Guidelines for Ledger Reconciliation

The overall objective of ledger reconciliation is to ensure ledgers are in reportable condition, so that financial statements prepared with the information are complete and accurate, and conclusions drawn and decisions based on the financial data and statements lead to successful outcomes.

Organizational Unit heads (Deans and Vice Chancellors ) are required to annually certify that all financial transactions for their respective organizations (departments, divisions, and units) are properly recorded in the ledger -- i.e., the ledgers are in reportable condition. What is “reportable condition”?

All financial activity is recorded completely, accurately, and in compliance with laws & regulations

• Completely — All financial activity is recorded in the ledger for a given period/fiscal year.
• Accurately — All financial activity in the ledger is appropriate for the FAU where they are recorded.
• Compliance — All financial activity is in compliance with UC, UCI, applicable funding agency or donor requirements, and other outside laws & regulations.

The Ledger Reconciliation process has been identified as a SAS 112 “Key Control” ensuring that UCI’s Financial Reports are accurate and complete.

Ledger Reconciliation Factors

Managers (Department Heads and PIs) are responsible for all financial transactions reported in their ledgers. There is no "one size fits all" approach for ledger reconciliation procedures. Financial Managers need to evaluate their specific situations and set up an appropriate process that manages risks.

Risk factors to consider are nature of financial transactions, transaction subject to workflow, accountability structure and control environment, department budget and financial reporting process, fund sources, vendor relations, financial system processes, and change due to growth and new systems.

Unreconciled ledgers for accounting periods in arrears will affect the timely reconciliation of future periods. Untimely reconciliations may result in delinquent cost transfers, delay the identification of fraudulent activity, increase risk to the University, negatively impact the organization’s (Dean/VC) ability provide annual certifications, and negatively impact the outcome of the fiscal year end audit and other audits.

Ledger Reconciliation Considerations

In the past, the effort of reconciliation generally consisted of "validating" transactions in the ledgers to hard copy source documents and assembling these documents, with the ledgers, in a file folder. In KFS, most hardcopy documents do not exist due to the paperless transaction environment. Many of these financial transactions will have already been validated through the mandatory workflow process. The workflow review and approval process, at a minimum, is examining the KFS transaction for:

• Appropriate FAU distribution (account, fund, activity, and function)
• Completeness
• Accuracy
• Compliance with policies, regulations, and other requirements
• Overall appropriateness (e.g., associated with a budget and appropriate for the departmental operations and University funds)

It is recommended that units conduct additional and timely validation on their ledgers on the below list of. KFS Documents and Feeder Systems:

KFS Documents

• Budget Adjustment (BA)
• Budget Appropriation Transaction (BAT)
• General Error Correction (GEC)
• Intercampus Transfer Expenses (ICT)
• Internal Billing (IB)
• Service Billing (SB)
• Travel Reimbursement (TR)
• Entertainment Reimbursement (ENT)
• Disbursement Voucher (DV)
• Auxiliary Voucher (AV)
• Purchase Order (PO)
• Payment Request (PRQ)
• Procurement Card (PCDO)
• Accounts Receivable Credit Memo (ARCM)

KFS Feeder Systems

• Payroll (PPS)
• Student Billing (SBS, aka Financial Aid)
• Cashiering and Campus Online Deposit (OP)
• Facilities (FA & FM)
• Library, Unex, UPS, and SBS feed to Pre Disbursement Process (PDP)

Validation coverage and procedures are based upon management's tolerance to risk. Managers must exercise professional judgment in determining the validation type or other procedures necessary to achieve adequate ledger reconciliation. For transactions that are not validated, the Reconciler should conduct a reasonableness analysis such as comparing financial summaries to budget or to expected outcomes.

In addition to ensuring that the ledgers accurately represent the financial status of your unit, a timely reconciliation allows the discovery of errors and mistakes in time to make subsequent month corrections or adjustments.

Ledger Reconciliation Roles and Responsibilities

Reconciler

The individual reconciling the ledger and who should be analyzing and reviewing the completeness and accuracy of recorded financial activity. The Reconciler is also ensuring that all financial transactions can be supported with source information. The Reconciler at a minimum is examining recorded financial activity for:

• Accuracy of appropriate FAU distribution
• Completeness of financial activity for the accounting period
• Compliance of financial activity for the funding sources
• Appropriateness of financial activity for the department operations
• Unusual activity, errors, and omissions

Financial Manager

The individual reviewing the ledger reconciliation results and is ensuring that the reconciliation has been appropriately accomplished within the above guidelines. At a minimum, the Financial Manager is acknowledging that the ledger transactions are complete, accurate, and compliant with applicable policies. Other ledger reconciliation elements the Financial Manager should consider are:

• The Reconciler and Financial Manager is not the same person. The individual reconciling the ledgers should be someone other than the person with authority to approve the expenditures on the same ledger. This ensures that duties are properly separated and ensures that no one person has complete control over a financial transaction.
• The reconciliation effort and review must be evidenced with a signature and date that may be electronic.
• The manager should also ensure that the ledgers have been reconciled and reviewed by the 15th of the subsequent month or by the applicable year-end closing schedule. (Example: April ledgers should be reconciled and reviewed by June 15th). Timely reconciliation allows the discovery of errors and mistakes in time to make subsequent month corrections or adjustments.

Ledger Reconciliation Efficiencies and Effectiveness

When hard copy documentation or other ledger validation becomes necessary, for example when an audit is scheduled, KFS will have the necessary tools that provide transactional source information/documentation. (Note: Most audits require only a sample of source documentation material, and this can be generated on request.) Printing, "screen shots" to obtain this hardcopy instrument will no longer be necessary. Note: some source documents will continue to reside in the department (e.g., PALCard receipts).

Productivity gains can be significant without the undue burden of validating all transactions in the month-end ledgers that are consistent and in line with operating expectations and that have already gone through the mandatory KFS workflow review and approval process.

The Ledger Reconciliation Report

The Ledger Reconciliation Report is designed to help campus fiscal officers review and reconcile their accounts each month.We recommend trying this report as an alternative to your monthly reconciliation procedure. The report provides a breakdown of all the transactions affecting the account for a given accounting period.

The report lists the selected month’s transactions and previous month’s balance according to whether they are income or expense and grouped by consolidation (SUPL, GENX, BENF, etc.). Columns provide more information including document number and type, the description, and amounts for budget, actuals, and balance.

In some cases, this information is clickable, allowing you to, for example, jump right to the relevant KFS e-document. At the bottom of each consolidation is the totals for the period and for the fiscal year so far.

Location: This report is located in the Decision Support portlet under “General Ledger - Campus Reports.”