Importance Of The Bank Reconciliation

Do you know that the bank reconciliation is one of the most important functions performed by the treasurer?

Cash at bank is usually the largest asset of the association and also the most fluid.

The practice of regular monthly bank reconciliations is one process to ensure accuracy in recorded transactions and therefore the correctness of the bank account.

Fundamentally a bank reconciliation is the practice of comparing the association’s records against the bank records. A monthly reconciliation also helps identify any unusual transactions that might be caused by fraud or accounting errors.

It also highlights deposits and unpresented cheques that are old and still remain in the bank reconciliation, and must be investigated regularly to prevent fraud and to pick up any errors. Outstanding cheques older than 15 months become “stale” and cannot be presented, so will need to be adjusted for.

As per the Accounting Manual for Parents and Citizens’ Associations, there are a number of requirements around the bank accounts and bank reconciliation such as:

1. At the commencement of the audit, the auditor will need to see bank statements for all bank accounts.
2. For all general meetings, ensure that a bank reconciliation (with original bank statement) is prepared before each meeting and checked by another executive officer.
3. The account is to be in the name of “(School Name) Parents and Citizens’ Association”.
4. Any two officers of the association may operate the account.
5. Wherever possible, an association and subcommittees should use a cheque account facility for non-profit clubs and associations to minimise bank charges.
6. The number of accounts held by subcommittees should be kept to a minimum. This can be achieved by separately accounting for each activity in the association’s cashbook.
7. It is recommended that the Outside School Hours Care (OSHC) subcommittee have a separate account.
8. Electronic banking facilities may be used where the financial institution’s software provides the necessary functionality and security.
9. Before the monthly meeting, get another executive committee member to check and certify the bank reconciliation. They MUST also sign the bank statement and cashbook when they are performing this check.
10. Attach the bank reconciliation to the bank statement, give copies to the Secretary and include all the paperwork in the monthly reports.

To assist, the Accounting Manual for Parents and Citizens Associations has an example (Example 7 on page 41 of version 3.4) that clearly and simply shows how to set out a bank reconciliation statement.

Whilst the bank reconciliation is a key function for accurate reporting, it is fundamentally also a frontline process that may highlight fraud.

As always, even if you find the reconciliation process difficult, continue doing the best you can for your school, as your contribution is valuable.