There are two primary reasons to reconcile an account. One is to help find errors in records. The other is to protect the organization from fraud. Here at Nonprofit Central we take fraud very seriously. In a small organization there is little time and even less money to address this type of issue.
If the process to change reconciled items were simple then it would be easy to do bad things with your organization’s account. For example, it could be easy to change the name of the person the check was written. So your records say one thing, but the actual check was written to someone embezzling money. Check out this resource on fraud prevention.
A digital accounting software, like MoneyMinder, gives you another layer of protection against fraud. Reconciliations confirm that the bank’s information matches MoneyMinder’s. If we undo a reconciliation the bank’s information can not be confirmed anymore.
In the Case of an Error:
When you do reconcile (if you’ve made an error) it is usually because someone had typed in the dollar amount incorrectly, has the wrong date, or has assigned the wrong category to a transaction. Errors do happen and they need to be fixed. If an error goes unaddressed, an audit committee will likely find them and ask you to fix those months later. Fixing a mistake after the fact takes a lot of time and is a big hassle at that point.
In MoneyMinder, to change a transaction, you have to unreconcile back to the point the error was made. So, if the current month is February and you noticed the error was made in November, you have to unreconcile January, December and November to make the fix. Then you have to make the fix and reconcile those months’ activities again.
This type of activity is logged in the Event Log in MoneyMinder as a “recordable event” so that we can see when this happens. It is transparent. These safeguards make it less likely someone might do this for fraudulent reasons.
Don’t make stealing from you easy. Protect yourself and your organization against fraud and enact a policy and procedure for reconciliation.