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 7 years. 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.

The Duke University Internal Audit Department will verify that timely reconciliations are being performed as part of their audits of University and Health System departments.

 

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. When paper copies have been received or kept they should also be matched against the transactions posted to the cost object. Examples of paper copies, which may be received or kept, are 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.

Unfunded Expenditures on Sponsored Projects

The University must ensure that sponsored projects are not overspent and that they comply with sponsor and University restrictions.

When project expenditures exceed project funding, an unauthorized diversion of General Fund resources has been made, thereby hampering the ability of University Officers and the Board of Trustees to make informed decisions with regard to available discretionary funding in the Current Unrestricted-operating budget. Overexpenditures on Sponsored Projects must be transferred as quickly as possible to an appropriate cost center.

If a department is obtaining additional funding to cover the overexpenditures, the sponsor must verify the amount and use of the funds. Future funding increments should not be used to fund current budget overruns; such practices result in large overruns at the end of the project.

 

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 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, some department business managers receive a paper report or 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.

The F&A costs represent the cost to a grant for that grant's share of costs incurred for facilities and in the general administration and operation of Duke University. The F&A costs should be charged in accordance with GAP 200.330 Facilities and Administrative Costs on Sponsored Projects and the current negotiated F&A cost reimbursement rate. F&A costs are charged to a grant on G/L account 694600.

Cost Sharing occurs when the sponsor will not reimburse expenses incurred on a 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 the salary expense that is to be cost shared is recorded using G/L account 600300, training grants or G/L account 600400, sponsored research.
• Cost shared fringe benefits on salaries charged to 600300, 600400, 603300 and 603400 are recorded on the normal G/L account for fringe benefits (610000 or 610100).
• The portion of salaries and fringes that the sponsor will not reimburse is credited to G/L account 808000 on the grant and is charged to the departmental cost object that is sharing the cost also using 808000.

The Office of Sponsored Programs does the entry automatically. The amount credited to 808000 should equal the amount charged to 600300, 600400, 603300 and 603400 plus the related fringe benefits.

Equipment and other cost sharing: When equipment is cost shared, the initial cost is charged to the WBS element using the appropriate G/L account. Then an entry is done by the departments grant administrator to credit the WBS element using G/L account 808100 and debit the departmental cost object that is sharing the cost also using G/L account 808100. Thus, the charge for the equipment in 66xxxx is offset by the credit to 808100. Other cost sharing is handled similarly, using G/L account 808200.