N9G “TOOLBOX”
What is the N9G Tool Box?
• The N9G tool box provides the field with helpful information
on a wide range of subjects.
• The tool box provides information to CNIC Regions &
Installations; keeping them “audit-ready” at all times.
• We have provided each of you with a tool box, just make sure
as we provide you a tool monthly, you keep it in your tool box!
Topics that will be filling your Tool Box
Monthly
•
•
•
•
•
•
•
Cost of Goods Sold
Cash & Cash Handling
November
December
Managers Financial Review
January
NAF Personnel
February
Contracts
April
Reconciliation
July
Assets Inventory
August
Reconciliation
Account reconciliation is important not
just for individuals and households, but
also for businesses. MWR, NGIS,
CMWR, & NFC Business Offices must
reconcile their accounts to check for
fraud and to prevent balance sheet
errors. Without accurate financial
information, REGCOM, Commanding
Officers and Managers cannot make
well-informed decisions.
Reconciliation
Balance sheet accounts are used to record
assets, liabilities and equity.
Balance Sheet Accounts
Assets
Liabilities
Equity
The account Balances roll forward from fiscal year to year
Income Statement Accounts
Revenue
accounts
Expense
Accounts
Unlike Income Statement accounts (revenue and
expense accounts), Errors made in balance sheet
accounts will remain until corrected
Reconciliation
Balance sheet account reconciliations are a continuous
explanation of activities that have occurred in an
account.
An account is reconciled when all differences have been
identified (regardless of age), proper accounting
treatment ascertained and corrective action is listed in
the reconciliation including when corrections will take
place, usually in the following month.
Reconciliation
Items must not be allowed to remain in a balance sheet account
indefinitely
 In general, one month would be considered an appropriate length of time
for an accounts receivable, short term liability or a clearing account
transaction.
 Prepaid amounts and deferred revenue amounts must be cleared to the
appropriate general ledger account in the period in which the revenue or
expenditure belongs.
 Reconciling items identified as errors must be cleared as soon as possible,
generally, this is expected to be in the month following detection
Reconciliation
Additional back-up may be required by Financial Reporting or
internal and external auditors.
• Departments must ensure all backup such as purchase orders,
receipts, properly executed contracts or other documentation is
retained and readily available when requested.
• Account reconciliation is an underappreciated yet critical
control to help ensure an organization's financial integrity.
• Weaknesses and inefficiencies in the reconciliation process
often lead to mistakes on the balance sheet and overall
inaccuracies in the financial close.
Reconciliation
Since the enactment of Sarbanes Oxley (SOX) in 2002 and other
rules and regulations that have followed, ensuring the accuracy of
account reconciliations has become increasingly important.
• In the past, if an external auditor found a material error during review of a
company's financial statements, it could still be corrected by the company
with an adjusting entry.
• In most cases, the controller wouldn't have to issue a restatement, nor
would the auditor have to report the error.
Reconciliation
• With the advent of SOX, the call for compliance has risen to another level.
• If the auditor finds a material error, the company may be required to
disclose a failure of controls.
• If the auditor finds a misstatement while reviewing the quarterly or annual
SEC reports that the company cannot prove it would have found on its own,
then the error is determined to be a material misstatement and a material
weakness that could also require disclosure.
Reconciliation
• An efficient, accurate, and timely financial close cycle (beginning with the
account reconciliation process) can create a foundation for:
 evaluating business performance
 supporting organizational decisions
 satisfying external reporting requirements.
•
Automation of the account reconciliation process is a critical step on the
road to achieving "balance sheet integrity" - and ultimately, a timely and
efficient financial close.
Software alone will not ensure account reconciliations
are accurate
Reconciliation
Following this best practices list
will send you on your way to error-free account
reconciliations and a more efficient financial close!
Account reconciliations should be complete - no account left behind!
 Ensure all appropriate accounts are being reconciled
 Ensure that there is an overall reconciliation policy and that it is adhered to throughout
the business office
 Ensure that each reconciliation includes a title, description of the account, and
procedures and/or instructions on how to complete the reconciliation (applicable
contacts, reports to run or obtain, etc.)
 Business Office Managers will be required to create and train accounting personnel on
the proper reconciliation processes
 Documentation supporting the account balance should be included with the
reconciliation. Documentation of a reconciliation allows for required auditability of all
financial records.
Reconciliation – Best Practice
Account reconciliations should be accurate
 The individual preparing and reviewing the account should have a basic
understanding of what the account is used for and what should be used to
support the balance. For example, cash accounts will most often need the
general ledger and a bank statement or appropriate DARs to validate funds
received, in order to perform the reconciliation.
 Ensure that the correct, most updated balances are being reconciled.
 Ensure that the reconciliation actually supports the balance and is not just a
repeat of the general ledger or a roll-forward of the balance. You actually
have to validate each entry, not just assume it is accurate. Backup
documentation is required to ensure accuracy.
 Watch for accounts that have unusual balances (such as an accrual with a
debit balance or a receivable account with a credit balance).
Reconciliation – Best Practice
Account reconciliations should be completed and reviewed in a
timely manner
 Create due dates for the reconciliations
 Have a mechanism to track the status of each reconciliation
 Make the high-risk account reconciliations due early in the close
cycle to identify any potential problems
 Review the unidentified differences and post the necessary
adjustments while the accounting period is still open
Reconciliation- Best Practice
Account reconciliations should support the appropriate
accounting principles
 Account reconciliations should follow the accounting principles
established by CNIC Finance
 Ensure the reconciliations are:
 objective
 that they identify material unidentified differences
 that they are consistent
 that the transactions behind the general ledger balance
followed the convention of conservatism.
Reconciliation
The account reconciliation process should be constantly
reviewed and improved
 Review the account reconciliation policy to ensure it accurately reflects FFR
Policies and procedures.
 Review the overall process routinely to identify improvements that help drive
quality and timeliness.
 Review the reconciliation procedures and/or instructions to ensure they
answer: What? When? Who? Why? How Much?
Good tools and processes provide a framework for ensuring quality,
accuracy, and completeness. They provide a means to track assignments,
due dates, and work completion. A robust, automated account
reconciliation process will focus the right people on the right activities and
give management real-time information around the close process.
Reconciliation GL Account
How to Reconcile a General Ledger Account
Good accounting controls means knowing what's in your balance sheet. If you don't
reconcile your accounts on a regular basis you can't be sure if your financial statements
are correct.
Follow these steps to clear and correct financial reporting.
 Understand the accounting policy for the account you are reconciling.
 The first step in reconciling your general ledger account is to know what should be
in it. You can't verify that the balance is correct unless you know the rules. Read
your company accounting policy manual and clarify any issues with your supervisor
or manager.
 Gather supporting documents. These will differ depending on the type of account
you are reconciling. They could be copies of invoices, agreements or contracts,
statements from outside parties (like bank statements) or copies of supporting
reports from other systems - like accounts receivable.
Reconciliation
How to Reconcile a General Ledger Account
 Ask yourself the investigative questions about the items in the account
- what are they? when were they created? how do they relate to
accounting policies? why are they in this account balance?
 Document your explanations and conclusions clearly and completely.
 Document for others - not yourself
 The purpose of the reconciliation is to demonstrate to others that
the account balance is correct.
 Make sure your explanations don't include too much jargon and that
they are complete.
Reconciliation
 A listing that just shows the activity
in and out of the account is not
really a reconciliation
 The purpose of the reconciliation is
to substantiate that the balance is
correct!
 The listing of all activity just shows
what the balance is!
Reconciliation
BLUF – The Balance sheet is required to be an accurate
reflection of the financial condition of each MWR, NGIS, CMWR
and NFC.
No ONE is perfect. The reconciliation process will assist in
identifying issues, mistakes and in some cases potential fraud,
waste and abuse.
It is our responsibility to safeguard the sailor’s money and the
reconciliation process is just one vital control in ensuring those
safeguards are sufficient.