Pooled Bank AccountsRecommendations and Strategies

Phyllis Flowers2014

You probably know how many individual bank accounts you have; but, how many do you really need? If you have a different bank account for each different fund, that really isn't necessary when you have true fund accounting software. Pooled bank accounts (one bank account with multiple funds) aide in cash management and make it easier to keep up with cash flow. Should you have interest-bearing accounts, consolidation (pooling) could help maximize those earnings. Or, perhaps you've forgone interest bearing accounts (understandable since the rates are really low) for a decrease in bank fees. Pooling of cash could result in even lower, overall fees. ---from Bringing You Flowers - January 14, 2014 blog posting.

Use of pooled bank accounts is much more efficient than a clearing account (where one bank account is used for all disbursements with automatic creation of due to and due from amounts when vouchers are entered). Why? At some point, those due to and due from accounts have to be settled; this takes time and effort, results in additional paperwork, and requires more monitoring of balances for cash flow. Pooled bank accounts also simplifies data entry for financial receipts.

So, how do you go about setting up pooled bank accounts? Each separate bank account must be associated with a unique cash (balance sheet) code. Think of this as the "pool" definition. Then with several of OpenRDA's standard reports (please see the illustrations in this white paper), it's easy to see each fund's share of the bank account. Where is the pool definition created? A standard balance sheet code for each pooled account is created via Setup in Financial Management and assigned a reference type (normally CASH if a checking/money market account or INVESTMENTS if a certificate of deposit or other type of investment account). Then balance sheet account masters are created in the applicable funds using this cash or investment code. The style (a field) in the the bank identification (in the Bank Reconciliation module) indicates whether the bank applies to one fund only (1 Fund / Bank) or if it is a pooled bank account (Multiple Funds / Bank).

Have some funds that are subsidized by other funds? Then those funds will show a negative (credit) balance until "paper" transfers are made to those funds. Some states, in their uniform chart of accounts, provide for specific revenue and expenditure account codes that should be used for the above-mentioned operating fund transfers. This is actually a best practice and journal entries

would be used. These are paper transfers instead of actual bank transfers as the monies are in a pooled bank account. If you have expenditure and revenue accounts for operating fund transfers, the cash code for the “from” fund is credited and the cash code for the “to” fund is debited. There is actually no overall effect to the pooled bank account as you have only moved monies from one fund to another fund. To facilitate querying and reporting, create a unique journal identification (e.g., FUND TRANSFERS with description of BUDGETED TRANSFERS BETWEEN FUNDS).

The Financial Management report below uses the balance sheet account year masters in conjunction with the bank masters from Bank Reconciliation module. Its use is predicated on the use of unique cash codes for each different bank account.

Illustration 1.

The Financial Management report below is an activity report that is also available on the taskbar                             of the Bank Reconciliation module (as well as from Reports in Financial Management module).                         It is sorted by the cash code and then the fund so that the fund’s share of the account is                                     displayed. Alternatively, for reconciliation and cash flow purposes, the same report can be                       sorted by cash code only as depicted in illustration 3.

Illustration 2.

Illustration 3.