Transaction Reconciliation

Card transactions should be reviewed (reconciled, approved, and audited) a minimum of monthly for the purpose of detecting possible policy violations and fraud, and ensuring accurate accounting/financial records. Ensure you are clear about the associated responsibilities—what cardholders need to do and what manager-approvers must do—and train them accordingly. Further, do not overlook the importance of transaction auditing. See more below.

Related Resources

• 10 ways to prevent late transaction reconciliation

• Supporting documentation (e.g., receipts)

• Transaction disputes

• Interface file for finance system

• A separation of duties dilemma involving accounting-related tasks

• Card program management

• Key control roles

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Cardholder Role

The process of reviewing and reconciling card transactions is commonly performed by cardholders (or a designated “proxy”) using technology, such as the card issuer’s online solution or the organization’s ERP system. It typically involves:

1. Ensuring posted transactions accurately reflect card activity initiated by the cardholder—the correct vendors and charged amounts—for the goods and/or services received

2. Confirming that there is appropriate supporting documentation for each transaction, per program policies and procedures

3. Entering a note or description of what was purchased and for what business purpose; for example, “Fertilizer for the east lawn,” “Framing service for auditorium artwork,” etc.

4. Verifying and/or assigning appropriate accounting/budget codes, expense types, etc. for each transaction

The first three noted above are rooted in common sense, but the last one could require extra training. Cardholders are likely not familiar with the nuances of the organization’s coding structure and expense types. As noted by Lindsay Watkins, P-Card Program Administrator for The Johns Hopkins University Applied Physics Laboratory, “The expense type that a cardholder assigns to a transaction during the reconciliation process is extremely important. It affects what they are able to bill back to the government, so, if a cardholder chooses the wrong expense type, it can cause incorrect billing to the government.”

Manager-approver Role

The person with oversight and approval responsibility is equally important as the cardholder role. First, they should hold a position with more authority than the cardholders for whom he or she provides oversight. This role entails:

1. Looking for policy violations and any signs of cardholder fraud

2. Verifying that the correct accounting/budget codes were applied

3. Confirming appropriate supporting documentation

Their sign off (ideally, electronic) on cardholders’ transactions represents the transactions are legitimate, comply with the organization’s policies and procedures and are coded properly.

Independent Auditing

Monthly (or ongoing) transaction auditing is most effective when accomplished by a robust auditing solution/technology. As an alternative, something as common as Microsoft Excel would be better than nothing. Whatever tool is used, someone—internal audit, the program manager, or other team—should be following up on the audit results. The primary purpose is to catch any potential fraud and/or policy violations previously missed by cardholders and manager-approvers.

Overall

Regardless of role, problematic transactions, whether a vendor mistake, cardholder error, or potential fraud, should be addressed according to the organization’s card program policies and procedures.