Guidelines for Performing Account Reconciliations

The purpose of these guidelines is to provide assistance to university staff who are
responsible for reconciling financial account balances. All grants and programs should
be reconciled on a monthly basis. Certain asset, liability, revenue and expense accounts
for programs, projects, gift or grant activities are targeted for regular, periodic
reconciliations by the Controllers Office, Audit Services and others. The reconciliation
process enhances the universitys internal controls by providing management, auditors
and other users with the ability to substantiate a balance, detect errors and analyze the
integrity of reported financial data.
What does it mean to reconcile an account?
A reconciliation entails the comparison of a general ledger balance as of a certain date to
a credible, independent or related source of information. The reconciliation agrees the
general ledger balance to the independent source through a process of listing and
explaining any differences such as those due to timing, accounting practices, unposted
items or errors. For example, an expense reconciliation must agree the expense balance
according to the general ledger with the balance according to the detail maintained by
the unit. Suggested methods of detail would be an excel sheet listing all POs, and Direct
Disbursements by account, or a binder in which a copy of the PO/Direct Disbursement
request is kept by account. Any differences between the two balances will be included in
an itemized listing that is properly documented and explained as a reconciling item.
Reconciling items may include purchase orders for which the Controllers Office has not
received an invoice, differences between the final invoice and the originally expected
amount, or keying errors. Each of these items or summaries of items must be listed on
the reconciliation document and explain the disposition of each type of difference. Ex.
Outstanding POs that will be invoiced in the following month, will be a reconciling item
between the detail (list of POs) and the general ledger. If these POs are paid in the next
month, that reconciling item will not appear on the next months reconciliation. Any
uncleared items will appear on subsequent monthly reconciliations until properly
handled. For timing differences, the reconciling item will clear with the passage of time.
If the difference is due to a keying error, an IUT or other adjusting entry should be
submitted to the Controllers Office.
There are four primary pieces to a complete reconciliation:
1.
2.
3.
4.

Doing the reconciliation correctly and completely

Doing the reconciliation in a timely manner
Documenting the reconciliation
Having a supervisor sign off, or approve, the reconciliation

Examples of Accounts Reconciled at the University of Louisville

Below are just a few examples of methods used to reconcile different types of general

ledger accounts. It is meant to illustrate that reconciliation techniques differ according to

the nature of the account and balance under review.
Assets:

Cash - Cash balances according to the PeopleSoft General Ledger are reconciled to
their respective bank statements on a monthly basis. These accounts are generally
reconciled by the Controllers Office, not the individual units. However, some units
may reconcile their cash to detail maintained by the unit.

Receivables Receivable balances according to the PeopleSoft General Ledger are

reconciled to outstanding, unpaid invoices or supporting receivable databases listing
unpaid invoices by patient, student, contractor or donor.

Inventory Inventory balances according to the PeopleSoft General Ledger are

reconciled to the supporting inventory system databases. Annually, the supporting
database records are reconciled to a physical count of inventory items held for resale.
If processes are functioning accurately, the value and number of items actually
counted will agree with the database listing those items. That database total will also
equal the PeopleSoft General Ledger balance.

Liabilities:

Accounts Payable As invoices are vouchered, the expense is charged to the program
(debit) and the Accounts Payable established (credit). The Accounts Payable is
cleared (debit) when the check is cut and the cash spent (credit). This means that any
amount in Accounts Payable should be cleared, usually within 60 days or sooner. If
amounts remain outstanding, contact the Controllers Office.

Payroll Taxes and Benefits Payable Each balance, according to the Peoplesoft
General Ledger, is reconciled to the unpaid taxes or benefits due according to the
PeopleSoft Payroll registers. These liability accounts should reconcile to the sum of
any outstanding balances for taxes or benefits collected or the sum of all unremitted
payroll deductions from employees and employer contributions for benefits as
processed through the payroll system. These are generally reconciled by the Human
Resources Department, not the individual units.

Deferred Revenues Deferred revenue balances usually represent income or

payments received that will not be earned until a later date. A reconciliation of the
balance should provide evidence that the balance is substantiated with appropriate
documentation. (i.e. Season tickets sold in advance of the scheduled games or
performances would be deferred income until the game or performance has occurred.
At each reconciliation period, the deferred revenue balance should equal the total
ticket sales revenue less any income earned by those revenues earned for
performances or events that have occurred by that date.)

Revenues:

Tuition Tuition revenues reflected by the universitys general ledger should

reconcile to the underlying student tuition records maintained by the Bursars Office.
Also, the balance should reflect a logical calculation of the number of students
enrolled for a particular semester multiplied by the tuition hours registered
multiplied by the appropriate tuition rate. (This is a simplified calculation. Other
factors may affect the total tuition revenue balances for a given period.) This
illustration points out that a true reconciliation may require more than one type of
analysis to prove the accuracy of the stated balance.

Other Revenue A record should be maintained of any deposits sent to the Bursars
office for transmittal. This record should be compared to the GL, to verify all deposits
are posted correctly.

Expenses:

Rents Rent expense should agree to the number of months or number of payments
due for the periods in the current year. This may be reconciled to the rental
agreement. If rates change during fiscal years or the rental period does not coincide
with the end of a month or fiscal year, the reconciliation may show a reconciling
difference for those timing differences and an explanation of any rate changes. (i.e.
Rental expense for a 12 calendar year is $500 per month for year 1 and $600 per
month for year 2. To reconcile a rent expense account for fiscal year 2, the total rent
expense should be $6,600 representing 6 months @ $500 plus 6 months @ $600.)
Supplies and other expenses These expenses can generally be reconciled against
the expected expenses for the program and account. The unit should track all
purchase orders or direct disbursement requests, as well as internal orders, so that
any charges on the program can be verified.
Payroll All payroll reconciliations should start with the payroll system, then it
should be followed to the general ledger. The first step is to verify that all employees
were paid the correct the amount according to departmental records. Then the general
ledger should be reviewed to verify that all payroll charges hit the correct program or
grant. Please note that any journal entries or grant sweep entries will not appear in the
payroll system.

Fringe Benefits The main concern with fringe benefits is that they are hitting the
correct speedtype and that sweeps are occurring on the grants.

F&A All F&A expense should be reviewed to determine that F&A is being
calculated on the correct transactions for the correct percentage.

How should a reconciliation be presented and documented?

Account reconciliations do not require a special form or format, but they should present
information clearly and in a consistent manner each time the reconciliation is performed.

The individual responsible for reviewing and approving the reconciliation should
approve the format used. Reconciliations may range from a simple presentation of one
or more balances compared to an independent source balance to lengthy and complex
spreadsheets supported by several sources and calculations spanning several months or
years. One reconciliation format may provide reconciliations of several accounts
simultaneously. For example, a reconciliation of deferred income may also provide a
reconciliation of the associated revenue account.
Reconciliations should be prepared or summarized on an electronic spreadsheet and
include the following minimum information:
1. General Ledger Balance Information The speedtype, name, accounts and
balances to be reconciled and the accounting date of reconciliation or period
covered by the reconciliation.
2. Name of preparer and date prepared.
3. Name of supervisor and approval signature.
4. Listing or summary listing of reconciling items noting dates, references, and a
description of how and when the item will be cleared or who is assigned to
investigate and clear the item. (i.e. Corrected by John Doe on JV 1010, June 15,
2003.)
5. Identification of the balance and source of information that reconciles to the
general ledger balance. (i.e. Balance per List of POs and Disbursements.)
6. Documentation or references to support significant reconciling items and the
source document that shows the balance reconciled to. (i.e. List of POs and
Disbursements.)
7. Previous period reconciliations should be available in order to compare the
previous periods ending balances and reconciling items with the current periods
reconciliation balances and items.

Reports available to assist in reconciliations:

CONT-3A and CONT-3B Monthly Budget Summaries
Input: Program or Project/Grant ID
Period
Fiscal Year (fiscal year 2003 is the earliest available)
This is a summary report to analyze your remaining budget and reconcile your accounts for a
specific month. There are links to detailed reports if necessary.
Main Reports
Expense Budget and Revenue Budget (Budget Ledger)
The first page summarizes the Expense and Revenue Budgets, with totals by budget pool for
Total Budget, Pre-Encumbrances, Encumbrances, Expended and Remaining Budget. It also has
the total expended for the month.

The grant report is slightly different, giving Total Expended for Project to Date (PTD), with the
expended by period and expended fiscal year to date in separate columns. The year to date
expenses are included in the PTD column. The Approved Budget less any Pre-Encumbrances,
Encumbrances, and Project to Date Expended equals the remaining budget of the Project.
GRANT NOTICE For grants that started prior to July 1, 2000, the approved budget may not
include any budget that was approved before July 1, 2000.
COSTSHARE NOTICE Costshare grant numbers were changed as of July 1, 2004. Project to
date information does not include a complete record of costshare history.
Budget Expenditure Report (Budget Ledger)
This lists total expended and revenue for the period and year to date by account. The totals should
tie to the front page Expense Budget.
Ledger Report (Actuals Ledger)
This lists all the accounts in the program and their activity as of the period and the year to date
balance. This is the main section of the report to be used during the reconciliation process. If the
activity and balances in the account match to your supporting detail, then no additional
reconciliation is necessary. If there is a balance that you are unsure of, the detailed reports will be
helpful in researching the unknown balance.
QUICK CHECK For any closed period, the total of the Ledger Report should be zero. If it
isnt you should contact the Controllers Office

Linked Reports
Budget Journal Report (Budget Ledger)
This report details all the budget entries made to the program/project/grant during the period
requested.
Pre-encumbrance Detail (Budget Ledger)
This report details all Pre-Encumbrances for the period requested, including Requisition number,
Vendor name, GL Account that will be charged, and related Budget Pool. The total should tie to
the Expense Report.
Encumbrance Detail (Budget Ledger)
This report details all Encumbrances for the period requested, including Requisition number,
Vendor name, GL Account that will be charged, and related Budget Pool. The total should tie to
the Expense Report.
Budget Transaction Detail (Budget Ledger)
This report details any entry made to the budget ledger that would affect Pre-Encumbrance,
Encumbrance, or Expended amounts. The report is grouped by fund, then by account. It includes

the document type (JV, REQ, PO, EX), Vendor, and Budget Pool.
Transaction Detail (Actuals Ledger)
This report details all transactions made to the Actuals ledger. The report is grouped by fund, then
by account type, then by account. The account type order is Assets, Liabilities, Net Assets,
Revenues, Expenses. It includes the Journal Source, Journal ID, Date, Description, Amount, etc.
The report can be used to research which entries caused a balance in the account.
Payroll Detail (Human Resources)
This reports details the payroll expense by pay end date. It is grouped by pay end date, then by
account. It includes the emplid, paycheck number, position number, and earnings code.
CONT-13A and CONT-13B Transaction Detail
Input: Program or Project/Grant ID
Period
Fiscal Year (fiscal year 2003 is the earliest available)
These reports detail all transactions to the Actuals ledger, year to date, by program and period.
The report is grouped by fund, then account type, then account. The account type order is Assets,
Liabilities, Net Assets, Revenues, Expenses. It includes the Journal Source, Journal ID, Date,
Description, Amount, etc. The report can be used to research which entries caused a balance in
the account. It also includes the fiscal year beginning balance and the ending balance through the
period requested. The current activity is a year to date activity from July through the period
requested.
CONT-15A and CONT-15B Account Summary
Input: Program or Project/Grant ID
Period
Fiscal Year (fiscal year 2003 is the earliest available)
These reports summarize the balances by account. It is grouped by fund, then account type, and
then account. The account type order is Assets, Liabilities, Net Assets, Revenues, Expenses.
The program report shows both the fiscal year requested and the previous fiscal year. The first
column, Beginning Balance, shows the balance at the beginning of the year. The second
column, Total Amt Period , shows the total activity for the period requested. The third column,
Total Amt YTD, shows the ending balance as of the period requested. These columns are
repeated for the previous fiscal year. Please note that the second column shows the period activity
only, therefore it is not possible to add the first and second column to get the third column.
The project/grant report is slightly different. It does not show the previous fiscal year and has four
columns. The first three columns are the same as the program report Beginning Balance,
Activity for the period requested, and Ending Balance through the period requested. The fourth
column provides a Project to Date total.
GRANT NOTICE For grants with activity prior to July 1, 2002, the project to date revenue
may not be correct. The revenue was not transferred from the legacy system (FRS). The project to
date expenses should be correct.

COSTSHARE NOTICE Costshare grant numbers were changed as of July 1, 2004. Project to
date information will not include a complete history of costshare activity.
These reports can be used to get a snapshot picture of the balances in a program/project.

One example of a reconciliation is below:

University of Louisville Athletic Association, Inc.

TV PAYMENT CALCULATION PER CONTRACT
2004/05
PAYMENTS
PER CONTRACT
Terms of Contract
18-19 games
20-21 games
22+ games

Live Football 2004

Live Basketball 04/05
TOTAL LIVE BROADCASTS

$600,000
$635,000
$675,000

4
15
19

Received

Jul-04
Aug-04
Sep-04
Oct-04
Nov-04
Dec-04
Jan-05
Feb-05
Mar-05
Apr-05
May-05
Jun-05

$
$
$
$
$
$
$
$
$
$
$
$

50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000

$
$
$
$
$
$
$
$
$
$
$
$

50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000
50,000

Total Due

600,000

$ 600,000

600,000

$ 600,000

Date
11/3/2004
11/3/2004
12/16/2004
1/12/2005
1/12/2005
1/12/2005
1/25/2005
3/7/2005
3/21/2005
5/3/2005
5/17/2005
6/29/2005

Deposit
A0016-424470
A0016-424470
A0016-424470
A0016-424470
A0016-424470
A0016-424470
A0016-424470
A0016-424470
A0016-424470
A0016-424470
A0016-424470
A0016-424470

DUE(over)
$
-

It includes a description of the amount being reconciled (TV Payments); the source of
third party (Payments per Contract); the date the amounts were posted on the GL (Date);
and the program and account involved. At any point during the year, the UBM would
know what is outstanding and still expected to be posted to the GL.
The reports used for this reconciliation include the transaction detail report, which would
allow the UBM to verify the entries in the GL. All entries should be verified against the
GL to be sure that they were posted in the correct program and account, and also that they
are for the correct amount.

For simple accounts, it may be enough to print the transaction detail, either for the month
using CONT-03, or for year to date, using CONT-13, and checking off the amounts that
are correct. It would also be good to attach to the monthly detail the copies of the IUTs,
Disbursement Requests, or other detail to support the amounts.

Retention
Reconciliations should be maintained according the Universitys record retention policy.
The complete policy can be found at:
http://library.louisville.edu/uarc/recmgmt/scheds.htm
The majority of the reconciliations should be kept for 3 years. All grant documentation,
including reconciliations, should be maintained for 5 years after the close of the grant.

Some other helpful hints about reconciliations:

1. To Reconcile Monthly Salaries: At the beginning of each fiscal year, set up a

spreadsheet listing each speedtype that pays any salary, with the name of the
person and the amount expected to be charged to that speedtype for each
month.(see example below). When Monthly Pay is posted by HR, run the query
in PS8, Human Resources, UBM Pay History by Department, and sort by
speedtype # so that this report is in the same order as the spreadsheet, and
reconcile the monthly amounts posted against my records.
The spreadsheet can also be used when reconciling each individual speedtype, and
for tracking totals for the Effort Reports. The spreadsheets can contain reminder
notes on this sheet for future terminations, flatfiles, etc. One problem with the
UBM Pay History by department is that if you are funding an employee from
another department, they will not show on this report, so you will need to run
individual speedtype reports from RDS, PAY-133 is a good report to use for this
instance.
2. To Keep Track of Activity on Each Speedtype: Set up a tickler file near your
desk to maintain all backup copies. (ie: IT requests, Physical Plant requests,
invoices, POs, Disbursements, Travel Vouchers, Flatfiles, etc.), anything to be
expensed or revenue received for a specific speedtype, so that when you are ready
to reconcile, the information from these individual files is readily available for
each speedtype.

3. Reconciliation Records: Keep a simple excel spreadsheet for all speedtypes, (see
example below). This spreadsheet keeps a running balance and expenses total.
On grants, the expense total is project to date, on programs, it is current year. The
salary spreadsheet can be used to reconcile salaries. The salary expense is totaled
and do a % calculation on the fringes to compare each month. This will let you
know if fringes are reasonable compared to previous months. Each month print
off the reconciliation report starting from the balances of previous month to the
balances of current month, attach it to the copy of the PI-03 or PI-04 report, sign,
date and file, along with all the backup for that month. The reconciliation should
also be given to the supervisor and his/her signature obtained before filing.