Comparing Other Category Balance with the Finance Statement

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clarky_007-p40
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Comparing Other Category Balance with the Finance Statement

Postby clarky_007-p40 » Wed Aug 26, 2009 2:57 pm

Comparing Other Category Balance with the Finance Statement

I just had a stake audit done and the auditor said the Other category balance from the Income/Expense Report (I/ER) does not match the Finance Statement for the same time period. I don’t think the auditor really knew what he was looking at.
[font=Calibri]1. [/font]The auditor said the Net Funds available (for the other category) in the Finance Statement should be the exact same as the total for the Other category in the I/ER. Is this true?
[font=Calibri]a. [/font]I don’t think it’s true because it does not take into account temporary adjustments made during the Reconciliation, correct?
[font=Calibri]b. [/font]The Net funds available does take into account outstanding checks, correct?
[font=Calibri]2. [/font]What is the best way to verify the Other category in the I/ER matches the Finance statement? Are the only ways this:
[font=Calibri]a. [/font]After reconciliation the MLS balance in the other category should match the other total in the I/ER, correct?
[font=Calibri]b. [/font]The other total from the I/ER should equal The Nets funds available if the temp. adjustments in the reconciliation are added/subtracted to the net funds available, correct?
[font=Calibri]3. [/font]Are there any other ways to verify there are no problems with the Other total in the I/ER in MLS?

THANK YOU :)

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aebrown
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Postby aebrown » Wed Aug 26, 2009 3:17 pm

clarky_007 wrote:I just had a stake audit done and the auditor said the Other category balance from the Income/Expense Report (I/ER) does not match the Finance Statement for the same time period. I don’t think the auditor really knew what he was looking at.
[font=Calibri]1. [/font]The auditor said the Net Funds available (for the other category) in the Finance Statement should be the exact same as the total for the Other category in the I/ER. Is this true?
[font=Calibri]a. [/font]I don’t think it’s true because it does not take into account temporary adjustments made during the Reconciliation, correct?
[font=Calibri]b. [/font]The Net funds available does take into account outstanding checks, correct?
[font=Calibri]2. [/font]What is the best way to verify the Other category in the I/ER matches the Finance statement? Are the only ways this:
[font=Calibri]a. [/font]After reconciliation the MLS balance in the other category should match the other total in the I/ER, correct?
[font=Calibri]b. [/font]The other total from the I/ER should equal The Nets funds available if the temp. adjustments in the reconciliation are added/subtracted to the net funds available, correct?
[font=Calibri]3. [/font]Are there any other ways to verify there are no problems with the Other total in the I/ER in MLS?


In brief, the answers are:

1. no
1a. Correct
1b. Correct
2. Reconciliation
2a. Correct
2b. Not necessarily
3. Not that I know of -- careful reconciliation is the best way

If you have successfully reconciled, and the temporary items are appropriate, there should be no problem. After all, that's the whole point of reconciliation -- the process of reconciling finds all things that are common between MLS and the Church Unit Financial Statement (CUFS) and then explains the differences. The things that are common are the items that are checked off, and the differences are the items listed as outstanding or temporary items.

The reconciliation report will have an unexplained difference of 0 for the Other account only if you have the right items identified as outstanding and temporary items (or you happen to have multiple errors that happen to cancel each other out, but that would be extremely rare).

You use the Ending Balance to reconcile, not the Net Funds Available number. Net Funds is the Ending Balance less the outstanding checks listed on the statement. This does not account for temporary items, or for outstanding deposits. So it is definitely not reliable to compare the Net Funds Available with the MLS Income/Expense Report balance and assume that they should be the same. If you have no temporary items or outstanding deposits, then it should match, but if you can point to temporary items or outstanding deposits, it should be simple enough to explain to the auditor why it doesn't match the Income/Expense report.

Also, note that you might have entered corrections to items in the audit period since the time you reconciled, which might create additional differences between the printed reconciliation report and an Income/Expense Report that you generate now.

jdlessley
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Postby jdlessley » Wed Aug 26, 2009 3:59 pm

Using an Income and Expense Report during an audit is unnecessary and only creates more work for an auditor and the clerk. The audit checklist does not even mention the I/ER for the reasons Alan noted. For the Other category (account) only the CUFS and the Reconciliation of the Other category in part 3 of the audit report using MLS information for the last month of the audit period is necessary to complete an audit reconciliation.
JD Lessley
Have you tried finding your answer on the LDS.org Help Center page or the LDSTech wiki?

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mfmohlma
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Postby mfmohlma » Wed Aug 26, 2009 4:06 pm

clarky_007 wrote:I just had a stake audit done and the auditor said the Other category balance from the Income/Expense Report (I/ER) does not match the Finance Statement for the same time period.


Just another hint: Make sure it is the same time period. My auditor and I had a bit of a tense moment until I realized I had printed out the I/ER with a date range of 1 January to 31 July, instead of 30 June. :o

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aebrown
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Postby aebrown » Wed Aug 26, 2009 4:14 pm

jdlessley wrote:Using an Income and Expense Report during an audit is unnecessary and only creates more work for an auditor and the clerk. The audit checklist does not even mention the I/ER for the reasons Alan noted. For the Other category (account) only the CUFS and the Reconciliation of the Other category in part 3 of the audit report using MLS information for the last month of the audit period is necessary to complete an audit reconciliation.


Although the audit checklist doesn't explicitly mention an Income and Expense Report, it does seem like one is necessary. Where else do you get the "MLS information" needed to fill out part 3 of the audit report, except by printing an Income and Expense summary report for the Other category, with a custom date range equal to the audit period?

Part 3 of the audit report requires the balance as of June 30 or Dec 31 in each subcategory of the Other category. I know of no way other than an I/ER to get those numbers. But that is the only reason you would need an I/ER (that I know of) during the audit.

jdlessley
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Postby jdlessley » Wed Aug 26, 2009 7:54 pm

You are right Alan that the Other category balance and the Other subcategories balances are from the Income and Expense Summary, but that is all that report is used for. Other than comparing the total Other category balance to the CUFS Other account balance there are no other comparisons.
JD Lessley
Have you tried finding your answer on the LDS.org Help Center page or the LDSTech wiki?


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