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Cash and Investments

[For Texas School Districts, this means all your 11XX Object Code accounts]

Step 1

Prepare clean reconciliations for all bank and investment accounts

Of course you should be doing this every month. But year end is definitely the time to shine. The end of year recs get alot of scrunity from the auditor.

Bad bank recs can bring an audit to a screaching halt. And make your auditor grimace. When cash and investments aren't reconciled it means potentially missing transactions in all other areas of the audit.

So how can you prepare clean bank reconciliations?

Here are some pointers - 

  • The reconciliations should of course be in balance. This means the account balance per your general ledger agrees to the adjusted bank balance on the reconciliation
  • Any reconciling items shown between the general ledger balance and bank balance should be fresh and verifiable. Meaning they should clear the bank soon after the year end.
  • "Stale" outstanding checks should be investigated and resolved (voided or reissued)
  • Reconciling items for unposted transactions to the general ledger should not exist. They should simply be posted!

Why are reconciliations so important? Because they explain the difference between the balance per bank and the balance per books. Just like when you "reconcile" with a friend after an argument. You work out your differences!

Step 2

Check for negative cash balances shown on the general ledger within the pooled group of accounts

What does this mean? You know the funds on the general ledger that share the same bank account at the bank? These are the "pooled" cash accounts.

Because they keep their money all together, it is possible for any individual fund to overspend its cash balance and go negative. This is actually common for the grant funds. Because they have to spend money first, and then apply for reimbursement.

Well accounting principles don't allow negative cash balances to show in the external financial statements. So those negatives have to be reclassified as Due To balances, technically IOU's to the pool.

Its easy. Just do this - 

In the negative cash fund, debit cash up to zero. Credit Due To General Fund for the same amount.

As part of this process, you must also then credit cash in the General Fund for that same amount, and debit Due from Special Revenue Funds.

Step 3

Update the Student Activity Funds in the accounting system

Are the student activity funds at your district maintained off-books during the year? Such as out at the individual campuses?

If not, then you should be good-to-go here already. These accounts should be reflected on the District's books and hopefully were reconciled in Step 1 above.

If they are maintained out at the individual campuses, then the records for these accounts need to be retrieved and the activity and year-end balances posted to the accounting system.

This round up can take some time so get this started soon after the year end date passes. And don't skip this step, the auditor will surely ask about these accounts if they are missing!

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