Friday, July 9, 2010
Reconcile and Review Bank Statements
Because cash is liquid and highly susceptible to theft and misappropriation, controls around cash should be appropriately strong.
One of the best control procedures for a small business or non-profit is the bank reconciliation. A bank statement will tell you a lot about the organization but only if you review the information in a timely manner.
You should examine cancelled checks and endorsements, track transactions between accounts, compare payroll checks with employee records, and ask questions about anything that looks unusual.
The bank reconciliation procedure is relatively easy and should be done monthly by someone independent of the accounting function. It doesn't make sense to have the accountant or bookkeeper perform the reconciliation because they'd be in a position to both commit the fraud or error and, cover up the problem. This is why you need a segregation of duties.
For a small non-profit, having the bank statements sent to an independent board member for monthly reconciliation may be one of the best and least expensive controls you can implement.