UCSB Campus Information & Procedure Manual

Reviewing & Reconciling the General Ledger 5/03

Reviewing and Reconciling the General Ledger

What is the General Ledger?

The General Ledger is the official record of all financial and current year budgetary
transactions for the campus. Accounting Services & Controls maintains the General
Ledger.

When is the General Ledger distributed?

A monthly report, the GL060, is distributed via campus mail, approximately the 5th
workday each month to all departments by the General Accounting unit.

The General Ledger can also be accessed on-line, via the Data Warehouse, using
Brio.Insight. General Ledger data is loaded into the Data Warehouse approximately the
4th – 6th workday of the month. To request a license for Brio.Insight, contact the
Administrative Analyst in Accounting Services & Controls at x8593.

Who gets the General Ledger?

Each department receives a paper copy of the portion of the General Ledger containing
the accounts assigned to their department code.

What if I don’t understand how to read the General Ledger?

The General Accounting Unit of Accounting Services & Controls offers periodic training
on reading and understanding the General Ledger. Refer to the “Training & Manuals”
section of the Accounting Services & Controls web site at
http://www.accounting.ucsb.edu.

What should I do with the General Ledger report?

Each month, the Ledger should be:
1. Reconciled
2. Reviewed
3. Signed (approved) and dated by the individual performing the reconciliation.

What do you mean by reconciliation?

By reconciliation, we mean the comparing and reviewing of all source documents to
their corresponding entry into the general ledger and expecting a match as to dollar
amount, vendor, and source document/invoice number.

Who should complete the monthly reconciliation?

The person reconciling the General Ledger each month should be someone in the
department who does not have the authority to approve invoices and transactions.
Ideally, this person would also not be involved with ordering or receiving the goods.

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Reviewing & Reconciling the General Ledger 5/03

I know I need to reconcile the ledger, but I have so many stacks of invoices and
statements, where do I start?
We have found the following system to be helpful.

1. First, sort everything by Account – Fund. For example, group all of the recharge
statements, invoices, and deposits that belong to one account-fund together.

2. Sort the account-fund invoices/statements by sub. For example, put all of your sub
3 expenses together.

3. Within Sub 3, use a folder for each month of the fiscal year and label
“Month Year – Reconciled”, for example, “July 2002 – Reconciled.”

4. Label one folder, “FY 2002 – 2003 Sub 3 – Unreconciled.”

5. Put all of your unreconciled items in the “Unreconciled” folder.

6. As items are reconciled each month, put them in the appropriate month’s
“Reconciled” folder.

You may discover that some subs do not have much activity during the year. If that is
the case, you may only need one “Reconciled” folder for the entire fiscal year’s activity.

This system ensures that every transaction that hits the ledger during a month is kept
together along with all of the corresponding documentation.

Again, this is just one possible system for organizing invoices and department activity.
If your department has a great deal of complexity, you might consider coding invoices,
documentation and activity according to your own categories of expense, such as by
object code or department code (project, cost center, or cost type) depending on the
system your department uses for reconciliation.

What is the best way to complete the reconciliation process?

There are three components to the General Ledger: Appropriations, Expenditures, and
Encumbrances. The reconciliation process should include each component.

1. We recommend starting the monthly reconciliation process by reviewing the

previous month’s ledger and any notes you may have made. Then look at the
current ledger to verify any correcting entries that should have taken place.

2. Pull all of the invoices, statements, journals, UFINS, etc. from your “Unreconciled”
folder. Sort out any deposit-related items from your expenditure-related items.

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3. Appropriations
Appropriations are budgets for departmental operational expenses. Examples of
appropriations include the July 1 Adjusted Budget, funding for merit increases or
range adjustments, or funding for one time allocations such as special projects and
contracts and grants.

All appropriations should be reconciled and reviewed – this is particularly important

as it relates to staffing transactions and receiving the appropriate funding for merits,
range adjustments, or retroactive pay.

4. Deposits
a. Compare copies of any deposit documentation to the General Ledger, to see if
the corresponding dollar amounts are recorded correctly.

b. If you have documentation for a deposit that does not appear on the Ledger, it
may be the deposit occurred too late to be posted for the month you are
reconciling. However, if you have documentation for receipts that were not
recorded but should have been, notify General Accounting.

c. On each document matched to the General Ledger, note the month/year it was
posted to the ledger, your initials and the date.

5. Expenditures
a. For each charge (debit) to the account-fund-sub, verify you have the appropriate
back-up documentation. Back-up documentation includes all invoices, packing
slips, copies of financial journals, UFINS and any other relevant information to
the transaction.

• If you are missing documentation for a type 53 or 54 entry (financial

journals or UFINs), first contact the initiating department. If they are
unable to produce a copy, you may request a copy from General
Accounting.
• If you are missing documentation for a type 41 (Vendor Disbursement –
Direct Deposit) or 42 entry (Vendor Disbursement – Check), you may
request a copy from Accounts Payable (AP); however, make a note of the
Accounts Payable Reference Number prior to making your request, as AP
will need this to find the appropriate documentation.
• For reoccurring items such as mail recharges, where no documentation is
available, verify the amount looks reasonable and initial next to the
charge.
• If you have an expenditure on the Ledger which does not belong to your
department, contact the appropriate Accounting unit (Accounts Payable or
General Accounting) to request more information. Depending on the type
of transaction, you may need to process a correction for the expense. Do
not wait until the end of the fiscal year (June) to make corrections –
remember that expense probably belongs to another department and your
delay could impact their budget and programs.

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b. When looking at each charge, compare the vendor name and invoice amount to
your back-up documentation. If all fields agree, make a checkmark next to the
amount on the ledger. On the invoice/documentation, sign your initials, the
month/year the item appeared in the ledger, and the appropriate sub. By placing
the appropriate sub on the invoice/documentation, it will make future filing and
retrieval much easier.

If your documentation does not match the entry in the General Ledger, make a
note to review and follow up.

c. Once you have reconciled all of the transactions in the sub, place all of the
corresponding documentation in the appropriate month’s “Reconciled” folder.

d. In the area next to the sub transactions, initial and date the ledger, signifying a
reconciliation was completed.

6. Encumbrances (Liens)
Encumbrances (or liens) reflect future commitments of resources prior to an actual
expenditure. Encumbrances are established by Purchasing when the department
issues a purchase requisition. Departments will see the encumbrance on their
General Ledger. When the order/services are received and the University is
invoiced, the original encumbrance entry is cancelled and the expense and related
cash payment is recorded.

If a department decides not to make the purchase, the department should contact
Purchasing and cancel the Purchase Order.

Encumbrances should be reviewed each month for accuracy. For example, if a

balance is remaining, yet the order is complete, please contact Accounts Payable
staff and request the encumbrance be released (removed) from the department’s
account.

Who should complete the monthly review?

The monthly review should be done by someone in the department who is familiar with
the department’s transactions and will be able to detect any errors or problems. Most
often, this person is the department Business Officer. In a small department, the review
may need to be performed by the Director or Department Chair. Whenever possible
this should be a different person than the individual doing the reconciling of the General
Ledger.

Why is the monthly review so important?

1. The monthly review is an important internal control because someone other than the
person ordering and paying for goods, is evaluating the transactions.
2. The review is also very important in the department budgeting process. Actual costs
can be compared to budgeted costs for reasonableness and variances can be
evaluated.

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What should I look for in the review?

For each account-fund-sub, the following should be reviewed:

1. Unusual transactions – expenditures made to unknown or inappropriate vendors, or

to vendors with an unusually large volume of transactions, even if the transaction
amounts are not individually significant.

2. Duplicate or erroneous payments – look for transactions involving the same vendor,
invoice date, and/or payment amount. (See “Processing Payment for Goods or
Services” section for tips on avoiding/preventing duplicate payments.)

3. Correct payment information – look for transactions that are coded with the wrong
account-fund-sub-object code information.

4. Reasonableness – look for transactions that appear unreasonable, such as a

food/beverage purchase on a federal contract (where such purchase is usually
prohibited).

5. Allowable per policy – greater scrutiny of supporting documentation may be

appropriate for transactions with significant policy implications – e.g. alcohol
included in meal costs for travel or entertainment.

6. Any questionable or irregular entries should be immediately investigated and

resolved.

What is a “Shadow System?”

If a department is using a shadow system, they are using another program such as MS
Excel, MS Access, or other system as a way of tracking their department’s financial
information, instead of relying solely on the General Ledger.

Our department uses a shadow system – should I perform a reconciliation

between the shadow system and the general ledger?
Yes. A monthly reconciliation between shadow system reports and the General Ledger
is critical, since the General Ledger is the official University record. Using the Data
Warehouse may make the reconciliation process easier for those using shadow
systems.

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References

Departments

Accounting Services & Controls

Accounts Payable
http://www.accounting.ucsb.edu/disbursement/

Administration (Data Warehouse License Request)

http://www.accounting.ucsb.edu/administration/

General Accounting
http://www.accounting.ucsb.edu/general/

Audit Services
http://www.audit.ucsb.edu

Data Warehouse (Information Systems & Computing)

http://dw.isc.ucsb.edu/

Resources

Reading the General Ledger (PowerPoint Presentation)

General Accounting
http://www.accounting.ucsb.edu/training/

Fund Accounting (PowerPoint Presentation)

Office of the Controller
http://controller.ucsb.edu/presentations.shtml

Object Code Listing

http://www.accounting.ucsb.edu/pdf/ObjectCodes.pdf

Using Department Codes (Project, Cost Center, Cost Type)

TBD

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