reconciliations by more than three months, it is time to have a plan in place.

Given the importance of bank reconciliations, many new government officials often wonder why they are not completed on time and think it is a problem of “prioritization”.  Most treasurers know the real reason.

County bank reconciliations are not easy to do.  Some of the most notorious problems include:

-          Justice of the Peace systems and deciphering credit card batches

-          Batched deposits in the accounting system that are difficult to break down

-          Breaking out payroll batches

This is not a problem that is cured with time.  The process needs to be changed.

I have three steps in my process when I am called in to provide help in these situations:

1)      I help the client catch up on their reconciliations.  This is not the time to train. 

2)      We identify issues during the reconciliations.

3)      After reconciliations are up to date, we make recommendations and if needed offer training.

This requires someone with actual experience reconciling county government bank reconciliations.  My company has developed and uses software to handle the unique and complex reconciliations confronted by county treasurers in Texas.   Call me at 972-771-1065 or e-mail nconway@conwaycpas.com.  

Frequently Asked Questions:

Are governmental bank reconciliations more difficult than business or personal bank reconciliations?

Governmental bank reconciliations are more difficult than the typical business or personal bank reconciliations in my experience.  In fact, they are in a different class by themselves.

Why are governmental bank reconciliations more difficult?

Governmental and especially county bank reconciliations require an amount of detail not present in other types of reconciliations.  For instance, in county bank reconciliations, Justice of the Peace reports typically are needed to break down the information on the bank statement and on the accounting system.  This can make a bank reconciliation turn into a jigsaw puzzle.

We have a limited budget.  What is your recommendation for us to complete our bank reconciliations?

Nearly all governments such as counties express this concern.  I would offer the same advice to someone searching for a doctor.  Are you really looking for cheap?  Not knowing what your cash balance is until the auditor shows up is a catastrophic problem.  If you are behind or need a process that doesn't take two weeks per reconciliation, it is worth an investment in getting a professional to help refine your process.

If you are stuck doing this on your own, my advice would be to look at using a software based solution without hiring someone to help train.  We use our own software called ClearRec.  www.clearrec.com.  I took a poll in June 2015 and my customers of clearrec universally mentioned that it cuts the time required for reconciliations in half (and in many cases more than that).

For county governments, what do you do to help with Justice of the Peace systems that are so difficult to reconcile?

We use our software which allows us to break down Justice of the Peace information into smaller, more manageable transactions that can match data on the bank statement.  For instance, you might see an amount in your accounting system for $52,133 as a deposit for Justice of the Peace.  We use the reports printed and electronically change that $52,133 into 100 smaller amounts like 8/5/2015 John Doe $53.22 DL#5551386 and 8/5/2015 Jane Doe $300 DL#4321672 so that they can be matched with bank data.

Why is using software quicker than doing it manually?

By the time you become an expert at reconciliations, you realize the limitations of using a paper based system or even Microsoft Excel.  A bank reconciliation is a linear process that benefits from features like automatic matching of transactions, "stay-in-balance" controls, and a set of reports showing audit friendly reports like an audit trail.  It is almost always quicker and more accurate to use a dedicated bank reconciliation software tool.

I used my built in bank reconciliation tool.  Why is that not working well?

A built-in bank reconciliation module typically is not a priority for creators of accounting systems.  A properly created bank reconciliation program has important features such as automatically matching transactions and especially splitting transactions into smaller pieces.  So, on your built-in bank reconciliation tool, you have probably come across a huge deposit like in my previous example and are unable to match it to anything on the bank statement... because it is oversummarized.  It needs to be broken out into smaller pieces.  You need specialized software for this.

I could use some help in providing information to my commissioners.  Is there anything you could give them?

I would give them this frequently asked questions section.  Many commissioners I know have valuable experience as businessmen or women.  There is usually an adjustment needed to some aspects of government such as the bank reconciliations if they have not personally completed a governmental bank reconciliation.