You can’t always just look at your bank statement for the balance because there are outstanding checks and deposits; looking at the GL doesn’t always capture recurring payments, fees, and other transfers.  A thorough bank reconciliation process can go a long way toward detecting fraudulent cash activity and helping your organization know just how much cash is available for operations.  The basic process typically includes comparing outstanding items with the next month’s bank statement, ensuring both the book and bank balance agree to the rec, and reviewing the rec for old outstanding items (>90 days) that should probably be written off and potentially reissued. 

A second set of eyes is essential.  A reviewer can be a business administrator, your Church’s CPA, or you can even ask a savvy volunteer review the bank rec to ensure someone outside the process is able to help keep the train on the tracks.  When your Church receives its bank statements, how much time passes before they are reconciled to the general ledger?  We recommend that our clients reconcile their cash accounts within ten days of the month end to properly follow up on cancelled checks, unexpected fees, etc.  Furthermore, many banks require fraudulent activity to be reported within 24-48 hours, so a daily review of transactions is also recommended.  Finally, we recommend a weekly reconciliation of online donations to properly match them to donor records and respective bank deposits. 

So what does your process look like?  Is it working?  What’s the hardest part of reconciling your bank statement?  Who reviews your bank reconciliation?

Having a third party review of the reconciliation is a big fraud prevention step and one of our firm’s recommended best practices when it comes to segregation of duties.