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CARS
Central Accounting Reporting System

Types of Reconciliations to be Performed by Agencies

Reconciling entity financial data with associated Treasury data is a critical element to sound governmental accounting and essential to successful audits of that data. 

The purpose of reconciling is to ensure the accuracy and timeliness of transaction activity is reflected in the entity’s Fund Balance with Treasury (FBwT).   The correctness of this activity is pertinent to the reliance of the transaction effect reported to CARS ledger and Treasury reports, including the Monthly Treasury Statement (MTS), Schedules of General Fund, and Schedule of Changes in Cash Balance from Budget and Other Activities, etc. 

Agencies have the responsibility to ensure that all funds are recorded and accounted for correctly and in doing so their responsibility is to perform timely, reliable, and effective reconciliations. 

Reconciliation Guidelines

Under 31 U.S.C. 3513, the Secretary of the Treasury must prepare reports to inform the President, Congress, and the public on the financial operations of the U.S. Government.

The head of each executive agency must provide reports and information on the financial conditions and operations of the agency that the Secretary of the Treasury requires. Thus, Treasury requires that agencies reconcile their FBwT accounts on a regular and recurring basis to ensure the integrity and accuracy of their internal and government-wide financial report data.

  • Agencies must perform timely reconciliations and implement effective and efficient reconciliation processes.
  • Effective reconciliations serve as a detection control for identifying unauthorized and unrecorded transactions at the agencies and Treasury.
  • Effective reconciliations are important in preventing entity disbursements from exceeding appropriated amounts and providing an accurate measurement of the status of available resources.
  • Agency Location Code’s (ALC’s) reconciliations must include a comparison of transactions at a level of detail sufficient for specific identification of differences to establish that the entity’s FBwT is accurately stated.
  • The reconciliation process must include distinguishing the different types of transactions (including the different source system transactions and its specific mechanisms, reclassifications, transfers and nonCash (TanC), appropriations, borrowings, warrants, etc.) in the entity’s system and CARS account statement.
  • Agencies need to document these reconciliations and make them available to management, auditors, and Treasury as requested.
  • Reconciliations involve identifying and comparing accounting events or transactions to determine whether it is recorded properly and can be cleared, have not yet been recorded (in-transit), or were recorded improperly and require correction either on the agency’s side or at Treasury.
  • Reconciliations are not complete until all differences are identified and explained.
  • Once reconciliations are complete, appropriate actions must be documented and any needed adjustments or reclassifications must be reported.
  • Agencies must ensure that all adjustments are researched and traceable to supporting documents.
  • The corrective action must address the root cause of the difference to prevent recurrence, if possible. 

Required Reconciliations

Fiscal Service is requesting all agencies evaluate their cash reconciliation process.  Although Fiscal Service can make the needed adjustments in CARS to support traceable reclassifications, it is incumbent on agencies to reconcile their cash balances with CARS at a level granular enough to support these changes.  To that end, Fiscal Service is willing to work with agencies to help with retooling ALC’s cash reconciliations.  This will be key in making the new CARS Reclassification reporting usable, and remediating GAO’s finding. 

Below are reconciliations an agency is required to perform.  These reconciliations are similar to reconciling your personal check book to the bank statement.  These reconciliations can be integrated into one reconciliation or performed independently.  Each ALC is accountable to perform a cash reconciliation.  Also, each entity who is the owner of a Treasury Account Symbol (TAS) must reconcile with their CARS FBwT.  Depending on the activity that is reported in a TAS, these two reconciliations may be the same (i.e., TASs with no appropriation warrants and nonexpenditure transfers activity would match between FBwT and Cash Activity Reconciliation). 

As part of this process, the agency needs to be aware of conditions creating differences, record the causes of these differences, and analyze to see if the same conditions are recurring differences at least monthly.  Some conditions creating these differences may include:

  • missed cutoff times
  • failure to get copies of documents
  • bank-processing errors
  • agency reporting/processing errors
  • Treasury reporting/processing errors 

Refer to https://www.fiscal.treasury.gov/reports-statements/fbwt/reconciliation-procedures.html for more information. 

  1. Fund Balance with Treasury Reconciliation by TAS: entails matching the balance(s) on Treasury’s CARS account statement by TAS with the corresponding balance in the federal entity’s accounting records, along with verifying the authority transactions.  For this reconciliation entities should use the CARS Account Statement as the authoritative source for FBwT.  The responsible party for this reconciliation is the entity who is the owner of the TAS.  Part of this reconciliation is to verify the activity by ALC is valid, and to ensure that each of the ALCs have performed the cash (source) activity reconciliation by source/mechanism. 

    Agencies must reconcile their USSGL account 1010 balances for each fund symbol that was recorded with Fiscal Service (CARS Account Statement; Expenditure Transactions Report; and Available, Unavailable, and Unappropriated Receipt Account Reports).  Fiscal Service posts appropriation warrants and nonexpenditure transfers to designated account symbols.  Fiscal Service updates account symbols in the CARS Account Statement and CARS ledger daily.  Agencies must compare their USSGL account 101000 transactions in their internal ledgers with Fiscal Service reports and must reconcile any differences. 

    Note: not all transactions posted in FBwT can be reclassified; only CIR, PIR, TDO Payment and IPAC source cash activity transactions can be reclassified and only the ALC users will be able to perform the reclassification.

  2. Cash (Source) Activity Reconciliation by ALC and by Source/Sending Trading Partner (Mechanism): a cash reconciliation is a process of verifying the completeness of a cash transaction across the entity’s financial system(s) and Treasury’s CARS account statement.  Its completion provides assurance for cash held by Treasury.  Source activity is defined as transactional activity in CIR, PIR, TDO Payment, and IPAC and sending trading partner (mechanisms) activity is OTCNet, Pay.GOV, CGACH, IPAC, TRACS, RITS, etc.  Federal entities have the ability to reclassify (correct TAS and/or BETC) on source activity.  For this reconciliation you would use the CARS ALC Statement.  Each entity should assign a responsible party for each of their ALCs to perform this reconciliation.

    This reconciliation is the process of matching transaction amounts reported in the CARS ALC account statement with those recorded in the entity’s general ledger.  Its purpose is to ensure that the cash activity recorded in the general ledger aligns with the entity’s actual cash activity in Treasury’s CARS account statement.  Although federal entities and Treasury record the same transactions, the time at which a federal entity records cash in the general ledger often differs from the time at which Treasury reports the associated change.  Along with timing differences, there could be differences in the number of transactions depending how the entity transactions are reported in their system (there may not be a one-to-one relationship because of summarizing transactions at different levels between the ALC or by Treasury systems).  It is important that each ALC reconciles and knows what transactional activity is causing the difference and come up with a way to account for the differences.  ALCs should be identifying the discrepancies and what specific transactions are causing the issue to know exactly what to correct and how to properly use CARS reclassification to make corrections, if needed.

  3. TAS and BETC reconciliation: part of the cash activity reconciliation by ALC and by source/mechanism is to incorporate a reconciliation at the TAS AND BETC level.  It is imperative that agencies preform a reconciliation at this level.  TAS/BETCs are used to determine the general ledger posting and transaction effect on Treasury reports including the: Monthly Treasury Statement (MTS), Schedules of General Fund and Schedule of Changes in Cash Balance from Budget and Other Activities, etc.  It is vital that agencies accurately reconcile by TAS and BETC so they know what transaction and TAS and BETC to correct and use to reclassify. 

Types of Transactions

To accomplish and be successful at the reconciliations outlined above, it is important for the agencies to be able to break out transactions in their system by type, including:

  1. Sources by Sending Trading Partner (Mechanism):  these transactions are reported by source, CIR, PIR, TDO Payment or IPAC, where transactional activity is used to post to the CARS account statement.  Examples of sending trading partners (mechanisms) are OTCNet, Pay.GOV, CGACH, IPAC, TRACS, RITS, etc.  Currently, if these sources by sending trading partner TAS and/or BETC transaction need corrected the CTA user reports the correction through CTA, but in the future these corrections will be reported to CARS through Reclassification module. 

  2. Reclassifications:  currently these transactions are reported by the ALC users through CARS CTA module, but in the future these transactions will be reported to CARS through the reclassification module.  Development is under way to ensure these transactions will be linked to the source transaction that is being corrected.  These changes will include:

    • ALC transactions can only be reclassified by CARS users who have access to the source/mechanism transactions reported to that ALC.  A source transaction can only be reclassified once. 
    • After the source has been reclassified the CARS ALC user will select the reclassified transaction if it needs to be re-reclassified (change the TAS and BETC). 
    • Each re-reclassification can be reclassified once, within each reclassification a new record will be created and all transaction activity from source to all the reversals and restatements will be linked together.  This means all the reclassifications and originating source records will be linked no matter how many times a reclassification has to be re-reclassified.  Refer to https://fiscal.treasury.gov/cars/cars-transactions-accountability.html for the reclassification definition.

  3. Transfers:  currently these transactions are reported by ALC users through the CARS CTA module, but in the future these transactions will be reported to CARS through Transfers and nonCash (TanC) module and these transactions will not be able to be reclassified; to correct these transactions the CARS ALC users will use the CARS TanC screen to make corrections. Refer to https://fiscal.treasury.gov/cars/cars-transactions-accountability.html for the transfers definition.

  4. NonCash: currently these transactions are reported by ALC users through CARS CTA module, but in the future these transactions will be reported to CARS through Transfers and nonCash (TanC) module and  these transactions will not be able to be reclassified; to correct these transactions the CARS ALC users will use the CARS TanC screen to make corrections. Refer to https://fiscal.treasury.gov/cars/cars-transactions-accountability.html for the noncash definition.

  5. Authority:   these transactions should never be corrected using CTA or CARS reclassification module.  This type of activity includes appropriation warrants and nonexpenditure transfers, these transactions have specific associated BETCs and does not have an associated ALC.

Ways to Improve the Reconciliation Process

We realize there are complexities to perform these types of reconciliations. So how can you get to an efficient reconciliation process?  What can you do to redesign a process that is auditable for both the agency and Treasury?  Getting it right can lead to big efficiencies!  Below are best practices that Treasury has observed during agency outreach.  These help agencies make their reconciliation process effective and efficient.  We will be updating this section periodically as we learn more from agencies.

Best Practices

  1. Agencies map or crosswalk their system transactional activity to match with the various transaction types with CARS account statement activity.
  2. Agencies map or crosswalk their system transactional activity to match with the various TAS-BETCs with CARS account statement activity.
  3. Agencies use 1010 sub accounts to post in their system so they can match with the various transaction types with CARS account statement activity.  For instance, post 101001 for CIR OTCNet transactions, 101002 for IPAC transactions, 101003 for non-Cash (non-TGA cash), 101004 appropriations, 101005 TDO Payment checks, etc.
  4. Breakout ALC activity to additional ALCs to align entity’s business processes and activity with Fiscal Service’s source and sending trading partner (mechanism) transactions.

Contacts

Fiscal Service is willing to work with agencies to help with retooling ALC’s cash reconciliations.  If you have any questions about what your ALC can or needs to do, or if you have any questions or feedback about the process and how to perform these reconciliations, please contact our CRM team:

Milissia Morris – milissia.morris@fiscal.treasury.gov
Joe Deem – Joe.deem@fiscal.treasury.gov

Last modified 01/27/22