Friday, December 8, 2017

Let's Work It Out: The Importance of Reconciliation
Melinda Ordway and Marcia Bohinc - Technical Assistance Bureau


All too frequently, headlines around the Commonwealth have reported the occurrence of missing money, misappropriations, or unauthorized spending in cities and towns. While the risk that a community may fail to detect fraud or otherwise safeguard its assets is a very real and critical problem, perhaps the strongest internal control for managing the situation is the performance of regular accounting reconciliations.

The Division of Local Services (DLS) has continually preached the importance of conducting frequent and prompt reconciliations. A reconciliation involves comparing two separately controlled sets of records to verify whether related account balances agree. This fundamental accounting process helps identify any unusual postings that could be caused by bookkeeping errors, or worse, by deception. The process of proving that transactions are in balance is essential for ensuring the integrity of general ledger data and mitigating fraud.


As a best practice, every community should conduct reconciliations of its two largest assets, cash and receivables, at least monthly to ensure records are accurate and no money is missing. However, the local volume of transactions may dictate that these reconciliations occur weekly, or even daily, given how time-consuming it can be to determine the source of discrepancies.

As the custodian of all revenues, tax titles, and tax possessions, the treasurer must keep a timely and accurate cashbook and reconcile this comprehensive journal of receipts and payments (including bank deposits and withdrawals) against bank statements each month. The collector maintains listings of the community’s various outstanding receivables, each of which is based on a receivable control. In this record of original entry, it begins with the initial tax commitment and tracks each processed collection, abatement, exemption, and tax title transfer, and is adjusted for each issued refund, resulting in the outstanding receivable balance.

After the treasurer and collector have internally reconciled their records, they should provide the balances to the accounting officer for comparison with the general ledger. The financial officers should then meet to discuss any identified discrepancies (caused by missing information, keying errors, timing differences, etc.) with the goal of resolving them. The results of these reconciliations should be reported to the community’s central manager or executive body to verify they were done and provide explanations for any outstanding variances.

Beyond cash and receivables, there are other bookkeeping records that must be periodically reconciled with the general ledger. These include the treasurer’s debt schedule and payroll with holdings, the assessors’ commitment and overlay charges, and other municipal and school department revenue and expenditure records.



To provide guidance and reinforce accountability, local officials should formally adopt a reconciliation policy that identifies each reconciliation to be conducted, assigns responsibilities, establishes deadlines, and requires the results be reported to the chief administrative or executive officer. Sample policies can be found in manuals posted on the Technical Assistance Bureau’s webpage. It should be every community’s goal to prioritize and complete regular reconciliations. Apart from the risk of potentially undetected revenue losses, the lack of timely reconciliations could delay or otherwise negatively impact the certification of free cash by DLS. It could also delay an audit engagement and result in a comment in the audit firm’s management letter.

19 comments:

  1. Anonymous6:09 AM

    I'm confident that the crackerjack financial team in Templeton thinks they know better than the Division of Local Services. Just ask Tuesday Girl.

    ReplyDelete
    Replies
    1. Anonymous8:55 AM

      Isn't that a little like "jack of all trades, master of none" !

      Delete
  2. Anonymous1:28 PM

    This comment has been removed by the author.

    ReplyDelete
  3. Anonymous1:32 PM

    This is not to bust balls of the employees it is the people in charge that makes this mess

    ReplyDelete
  4. Anonymous1:47 PM

    Nice to see the Templeton highway are keeping there standards intact!!! Any road you go down in this third world town is bad. I went to Barre so my route is barre rd. Omg the sand that being kicked up by the tires are taking my paint off. As soon as you go into Hubbardston the road is black same as barre. On the return trip no way coming back thru the nightmare road that highway dept left it so headed to petersham and up 101. All were fine there were patches of snow here and there but no gravel insight Even phillipston got it right !!! Templeton should be proud of the third world status you guys can try again on Tuesday !!! Ps drop the plow

    ReplyDelete
  5. Good morning, since Jeff is busy making money, I thought I would throw out this comment and see where it will go. If all of this information in the above article is what we should have been doing for the past four or five years, and didn't, how do we avoid this again ? Lets see where we went wrong ? If we don't figure this out, the path to ruin is still wide open. What about our State Officials ? They had no problem going into Winchendon to straighten them out, so why not us ? I can still not understand how the DOR allowed our town to go so long without doing an audit. I know everyone says we do not want the State in here, but I do not see any plan to get our self out of the mess we are in. Do you ? My opinion, Bev.

    ReplyDelete
  6. Anonymous10:50 AM

    The roads are shitty as usual. Winchendon, Rindge and any state road look better. What's with driving down the middle of the road sanding, then reverse direction with sander off?

    ReplyDelete
    Replies
    1. The real cost for the equipment we need and the labor we would need to bring our roads up to any kind of a reasonable standard, is mind boggling, to say the least. It is a good thing the Otter River Sportsman's Club road got all fixed up '! Heaven forbid that super high priority road not be left out. " yah, you can't make this stuff up !

      Delete
    2. Anonymous5:39 PM

      last time i checked the sportsmen club road is a town road

      Delete
  7. In my humble opinion its the way we purchase equipment, not the actually cost of the equipment that has got us here.
    We have no plan, never have had one. It's "forget it till it breaks" then buy a used one for cash.

    As of this moment we dont even have a complete list of all town assets. Without such a list how can anyone come up with replacement or repair costs?
    Without the documentation it is virtually impossible to come up with a responsible plan. Some towns run financing of about 3.5% of their assets at any given time in their Capital Improvement Plans.

    The only item I can think of that we financed this year was a police cruiser at around $11,500 yr (leaving the Elementary School alone). Even the new truck which costs $175,000 is being bought for cash. Does this make sense?

    ReplyDelete
  8. Fed raises rates, sees three rate hikes in 2018: This is the latest headline regarding the Federal Reserve.

    Anyone else seeing the price of our school, Police station going up without any benefit to taxpayers..........planning?

    ReplyDelete
  9. Just so as I dont leave the wrong impression. At this time we are trying to get a complete list of town assets put together and the response has been positive on all accounts. All committees that have come before the CIC have brought lists, details and a willingness, almost eagerness to return with better info. We have many needs in Templeton. Fire and Police have specific needs that both Chiefs presented well. DPW is attempting to modernize and renew its fleet with a view that all equipment TOWN equipment. Some agree, some dont, but at least we are seeing plans. All wont be smooth sailing, but as long as the finances are looked after as required and not how they have been in the past we might have a shot.

    ReplyDelete
    Replies
    1. I believe the voters should have the facts in front of them before they vote on anything. What we owe on, how much longer we have to pay until each individual debt is gone. I remember sitting at a TM, when people were told that something BOS wanted to buy was only 135,000 a year. No one asked how many years it was going to take, or what the cost would be in the end. Those 40 year loans will get you every time.

      Delete
    2. As I mentioned, one of the Brookfield's hires help for snow plowing, man and truck. Something to think about, seeing our financial future looks less than rosy.

      Delete
  10. Anonymous11:53 AM

    Hey 5:39, the comment is valid. Templeton has major roads that have not been maintained. Why are they repairing lesser travelled roads ahead of major roads that are 30 years without resurfacing?

    ReplyDelete
    Replies
    1. Anonymous12:11 PM

      thats a question you should be asking bud and the selectmen

      Delete
  11. Anonymous12:12 PM

    anom 11:53 because that is the way things are done in Templeton. We done wants the people to think that we are can do it the right way

    ReplyDelete
  12. Hopefully with the new "street smarts" or something like that program that Alan has hired we will have better information on which to base street repair.

    "The one who bitches most" approach has not served Templeton well.


    ReplyDelete
    Replies
    1. Seems like it got someone's road fixed, and made them a selectman ! Why do we have some selectmen among the missing when difficult or unpleasant issues come up ? Rainy day selectmen do not do their job, do not work for the taxpayers.

      Delete