GAP 200.012, Reconciliation of Financial Transactions

I.   General

II.  Responsibility and Documentation

III. Procedure

IV. Reconciliation Process

 

I. General

Reconciliation or verification of financial transactions is a key element of Duke’s internal controls and is fundamental to sound business practices. A verification of all charges against a cost object, accompanied by any necessary corrections, ensures the fundamental transactions, which result in financial reports, are correct.

This procedure details responsibilities, documentation required, and specific procedures for ensuring that proper verification is taking place.

 

II. Responsibility and Documentation

The business manager, other person who has financial responsibility, or individual to whom authority has been delegated, must verify all financial transactions on a timely basis (monthly or on an ongoing basis during the month). They must verify that the charges are accurate and charged to the appropriate account. Erroneous transactions noted during the verification process are to be corrected before the close of the next accounting period.

The business manager or owner of the code is ultimately responsible for ensuring that the verifications are being completed. They must review the reconciliation and document their review. The business manager or owner may delegate the review process; however, they should ensure that the individual reviewing the reconciliations is not the same individual who is performing the verification.

Documentation that the verification and review have taken place can take several forms. Some documentation options are:

• Sign or initial the financial report
• Sign or initial the Financial Transaction Reconciliation Log
• Sign or initial a reconciliation cover sheet
• Sign or initial a monthly log of reconciliations

This signature certifies that the account was reconciled (verified) and reviewed for the accounting period. The documentation of the review must be maintained in an accessible location for current year plus 2 years.

If the department has original documentation (such as corporate card receipts and statements) that supports the reconciliation then it must be kept, in an accessible location for the appropriate period of time as defined in GAP 200.240 Retention Period of Accounting Documents. If the department only has copies and the originals are maintained centrally (such as vendor invoices, Travel Expense Forms, Miscellaneous Reimbursement Form, phone bills, etc.) then the decision to keep copies is a matter of departmental procedure.

 

III. Procedure

Perform transaction verification by reviewing via SAP (either on-line or by printing an SAP report) the documentation for items such as Journal Vouchers, Purchase Orders, payroll charges, vendor invoices, and Accounts Payable Check Requests. If paper or digital copies have been received or kept they should also be matched against the transactions posted to the cost object. Potential examples of paper copies include Miscellaneous Reimbursement Form, Travel Expense Form, Accounts Payable Check Request, Bursar Receipt, Experimental Subject Payment Form, vendor invoices, telephone bills, etc.

Through the verification process, all charges posted to a cost object are reviewed to determine that they are appropriately charged to the cost object and the proper G/L account was used. Any errors found are to be corrected before the close of the accounting period following the period the charge was processed.

 

IV. Reconciliation Process

The reconciliation or verification procedure is done to ensure that all transactions/charges to a cost object are appropriate and that the correct G/L account is used for the transaction. This is accomplished for each transaction by reviewing the SAP online document via drilling down from a report or by comparing the charge to paper or digital documentation (backup).

The following steps will assist in providing documentation for review and ensuring that all transactions are reviewed.

1. Run an actual line item report for the cost object to be reconciled. (Recommendation: Either print the report or export to Excel in order to mark transactions and note corrections as the report is reviewed.)
2. Working down each line item of the report, verify each transaction is appropriate per the SAP document or paper documentation. Note any corrections needed. (Note: If using a printed report or Excel, mark or “check off” transactions as verified and note any corrections.) When the detail reconciliation is performed by one individual and subsequently approved by the business manager, the business manager should verify that the transactions listed on the detailed report represent all transactions posted to the cost object during the accounting period being reconciled.
3. For transactions where documentation is not available via paper backup or online in SAP, contact the department responsible for the transaction. Request that the department either send a copy of the backup or explain why the transaction (charge) was processed.
4. Process a Journal Voucher to make any necessary corrections*. Include documentation (header text, extra text, etc.) as required per GAP 200.020, Journal Vouchers or GAP 200.150, Cost Transfers on Federally Sponsored Projects, whichever is appropriate.

*(Exception: Journal vouchers cannot be processed to 60xxxx and 61xxxx payroll-related G/L accounts. Submit the appropriate payroll form for corrections to 60xxxx G/L accounts).

Corporate Payroll Services generates payroll charges (60xxxx G/L accounts). No documents are sent as backup for these entries. The charges on your financial statement represent the gross dollars paid to employees per cost object by the type of payroll (monthly or biweekly).

Payroll charges should be checked for reasonableness by comparing them to budgeted payroll or to the prior month's payroll charges. If the amount charged seems too high or low, contact the departmental payroll clerk for an explanation. Additionally, department business managers have access to the Accounting View of Payroll in SAP, which details the payroll charges to each cost object.

Fringe benefit charges (61xxxx) are a fixed percentage based on the gross payroll charges to the cost object and are split between monthly and biweekly. Fringe benefit charges can be verified by doing a calculation based on the actual payroll entries and the current year fringe benefit rate percentage.

Payroll accruals are posted for the estimated biweekly payroll earned but not paid through the end of the fiscal month for 1xxxxxx cost centers. Accruals are based on the previous pay period's payroll expense. The reversal of the accruals occurs in the following fiscal month.

Sponsored Project Reconciliation Activity

The Facilities & Administration (F&A) costs represent the allocations to a sponsored project for its share of costs incurred to maintain facilities and support the general administration and operation of Duke University. The F&A costs are charged in accordance with GAP 200.330 Facilities and Administrative Costs on Sponsored Projects and the applicable negotiated F&A cost reimbursement rate.

Cost Sharing occurs when the sponsor will not reimburse allowable expenses incurred for a sponsored project. These costs are covered by another funding source, usually departmental funds. The most common costs that are shared are salary and fringe benefits, equipment and F&A costs. GAP 200.140, Cost Sharing on Sponsored Projects provides more detail regarding cost sharing.

• Cost shared salaries are compensation for effort expended on a project, which will not be reimbursed by the sponsor. The portion of salaries and fringe benefits that the sponsor will not reimburse is credited to G/L account 808000 and 808001 respectively on the sponsored project, and is charged to the cost object identified in the payroll cost share tool. Detailed guidance for the payroll cost share tool is available on the Research Administration Training site.
• When equipment is cost shared, the initial cost is charged to the project's WBSE using the appropriate G/L account. An entry is required by the sponsored project's grant administrator to credit the WBSE using G/L account 808100 and debit the departmental cost object that is sharing the cost. This G/L account also applies to other types of direct costs on sponsored projects that are not subject to F&A costs. Cost sharing for other types of costs that are subject to F&A is handled similarly, but using G/L account 808200. The final category of cost share is tuition remission; if payroll costs for graduate research assistants on sponsored projects are cost shared, the associated tuition remission is also cost shared, via a manual entry by the Office of Post Award Administration using G/L account 808300, to the same departmental cost object as the payroll cost share.

When reconciling sponsored project fund codes, ensure all allocated expenses are supported by documentation specific to each transaction, and that the same expense/transaction is not duplicated in error. For example, while a project may require the same supply at multiple times, each instance of the cost must be supported by a unique vendor invoice number or other identifying document.

Pre-award expenses incurred within 90 days prior to the start of a grant or cooperative agreement are generally allowable by most federal agencies. All pre-award expenses incurred before the start date of the award should be reconciled to confirm the expenses were incurred within the allowable pre-award period (generally 90 days, or a greater number of days if requested from and approved by the sponsor). Exceptions must receive prior approval, coordinated with the pre-award office. Pre-award spending is generally not allowable on federal contracts.