Account Reconciliations
Account Reconciliations
• Account Reconciliation Process

Policy

The Four Types of Recons

Warning Signs

Roll-Forwards

Accountability
• CARS Tips
• Best Practices
• Statutory Account Reconciliations
2 Security Classification
Foundation of Financial Accuracy
• SEC Reporting Control Processes
Ongoing Control &Monitoring Activities
Pre-close accounting
issue reviews
Controller’s
Roundtable
File 10Q
Audit Committee
Annual SOX
Assessment
Accounting
memos
SOX/KMC Certification
Environmental
reserve analysis
Executive Review
DGM Restructuring
Approvals
Warranty
Council
Quarterly Accounting Close Reviews
Prepare Management
Financial
review &
Statements
analysis
& Exhibits
Trial balance
submissions
Divisional SubConsolidation
Monthly account
reconciliations
Disclosure
Committee
Review
Post
FAS 5 Legal Analysis
Closing
Adjustments
Tax & Corp.
consolidation
Prelim.
Financial
Results
Judgmental reserves (warranty and
restructuring) roll forwards
Bi-weekly CAO calls with divisional
and regional controllers
3 Security Classification
Internal audit procedures
Reconciliation Process: Policy Basics
• Every balance sheet account -- Every month

Reconciliations completed by workday 13 or 18 (quarter vs. non-quarter end)

All accounts are required to be in CARS
• Every account must be assigned a reconciler and a reviewer

Reconciler and reviewer must be appropriate

3rd party (Genpact) reconciled accounts have a Delphi owner (“Approver”)
• Reconciliations must have sufficient supporting documentation

Must support the balance and the reconciling items / activity
• Outstanding reconciling items must be addressed on a timely basis

$100,000 or more must be resolved by the next month close

Under $100,000 must be resolved within 60 days (2 months after) or written off
• Zero balance accounts must be monitored and reconciled

Ensure that no balances are present and, generally, no activity occurred
• All accounts in local ledger must be represented in CARS

Note: Account Reconciliation policy available on the DCAP (Corporate Accounting Policy page)
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Reconciliation Process: Policy Basics
• Reconciliations are a key control to ensuring that:

General ledger balances match the local supporting detail records

Any differences between the GL and detail are properly explained
• To be considered reconciled, all reconciling differences must be identified, investigated and
resolved

$100,000+ resolved within 30 days (i.e. next month)

Under $100,000 resolved within 60 days (i.e. 2 months)

If an insignificant item remains unexplained for more than two months an adjusting entry should be
recorded to clear (i.e. write-off) the amounts
• Reconciliations should not focus on just the activity in the account, but also on the account
balance

The accounts assigned to you are your responsibility

In your personal bank account, do you care just about the activity, or do you also care about the
balances?
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Reconciliation Process: Accountability
• Finance Directors have the ultimate responsibility for ensuring that all divisional
accounts are reconciled.
 Responsibility may be formally delegated (in a written document) to Assistant Finance
Directors
• Each division should have a formal account reconciliation review and sign-off
process.
 Documented (in writing) and maintained in the record of the division’s accounting
procedures.
 Reviews of reconciliations should focus on ensuring the quality and completeness of
the reconciliation.
 Divisional review process must include a detailed supervisor review of the account
reconciliations (i.e. agreeing to source documents, etc.) on monthly basis.
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Reconciliation Process: Accountability
• Preparer self-review should include the following steps:
 Review of nature and purpose of activity
 Verification of accuracy of amounts recorded (e.g., agrees to related
support)
 Verification of appropriate accounts and classification (e.g., P&L line item,
current vs. long-term, asset vs. liability, etc.)
 Verification that timing of activity is appropriate (e.g. accrual not cash basis,
out of period adjustment, etc.)
 Ensure that appropriate (objective, verifiable) support is included
 Ensure that no extraneous information is included with the final support
package
 Provide information to supervisor for review
 Address any supervisor review points or questions prior to finalization
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Reconciliation Process: Accountability
• First-line supervisor review should be as if the reviewer was preparing the
account reconciliation, the following additional elements should be included:
 Provide review points to preparer
 Ensure review points are appropriately addressed prior to finalization
 Document supervisor review through formal sign-off of work product
• Certain accounts or other items may require additional review beyond the
preparer and supervisor. These include:
 Unusual or non-recurring items
 Subjective items
 All inventory reserves
 Items for which there were differing viewpoints on the appropriate accounting
treatment
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Reconciliation Process: Accountability
• Each division / trial balance / site is responsible for appropriately reconciling and reviewing
the accounts assigned to them

Reconciler: Completes the reconciliation by the required due date. Completes a self-review to
ensure that you have:
• Accounted for the balances
• Investigated reconciling items
• Attached sufficient supporting documentation

Reviewer: Review the account to ensure that:
• Balances and activity are accounted for
• Proper documentation is attached
• Review is completed in a timely manner

Approver (Third Party Reconciled)
• Ensure proper and timely reconciliation and review
• The Delphi approver is the owner of this account – not the outside party
Accounts assigned to you are your responsibility!
You are the expert on these accounts. These accounts are pieces of
the total puzzle that eventually become our financial statements.
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Reconciliation Process: Types of Recons
• The assigned reconciler and reviewer are responsible for the accounts assigned
to them – they must understand the nature of the account, what type of activity
flows through it, the unique risks, etc.
• Four types of account reconciliations
 Sub-ledger to general ledger
 General ledger to specific source documents
 General ledger to estimates / calculations
 Statutory to U.S. GAAP (covered separately)
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Reconciliation Process: Types of Recons
• Sub-Ledger to General-Ledger
• A/R, A/P, inventory, PP&E, etc. accounts are based on information contained in the local
sub-ledger. The balances must equal the balances in the general ledger
• For some accounts based in SAP, or other systems, there can be no manual adjustments –
the balances are generated automatically

In these cases, you may not need to reconcile the activity in the account, but you do need to
ensure that the sub-ledger equals the GL and that there are no reconciling items
• Some account balances are system set and only change annually (retained earnings,
PP&E beginning balances, etc.)

Review monthly to confirm that the account has not changed (system errors do happen)

Document which accounts meet this criteria – an exemption is not needed

If accounts have unexpected changes, you must perform monthly reconciliations until it is
confirmed that the system issues have been corrected
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Reconciliation Process: Types of Recons
• Account to Specific Source Documents
• Accounts such as cash are based on source documents. The account must be reconciled
to the bank statement and properly adjusted, if needed. The balance in the GL must agree
to the source documentation, plus or minus reconciling items
• Example: Cash
Balance per bank statement
Add: Deposits in transit
Deduct: Outstanding checks
Adjusted bank balance
Deduct: Service charges
Balance per general ledger
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$2,000
1,000
(600)
$2,400
(100)
$2,300
Reconciliation Process: Types of Recons
Accounts Involving Estimates
• Certain accounts involve management estimates in addition to sub-ledger or other details
Example: Reconciliation of the A/R reserve for doubtful accounts:
Balance as of January 31
February credit activity posted to ledger
Balance at February 28
$ (775,000)
(100,000)
$ (875,000)
Balance at February 28 is compared to management analysis supporting required level of
reserves:
GM & outside customers 90+ days past due (reserve at 25%)
$ (312,500)
GM & outside customers 31-89 days past due (reserve at 10%)
(375,000)
Additional specifically identified accounts (reserved at 100%)
(175,000)
Required level of reserve
$ (862,500)
Additional adjustment required to A/R Allowance reserve
$ (12,500) 1
1 Reconciliation should contain adequate detail to support the adjustment made by management. including copies of G/L screen
prints, A/R sub-ledger detail, credit manager sign-off and approval forms and journal vouchers.
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Reconciliation Process: Types of Recons
Source Document
Type of Reconciliation
• Bank Statements
Cash Accounts
•
Inventory
Subledger Detail
Accounts Payable
Accounts Receivable
Plant & Equipment
• Debt Agreements
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Accrued Interest Payable
Reconciliation Process: No Source Documents Exist
• Need to calculate what the balance should be
 Do not confuse a calculation with detail of the account activity!
 Compare calculated balance with ledger balance
 Do not assume the ledger balance is correct
• Transactions can be recorded in the wrong account
• Journal entries can be missed or forgotten
• Entries can be made for the incorrect amount
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Reconciliation Process: Accounts Reconciled to
Calculations
Accrued liabilities
Prepaid items
Reserves and allowances
Taxes
Insurance
Excess and obsolete
Interest
Rent
Warranty
Retirement benefits
Impaired assets
Allowance for doubtful accounts
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Reconciliation Process: Warning Signs & Issues
• Warning Signs:
 Balances that appear incorrect at first review
•
•
•
Debit balances in a liability account or credit balances in an asset account
Significant change from the prior period
No change at all from the prior period
 Aged reconciling items that are not being explained or written-off
•
Items that linger well past the 60 day cut-off without any reason or
documentation to support
 Reconciliations that have inadequate or missing supporting documentation
•
•
•
Unexplained screen prints of activity
Unidentified reconciling items
No supporting detail – either of activity or balances
 Reconciliations that just are inconsistent with underlying business processes
•
•
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Often indicates an account that has been assigned to someone who is not
familiar with the balances, processes, etc.
Not every account is the same – some accounts require specific skills or
knowledge to properly reconcile. Make sure employees assigned to accounts
are appropriate for those accounts
Reconciliation Process: Roll Forwards
• Roll-Forward vs. Reconciliation: A common mistake is to perform
a roll-forward that summarizes activity as opposed to a true
reconciliation that substantiates the balance in the account
• Roll-Forward
 Summary of debits and credits in the account
 Does not provide assurance regarding the balances
• Reconciliation
 Explains the balances – provides evidence and comfort that balances are
accurate
 Explains differences between the local sub-leger and the general ledger
balances - including supporting documentation
 Will include activity summary as well as additional information about the
account and the balances
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Reconciliation Process: Best Practices
• Assign resources to ensure adequate time to complete
 Make account reconciliations a priority for staff
 Make sure staff are not just “doing the easy ones”
 Consider authorizing overtime or short-term contract staff
 Consider adding staff – perhaps co-op or intern
• Have process to resolve complex issues
 Call team together
 Schedule weekly report-outs on status
 Quickly elevate concerns to management
• Have process to flag potential income statement impacts
 Work to resolve all accounts
 Forecast and address concern
 Keep divisional management and CAO informed
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Reconciliation Process: Best Practices
• Set up periodic review sessions
 Best practice – Each month finance executive should randomly select
accounts for detail review with the account owner and manager
• Managers should keep logs of accounts that they are responsible
for reconciliation
 Finance Executives should review regularly
 Focus should be on high risk accounts
• Consider “independent” review of accounts
 Switch accounts between Finance Executives
 Rotate account reconcilers
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Reconciliation Process: Best Practices
• Divisional Internal Control should perform account reconciliation
tracking
 Verify list is complete and accurate including third party reconciliations (i.e.,
ACS/Accenture)
 Spot check sample of reconciliations
• Set divisional policies on thresholds for required adjustments
• Close accounts that are not needed
• Combine accounts if possible
• Have documented issue resolution process
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CARS: Tips & Ideas
• All accounts are required to be reconciled in the CARS system
 Key sites are required to review data quarterly to ensure that all accounts present in
the local ledger are present in CARS
• CARS does not force a person to do high quality reconciliations, it
is simply a tool to use
 Just because you see something noted as ‘reconciled’ in the system, doesn’t mean it
is necessarily correct – it is still up to the account owners to ensure quality
• CARS offers many features that may be underutilized by sites
 Detailed reporting
 Review / Audit capabilities
 Contact your local Super-User or the CARS team for support / help
• CARS performance is often limited by network capabilities
 Limit / eliminate large attachments, but be sure to indicate where back-up
documentation can be located for future review
 Work with your local accounting team to close and eliminate unnecessary accounts in
your local ledger
•
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Additional accounts, even zero balances, drives additional traffic
Best Practices / Summary
Account reconciliations are the foundation of our financial records. Accurate and
complete reconciliations help to ensure that we present accurate financial information
and that management has the correct information to help make decisions.
• Make sure you allocate sufficient time to give the account
reconciliation process the attention it deserves
 Make accurate, high-quality reconciliations a priority for your staff
• Develop a local process or key contact to help resolve complex or
difficult issues – designate a local expert
• Monitor your completion, outstanding reconciling items, timeliness,
total accounts, etc. – all available from CARS
 Including “Accounts Pending Modification” (returned to reconciler by reviewer)
• Consider implementing an independent review
 Rotate review responsibilities within your staff – make sure the review process does
not become a ‘check-the-box’ exercise
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Best Practices / Summary
• Close accounts that are not needed – both in your local ledger as
well as the CARS system
 Consider combining similar or related accounts if feasible
• If you can’t comply with the reconciliation policy requirements,
follow the proper steps for obtaining a deviation (refer to Section
IV. Policy Deviations in the Account Reconciliation Policy)
• Ensure that accounts are assigned to the correct staff – don’t
expect everyone to be able to manage every account
• Reconciliations are about the activity and the balances – a rollforward of activity is only half of the job
Remember, this process is your responsibility. Every reconciliation
performed rolls up to the corporate financial statements. Mistakes or
neglect of your accounts has a direct impact on the company. Your
efforts make a difference.
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Statutory Account Reconciliations
• Each trial balance Finance Manager has the ultimate responsibility for
ensuring that all statutory accounts have been reconciled to the U.S.
GAAP accounts as required by this policy.
• Each trial balance location should have a formal review and sign-off
process. This process must be formally documented and maintained in
the accounting records of the trial balance location. The location of these
records is at the discretion of the location.
• Reviews should focus on ensuring the quality and completeness of the
reconciliation.
• There is no exemption from the statutory reconciliation requirement. If
circumstances arise that prohibit a statutory reconciliation, the respective
trial balance Finance Manager or delegate must contact the Divisional
Finance Director.
25 Security Classification
Statutory Account Reconciliation - Example
• Assume the machine tool was placed in service on January 1, 20x5. The reconciliation is
for the year 20x5. This example is simply an example; units are permitted to complete
statutory to U.S. GAAP reconciliations in any format that provides the information clearly.
• Local Statutory Accounts
Machine Tool with a cost of $3,500 was capitalized
The current gross book value of property, plant and equipment is $5,503,500
1 year of depreciation on this asset has been charged to expense $350.
The current balance in accumulated depreciation is 2,300,350
Local Statutory Net Income is $1,255,350
• U.S. GAAP Accounts
The Machine Tool was expensed
No depreciation expense was charged
The current gross book value of property, plant and equipment is $5,500,000
The current balance in accumulated depreciation is 2,300,000
U.S. GAAP Net Income is 1,252,200
26 Security Classification
Statutory Account Reconciliation - Example
• Delphi XYZ would prepare the following reconciliation within 45 days
after the accounting period ends:
 Property, Plant & Equipment Account
•
Amount per Statutory Books
$5,503,500
•
Balance per US GAAP Books
$5,500,000
•
Difference
$3,500
Reconciling Item:
•
Machine tool capitalized for local statutory purposes
•
Remaining difference
($3,500)
$0
 Accumulated Depreciation Account
•
Amount per Statutory Books
$2,300,350
•
Balance per US GAAP Books
$2,300,000
•
Difference
$350
Reconciling Item:
•
27 Security Classification
•
Depreciation expense on machine tool capitalized
for Local statutory purposes
($350)
Remaining difference
$0
Statutory Account Reconciliation - Example
 Net Income
•
Amount per Statutory Books
$1,255,350
•
Balance per U.S. GAAP Books
$1,252,200
•
Difference
$3,150
 Reconciling Items:
28 Security Classification
•
Machine tool capitalized for local statutory purposes
($3,500)
•
Depreciation expense on Machine tool – local statutory
$350
•
Remaining difference
$0
Questions?
• For more information, please contact Technical Accounting or Internal Audit
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Account Reconciliation Examples
30
Good Example
Cash Asset Account
Delphi Corporation
Reconciliation of Account
March 2005
Account Numbers:
EW 1001 00000 12000 000 000 0000
Description: Cash
***
Subledger/
General LedgerDetailed Records
$
527,545 $
534,045
Ending Balance:
Reconciling Items:
Mar. Stop payments booked by Bank not adjusted to G/L:
#481 $3,000; #482 $1,000; #484 $5,000
Mar. Outstanding checks:
#401 $10,000; #410 $2,500
Mar. Deposits in Transit:
Dep#123 $15,000
Reconciled Balance (G/L should equal detailed records)
9,000
12,500
$
*** - Please Specify: Bank Statement
(e.g. bank statement, Physical inventory records, DACOR, Olimpic, etc.)
Prepared by:
Approved by:
GL balance reconciled to bank statement
No unreconciled differences
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(15,000)
534,045 $
Variance $
534,045
-
Good Example
Equipment Asset Account
Delphi Corporation
Reconciliation of Account
March 2005
Account Numbers:
EW
EW
EW
EW
EW
Description:
Capitalized IT Hardware & Accumulated Depreciation
March 2005 Balance: EW
EW
EW
EW
EW
3264 00000 62001 000 000 0000
3264 00000 62012 000 000 0000
3264 00000 62501 000 000 0000
3264 00000 62507 000 000 0000
3264 00000 62596 000 000 0000
3264 00000 62001 000 000 0000
3264 00000 62012 000 000 0000
3264 00000 62501 000 000 0000
3264 00000 62507 000 000 0000
3264 00000 62596 000 000 0000
Book Value per DGL
Book Value per SAP
Variance
IT Hardware Beginning Balance
IT Hardware Current Year Addition
Accum Depr Beginning Balance
Accum Depr Current Year
Accum Depr Other Current Year Adjustments
$ 3,177,272
-
(1,208,459)
(267,727)
1,701,086
Balances should
agree to the
general ledger.
1,704,041
$
(2,955) A
Balance should agree
to SAP (sub-ledger).
Reconciling Item:
March 2005 EWF93 reversing - IT accrual of depreciation
asset to be booked in SAP in April 2005
$
Net unreconciled difference$
Prepared by:
Approved by:
Security Classification
2,955 A
-
One reconciling item
explains the
difference. Plan to
resolve is
documented.
Good Example
Prepaid Asset Account
Account Number:
EW-2690-02138-00000-000-000-0000
Description:
Prepaid Expense - Sundry - IT Department
5/1/2005
Beginning Balance
$
89,200.00
5/31/2005 Ending Balance
$
72,900.00
AMR - 3 months remaining at $4,300 per month
Gartner - 5 months remaining at $12,000 per month
$
$
12,900.00
60,000.00
5/31/2005 Calculated balance
$
72,900.00
May Activity
EWE10
AMR Amortization 9 of 12
Gartner Amortization 7 of 12
$
$
(4,300.00)
(12,000.00)
Notes
EWE10 - Setup AMR $51,600.00 invoice in prepaid to be expensed
1/12 September 2004 through August 2005 ($4,300/month)
EWE10 - Setup Gartner Group $144,000 invoice in prepaid to be expensed
1/12 of November 2004 through October 2005 ($12,000/month)
Prepared by:
Security Classification
Approved by:
Calculated
expected
balance
Good Example
Allied A/P Liability Account
Delphi Corporation
Reconciliation of Account
March 2005
Account Numbers:
EW 4201 00000 00280 000 000 0000
Description: Accounts Payable - Allied
Ending Balance:
***
Subledger/
General Ledger Detailed Records
$ (10,769,639) $ (17,363,876)
Reconciling Items:
Mar. 2005 wire transfers to Asia and Europe, not recorded in DACOR
6,646,082
Mar. Rebills not invoiced to the customer
Mar. 2005 Packard cross charge incorrectly classified to 4201 - 00280
Mar. 2005 Mexico cross charge not booked in DACOR
Mar. 2005 Singapore receipts not booked in DACOR
Account classification error posted in March (should be 00266)
Difference in Mar. wire transfer to Asia to be written off Apr. 2005
75,121
11,143
(102,102)
(79,122)
43,064
51
Reconciled Balance (G/L should equal detailed records)
$
(10,769,639) $
Variance $
*** - Please Specify: DACOR
(e.g. bank statement, Physical inventory records, DACOR, Olimpic, etc.)
Prepared by:
Approved by:
GL balance reconciled to sub-ledger
No unreconciled differences
All reconciling items current
Security Classification
(10,769,639)
-
Bad Example
Allied A/R Asset Account
Delphi Corporation
Reconciliation of Account
March 2005
Account Numbers:
EW 1601 00000 00501 000 000 0000
Description: Accounts Receivable
Subledger/
General Ledger Detailed Records
$
8,268,412 $ 15,625,035
Ending Balance:
Reconciling Items:
Incorrect posting to 1601-00501 (Will be reclassified to 1601-00577 in April)
(2,949,694)
Material in transit (FOB Destination)
Warranty receivable from vendors, not processed by A/R - Approval pending
Sales for last 2 days of month un-invoiced
A/P - correcting entry to be done in April
Unapplied credits/payments (Cannot identify invoices being paid)
Debit balances as a result of short paid invoices or unidentified deductions by customer
(9,228,792)
212,338
628,824
897,035
Reconciled Balance (G/L should equal detailed records)
(e.g. bank statement, Physical inventory records, DACOR, Olimpic, etc.)
Prepared by:
Security Classification
Approved by:
$
(1,326,267)
304,615
-
6,215,753 $
6,215,753
Variance $
-
Contains
unidentified
reconciling
items
Bad Example
Audited Accrued Liabilities
Delphi Corporation
Account Reconciliation
February 2005
Non-SAP
Account Number
Sub Account
SAP
SAP Account
S441199997
Profit Center
All
Description
Audited Accrued Liabilities (SAP Account S441199997)
Month and Year
Feb-05
Month-end Balance per General Ledger (attach copy)
$72,393,074.72
Details of Month-end Balance (use attachments if required)
Month Booked
Journal/Document
Explanation of Entry
Dec-04
102865965
Doc was input into wrong account - Joe Delphi to correct
Jan-05
102918735
Mfg. Doc was entered as perm - should be an accrual (Jane Delphi)
Feb-05
102936590
Holt Module System - Jim Delphi - booked as perm entry s/b accrued
($700,000.00)
($937.16)
($10,682.80)
Prior month entries to be reversed
$62,977,591.77
Total Reversals from Prior Month
($62,977,591.77)
Total Current Month Activity less recons above
Total (must equal month-end balance)
$73,104,694.68
$72,393,074.72
Contains old reconciling item (December 2004)
Contains unexplained reconciling items (no detail for last 3 items)
Does not support balance
Security Classification
Debit/Credit
Bad Example
Accrued Accounts Receivable
Delphi Corporation
Account Reconciliation
April 2005
Non-SAP
Account Number
Sub Account
SAP
SAP Account
S221000NFT
Profit Center
H201
Description
Accrued Accounts Receivable - NAFTA Custom Refunds
Month-end Balance per General Ledger (attach copy)
$197,741.47
Details of Month-end Balance (use attachments if required)
Month Booked
Journal/Document
Explanation of Entry
NAFTA Recievable Balance
Debit/Credit
$197,741.47
MEMO: Delphi A Tax Staff Maintains detail of the
outstanding expected refunds. Account represents
expected refunds for 2003 forward.
Total (must equal month-end balance)
$197,741.47
Should attach tax staff detail
Does not show preparer understands account
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