Why bank reconciliations matter for local governments

By Jodi Bursheim

With high-priority projects vying for your attention, it can be easy to overlook tasks that don’t have an immediate urgency. For many local governments, bank reconciliations often fall into this category. Although it may be tempting to put these off, doing so can have serious consequences.

This is because regular bank reconciliations—that is, the cross-checking of your financial records against your bank statements—are the cornerstone of your organization’s financial integrity. (At Abdo, we recommend monthly bank reconciliations.)

Here are four reasons why timely bank reconciliations are essential for your local government.

1. Ensuring financial accuracy

Financial accuracy is critical to your organization’s ability to effectively plan, budget, and yes, even complete its audit. In fact, your auditor may refuse to begin your audit if cash and investment accounts have not been reconciled.

Monthly bank reconciliations ensure accurate government financial reporting by identifying and correcting errors before reports are sent to council or management. By conducting monthly bank reconciliations, it allows for timely corrective actions when you identify irregularities in your financial data, such as delays in transaction processing, data entry errors, or fraudulent activity.

2. Preventing fraud and strengthening internal controls

No one wants to discover a suspicious payment on a financial statement that happened 9 months ago.

Monthly bank reconciliations give you—a public steward of taxpayer money—an important control mechanism in protecting your local government’s assets. They’re a particularly powerful tool in municipal fraud prevention: you’re able to identify suspicious transactions before they become a devastating issue.

3. Improving cash flow management and budgeting

If you’re not conducting regular bank reconciliations, it’s impossible to know your organization’s cash position. This, of course, affects your budgeting and planning.

Keeping up with your monthly bank reconciliations allows you to answer this critical question with confidence: Do we have enough liquidity to meet our obligations?

4. Building trust with council and the public

The last thing you want to do is to go back to council and say, “Hey, it’s October, but we found a mistake in your February financials.”

This is where monthly bank reconciliations serve as more than cash flow management tools or an internal control measure for local governments. Staying on top of these can help you avoid this situation—and significantly enhance trust in your team’s financial management capabilities.

How to stay consistent with bank reconciliations

Although bank reconciliations are not the flashiest of tasks, they are one of the most important things you can do for your organization’s financial integrity.

True, ensuring bank reconciliations are completed each month can be a tall order, especially when your staff is stretched thin. If you’re struggling to stay consistent, the Abdo Financial Solutions team is here for you.

From helping you streamline your month-end processes to getting your reconciliations back on track, we can guide you to a brighter path.

To learn more about how we can empower your organization, contact us today.