A.
Purpose. The purpose of regular reconciliations of cash and accounts
receivable is to ensure revenue transactions are in balance, mitigate
fraud, and safeguard general ledger accuracy. Failure to reconcile
cash and accounts receivable hampers the Town's ability to produce
reliable revenue reports, maintain accurate records, close its books,
make timely submissions to the Massachusetts Department of Revenue,
Division of Local Services (DLS), and complete audits. In addition,
unresolved variances can reduce the amount of free cash certified
by DLS and may result in significant deficiency findings by the Town's
independent auditor.
B.
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE CONTROL ACCOUNT
CASHBOOK
COMMITMENT
GENERAL LEDGER
Definitions. As used in this section, the following terms shall have
the meanings indicated:
Outstanding amounts owed to the Town resulting from the issuance
of bills for property taxes, motor vehicle excise taxes and charges
for services, i.e., utility bills. (Accounts receivable resulting
from invoices issued for police details are addressed in a separate
policy.)
A record of original entry in which the recordkeeper for
the department issuing the bills reduces the total amount committed
by amounts collected and abatements and exemptions granted, and increases
it by refunds issued.
A ledger maintained by the Treasurer that tracks the Town's
running balance of cash-on-hand in which is recorded all cash receipts,
disbursements, and interest earned on investment of Town funds.
For each billing cycle, 1) in the case of a real estate tax
commitment, a list of land parcels in the Town subject to the property
tax, showing for each parcel the amount of the tax due and the name
and address of the person liable for payment, and 2) in the case of
a motor vehicle excise tax or utility commitment, a list of the individual
accounts, the amount charged for each account and the name and address
of the person liable for payment.
A bookkeeping ledger that serves as a central repository
for accounting data for an organization. Each account maintained by
the organization is known as a ledger account, and the collection
of all these accounts is known as the general ledger. The general
ledger is the backbone of any accounting system which holds financial
and nonfinancial data for the organization.
C.
Applicability. This policy applies to any Town department with the
responsibility for the issuance of bills for taxes or charges for
services, and/or for the collection of fees; the Town Accountant,
or his/her designee; and Treasurer/Collector, or his/her designee.
D.
Policy.
(1)
No later than 30 days after the end of each month the following shall
occur. A department responsible for the issuance of bills shall reconcile
the sum of all receivable balances from the commitment with the accounts
receivable control account. Any variance shall be researched and resolved.
Upon resolution, the department shall forward the receivables balance
to the Town Accountant for comparison with the receivables control
account in the general ledger. If the amounts do not match, the department
and the Town Accountant shall determine the reasons for any variance
(e.g., missing information, errors, and/or timing differences).
(2)
No later than five days after receiving bank statements, the Treasurer/Collector
shall reconcile the cashbook to the bank statements and reconcile
any differences between the two. The Treasurer/Collector shall then
transmit the reconciled balance to the Town Accountant for comparison
to the cash control account in the general ledger. If the amounts
do not match, the Treasurer/Collector and the Town Accountant shall
determine the reasons for any variance (e.g., missing information,
errors, and/or timing differences).
E.
Procedures. The following internal controls shall be followed to
implement this policy:
(1)
For any billing cycle, a department responsible for the issuance
of bills establishes an accounts receivable control account equal
to the total commitment by tax or charge.
(2)
Concurrent with the department's establishment of the accounts
receivable control account, the Town Accountant posts the total commitment
of tax or charge to an accounts receivable control account in the
general ledger.
(3)
Each subsequent collection, abatement/exemption, refund or transfer
(e.g., to tax title in the case of property taxes), by parcel or account,
is posted by the department to the commitment book and the department's
accounts receivable control account with concurrent notification to
the Town Accountant for posting to the accounts receivable control
account in the general ledger.
(4)
On a regular basis as described in the Town of Northfield Revenue
Processing Policy, all departments receiving payments, whether pursuant
to the issuance of bills or for fees, shall transmit to the Treasurer
such amounts collected under the cover of a Schedule of Departmental
Payments to Treasurer (a turnover sheet) showing the amounts by category
of tax, charge or fee for the period just ended; a copy of which shall
concurrently be transmitted to the Town Accountant for posting to
the general ledger's revenue accounts and cash control accounts.
(5)
Pursuant to the Town of Northfield Revenue Processing Policy, all
cash receipts and checks are deposited into the bank. Within two days
of the receipt of cash and checks, the notification of disbursements
made, or notification of interest earned, the Treasurer shall post
the transactions to Treasurer's cashbook.