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10-28-15 - 14-104 - Performance Audit - Common Cash Bank Reconciliations - Department of Finance and Administrative Services

DFAS should dedicate the additional resources needed to accomplish accurate and timely reconciliations. Accurate and timely bank account reconciliations are essential internal controls to ensure that cash records are complete and accurate, and that data entry errors, bank errors, and potential fraud are detected and resolved in a timely manner. DFAS must first develop a complete understanding of the processes and activities that affect Common Cash. Once the department fully understands how various transactions affect Common Cash, it can implement business process improvements to resolve the complex account structure. Process improvements should also ensure general ledger data is sufficient to facilitate the matching of book transactions to bank statement activity. Gaining a full understanding of all cash transactions, revising business processes, completing the revised monthly book-to-bank Common Cash reconciliation, and resolving reconciling differences will enable DFAS to improve internal control over Common Cash, address the deficiencies noted by the external auditors, and eliminate CAFR audit finding 08-16.

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Summary

The Department of Finance and Administrative Services (DFAS) has made progress in revising its process for the Common Cash Bank Reconciliation. Through FY2015, DFAS used a spreadsheet template that was characterized by external auditors as unnecessarily complex, and which did not produce reconciled balances that readily tied to the general ledger. As a result, the external auditors raised CAFR audit finding 08-16, Bank Reconciliation Process. The Department should dedicate the resources needed to develop a complete understanding of the processes and activities that affect Common Cash, finalize its revision of the Common Cash Bank Reconciliation process, and develop a specific corrective action plan to address CAFR audit finding 08-16.

Accurate and timely reconciliations are essential for ensuring the integrity of the City’s Common Cash account. DFAS needs to continue its efforts to develop a true book-to-bank reconciliation and ensure the Common Cash account is in full compliance with Generally Accepted Accounting Principles and State regulations. Until this issue is remedied, erroneous Common Cash activity or unapproved transactions may not be detected and addressed.

Recommendations & Benefits

Developing a complete understanding of the processes and activities that affect Common Cash, revising business processes, implementing a true monthly book-to-bank Common Cash reconciliation, and resolving reconciling differences will enable DFAS to:

  • Improve internal control over Common Cash,
  • Ensure that cash records are complete and accurate,
  • Produce accurate and timely bank account reconciliations,
  • Address deficiencies noted by the external auditors, and
  • Eliminate repeat CAFR audit finding 08-16.

DFAS agrees that additional improvements are needed to reduce the complexity of the Common Cash reconciliation. DFAS has taken steps to improve the Common Cash reconciliation and will soon implement software to simplify and aid the Department with the reconciliation process.