One of the best ways to prevent and detect fraud is by conducting regularly scheduled reconciliations – seems simple, right? According to StatisticBrain.Com, they recently reported only 21% reconcile their own personal checking account. Banks have rules on how many days you have to dispute errors – most require you to report them within 30 days of the most recent statement. Reconcilers are likely to encounter some type of reconciling item throughout the year.
Early in my career, I managed reconciliations and I detected a slide error committed by the bank. The transaction posted correctly by our organization on our General Ledger for $15, but the bank recorded it as $1,500. Thankfully, and during the reconciliation process, this was flagged as a reconciling item/bank error of $1,485. Ironically, this same error became an even bigger issue the subsequent month. The bank should have reversed the $1,500 charge, and then post the original $15, but the processing center accidentally posted it a second time for the exact amount – they increased the error to $2,985 ($3,000 total on their end). The error had to be carried over an additional month before it was reconciled. I share this to demonstrate errors do happen and unfortunately, they may occur on a regular basis. Furthermore, fraudsters look for weaknesses like accounts not being reconciled on a regular basis and they prey upon this vulnerability commit fraud. I also want to share that you should never net the error difference when reconciling. For example, the bank should have reversed each error individually – reverse $1,500 in both instances and then post $15 correction; however, they ended up just posting a net difference of ($2,985). Always make your reconciliation a clean audit trail. Also, I want to stress to everyone throughout the University, reconciliations are not just for checking accounts, reconciliations come in many business forms. For example, P-cards, vendors, payroll, POS systems, equipment, fleet services, supplies, research, grants, students, aid, awards, etc.