Trap #8 Violating basic accounting rules and practices (Part 5)

One of the more serious traps churches can fall into is poor bank reconciliation practices.  Some of the ways we have seen this played out:

Due to understaffing and time pressures, bank accounts are not reconciled for months at a time.

Bank reconciliations are not complete consisting only of checking for cleared checks and surface level comparison of bank statement balance with the general ledger balance.

The bank reconciliation is prepared by the same person responsible for check writing, general ledger, reporting etc

There is no review of the bank reconciliation by supervisory personnel.

All of these things seem to take place because the church staff and volunteers have a poor understanding of the importance of the bank reconciliation. The bank reconciliation is the “Grand Central Station” of an organization’s financial activity. With the exception of a few, usually immaterial transactions, (such as petty cash disbursements) every transaction will flow though the bank accounts of a church. Performing the bank reconciliation on a timely basis helps insure the viability of a church’s financial reports. Additionally, having an independent reconciliation is one of the most effective fraud prevention measures.

KEY: Make sure your bank reconciliation tasks include:

A comparison of dates and deposit amounts with teller team reports

Investigation and documentation of transfers between bank accounts

Accounting for the sequence numbers of checks written.

Examination of cancelled checks for suspicious signatures, endorsements or other alterations.

Comparison of payees on cancelled checks with the approved vendor list.

Review of voided checks.

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