1101 PR.04 Balance Sheet Ledger Account Reconciliation & Certification

1.     Overview

2.     Reconciliation

3.     Certification

4.     Monitoring

This procedure supports Policy 1101 Guiding Principles for Business and Financial Administration, which sets forth the fundamental principles for the administration of business and financial activities at the University, including the internal control framework, and requires that all units assure a sound business and control environment.  This procedure details the requirements for balance sheet ledger account reconciliations and certifications.

A balance sheet ledger account reconciliation is the comparison of an asset or liability balance in the general ledger to another source of financial data, such as a bank statement, a sub-ledger, or another system.  The purpose of a balance sheet ledger account reconciliation is to verify the accuracy, completeness, and validity of ledger accounts included on Yale’s Statement of Financial Position (a.k.a. balance sheet) at a given point in time.

Reconciliation, verification, and substantiation are essential for an effective internal control environment to help ensure:

• Accumulated general ledger account balances can be substantiated by supporting detail records;
• The accuracy and completeness of transactions that have been posted to general ledger account balances;
• The information transmitted to, contained in, and reported from the University’s financial systems is accurate, complete, and recorded in a timely manner;
• The information can be relied upon for making financial and administrative decisions;
• Efficient and effective audit process; and
• Fraud, theft, compliance violations, and other irregularities are quickly detected and reported to the appropriate authorities.

The difference between asset and liability balances recorded in the general ledger and other sources of financial data are reconciling items.  Reconciling items may be caused by timing differences, general ledger errors (e.g., sub-ledgers errors, manual journal entries), or errors in the other sources of financial data (e.g., bank errors).  A critical element of the account reconciliation process is the resolution of differences.  Please refer to the Accounting Manual for University standards on how to properly resolve and account for differences identified during the reconciliation process.

Units are responsible for ensuring that balance sheet ledger accounts for which they are accountable are reconciled monthly and in a timely manner.  This requirement is an essential part of Yale’s financial management principles.  Units are also responsible for maintaining up-to-date department specific reconciliation procedures and documentation.  This includes ensuring account balance reconciliations contain adequate supporting documentation and maintaining appropriate approval and segregation of duties in accordance with Procedure 1104 PR.01 Signature Authority, Delegation of Approval Authority and Access for Financial Transactions.  The same individual should not prepare and approve a reconciliation.  Reconciliation preparation and approval should only be performed by individuals with knowledge of the account balance and an understanding of the reconciliation purpose.  Reconciliation approvers are responsible for ensuring that reconciliation preparers are adequately trained and possess the skill, experience and competence for preparing the reconciliation.

University standards and best practices for account reconciliation can be accessed on the Accounting Manual, in the Balance Sheet Ledger Account Reconciliations guidance.

The Controller’s Office requires account certification on a quarterly basis for balance sheet ledger accounts that meet certain quantitative or qualitative risk factors.  This Workday business process is known as Balance Sheet Account Certification (a.k.a. account certification event).

The Controller’s Office determines the risk factors used to identify accounts.  The General Accounting office maintains a master list of balance sheet ledger account assignments.  The account assignment inventory indicates the preparers and approvers responsible for completing quarterly account certifications in Workday.

The purpose of the account certification process is to verify that account owners (a.k.a. certification approvers) have reviewed reconciliations for all asset and liability account balances under their authority and that, to the best of their knowledge, the following conditions have been met:

• The activity within the balance sheet ledger account(s), in all material respects, is appropriate and reasonable for the purpose of the ledger;
• There are appropriate controls in place within the accounts listed to provide reasonable assurance regarding the reliability of the reconciliation;
• If unusual activity was discovered, it was noted and reported as appropriate for further review;
• The reconciliation is complete;
• The balance is accurate and appropriate (or adjustments have been identified and will be made in the next accounting period); and
• The balance is supported by appropriate documentation.

Account Certification Business Process Requirements

Each account preparer and approver will be required to complete the quarterly account certification event in Workday in a timely manner.  Period close dates and timelines for certification can be accessed in the Balance Sheet Ledger Account Reconciliations guidance.

The account certification business process is initiated by Financial Systems & Solutions (“FSS”) as part of the quarterly financial close process.  Once initiated, each identified certification preparer will receive a notification in their Workday inbox to complete the certification event.

Certification preparers are required to perform the required reconciliation procedures, identify and report variances, if applicable, and submit the certification to the account approver.  Please refer to the Balance Sheet Ledger Account Reconciliations guidance for University standards on how to properly document variances within the reconciliation.  Please refer to the Workday Training Guide: Account Certification for instructions on how to properly document variances in the certification business process.

Certification approvers are required to review the information and data submitted by the preparer in a timely manner.  Approvers should submit and complete the business process after they have reviewed and confirmed the accuracy, completeness, and validity of the balance(s).

For more detailed instructions on how to properly complete this business process, please refer to the Workday Training Guide: Account Certification.

The Controller’s Office may conduct independent reviews of balance sheet ledger account reconciliations.  It is expected that reconciliations will be completed and provided to the Controller’s Office upon request.

The Controller’s Office is responsible for monitoring the completion and timeliness of the quarterly account certifications.