One financial practice that varies in most school districts involves the number of bank accounts that have been opened over time. The reason why certain accounts were opened may have been supported by arguably good business reasons, at the time. The relative effort to perform timely bank statement reconciliations increases relative to the number of bank accounts. In a worst case scenario, one or two bank accounts are reconciled infrequently. This issue has led many financial officers to ask the question “What is the minimum number of bank accounts that is required in a school district?”
If this scenario describes your district, maybe your district should consider its options to consolidate bank accounts to the minimum number needed for financial accountability requirements. Some districts have found they are able to satisfy their financial accountability responsibilities with a separate bank account for the district’s General Operating Funds, Clearing Accounts, Debt Service Funds, Capital Projects by bond issue, and Student Activity Funds. An old school practice that may persist in some instances is to have separate bank accounts for certain federal funds instead of relying on the district’s chart of accounts to provide separate accountability for each federal project.
The monthly reconciliation of bank accounts and balance sheet accounts should be part of a systematic end-of-month close process. The district should work to ensure that reconciliations are brought current, as applicable, and old unreconciled items are resolved. Also, appropriate personnel should be trained in the use of bank reconciliation features provided by most of the financial information systems.
Due to the inherent risks associated with ensuring the integrity of the district’s cash transactions, timely reconciliations of bank and investment accounts are absolutely essential. In some instances, the reconciliation process may identify certain financial management issues including: cash management practices, general ledger maintenance, outstanding checks, timeliness of deposits, overdraft fees, deficit balances and projections for estimated monthly cash balances.
As an added internal control, districts should have a governance process for the review and approval of requests to open additional bank accounts.