Blog · 23 August 2026 · 9 min read

Why a reconciled report can still be wrong

A practical running-balance check to find omitted, duplicated or misplaced transactions before sending a donor financial report.

Your donor report may add up perfectly. The opening balance, income and expenditure may lead exactly to the stated closing balance. The closing figure may even agree with the bank statement. That does not prove every transaction is present or correct.

Two mistakes can cancel each other out. A missing deposit and a missing payment of the same amount leave the closing balance unchanged. A running-balance check tests the report line by line, so you can find where the records first move away from the source documents.

What a closing reconciliation actually proves

A basic reconciliation uses a simple calculation: opening balance plus money received, less money spent, equals closing balance. This is an important check, but it only tests the totals at the start and end.

Imagine a project starts the month with 10,000 currency units. It receives 4,000 and spends 6,500. The expected closing balance is 7,500. If the report shows those figures and the bank statement also closes at 7,500, the report appears to reconcile.

However, the report could still contain a missing transaction, a duplicate, a wrong date or an amount entered in the wrong column. If another error has the opposite effect, the closing figure can remain correct.

Reconciliation also does not prove that an expense was eligible under the donor agreement, approved by the correct person, charged to the right budget line or supported by a valid document. Those are separate checks.

It helps to think of the closing reconciliation as an endpoint check. It confirms where the report finishes. A running-balance check examines the route taken to reach that point.

• A correct closing balance does not prove that every transaction is included.
• Equal and opposite errors can cancel each other out.
• A bank balance does not confirm the budget classification or eligibility of expenditure.
• Arithmetic checks and document checks answer different questions.

How the running-balance check works

A running balance starts with the opening balance and updates it after every transaction in date order. Money received increases the balance. Money paid out reduces it.

Set up columns for date, reference, description, money in, money out, calculated balance, source balance and difference. The calculated balance for each row is the previous balance plus money in, less money out.

For example, an opening balance of 10,000 followed by income of 2,000 gives a new balance of 12,000. A payment of 750 then reduces it to 11,250. A bank charge of 50 reduces it to 11,200.

Where the bank statement gives a balance after each transaction, copy that figure into the source balance column. The difference should be zero after each line, unless there is a known timing item or the statement uses a different transaction order.

Do this check in the bank account's own currency. If the donor report is prepared in another currency, complete the transaction check before applying exchange rates. Otherwise, exchange differences and rounding may hide a missing source transaction.

A useful spreadsheet layout is:

• Column A: transaction date
• Column B: bank, receipt or voucher reference
• Column C: short description
• Column D: money received
• Column E: money paid
• Column F: calculated running balance
• Column G: balance shown by the source record
• Column H: difference between columns F and G

Worked example of two errors cancelling out

Suppose the bank account opens at 8,000 currency units. The statement then shows a donor transfer of 3,000, a payment for training materials of 1,200, a refund received of 500 and a venue payment of 500. The correct closing balance is 9,800.

Now suppose the person preparing the report misses both the 500 refund and the 500 venue payment. The report shows only the 3,000 received and the 1,200 paid. It still closes at 9,800.

A closing reconciliation will not identify the problem. Total omitted income equals total omitted expenditure, so the two errors cancel each other out.

The running-balance check exposes the issue. After the 1,200 payment, both the report and statement show 9,800. The bank statement then rises to 10,300 when the refund arrives, but the report stays at 9,800. The first difference is 500. After the venue payment, the bank returns to 9,800, so the final difference disappears.

This example shows why checking only the last row is weak. The important clue appears in the middle of the month and vanishes before the end.

The same pattern can occur with duplicated entries. A payment recorded twice may be hidden by income that was also recorded twice. It can also happen when two different transactions happen to have the same value.

• Opening bank balance: 8,000
• Donor transfer received: 3,000
• Training materials paid: 1,200
• Refund received but omitted from the report: 500
• Venue payment omitted from the report: 500
• Correct and reported closing balance: 9,800

Investigate the first point of difference

When the running balance does not agree, start with the first row where a difference appears. Do not begin by changing the closing balance or adding a general adjustment. The first break is usually easier to explain than the final difference.

Check whether a transaction is missing from the report or entered twice. Then compare the amount, date and direction. A receipt placed in the payment column creates a larger difference because the balance moves the wrong way.

Also check the transaction immediately before the first difference. Bank statements sometimes place transactions in value-date order while a cashbook uses the date written on the receipt or payment voucher. Two transactions on the same day may appear in a different order. In that case, the balances may differ temporarily and agree again once both transactions are included.

Bank charges, interest, taxes deducted by the bank and direct transfers are common statement entries that may not be in the paperwork pile. They still need an accounting entry and a suitable explanation or supporting record.

Record each genuine timing difference rather than forcing the balances to agree. An issued cheque that has not yet cleared, or a deposit made just before the reporting date but credited afterwards, may belong on a reconciliation list. Confirm that it clears after the period end.

Once you correct the first unexplained difference, recalculate the running balance and find the next one. Working in order prevents one mistake from being hidden by later adjustments.

• Look for a missing or duplicated amount.
• Check whether money in was entered as money out, or the reverse.
• Compare dates, references and transaction order.
• Identify bank charges, interest and direct deductions.
• Document genuine timing differences separately.
• Avoid unexplained balancing entries.

Use separate checks for bank, cash and donor funds

A small organisation may use one bank account for several projects. In that situation, the donor fund balance will not normally equal the whole bank balance. You need two connected but separate checks.

First, reconcile the complete bank cashbook to the bank statement. Include every transaction in the account, not only transactions for one donor. Run the balance in statement order and explain outstanding items.

Second, maintain a donor ledger. Begin with the donor's opening fund balance, add donor income and subtract expenditure charged to that donor. The resulting balance is the unspent donor fund according to your records.

If money moves from the bank to a cashbox, treat the movement carefully. For combined bank and cash records, it is a transfer between locations, not new income or programme expenditure. The actual expense is recorded when the cash is spent for the project.

For petty cash, calculate a running cashbook balance after every receipt and payment. Count the physical cash at the reporting date and compare it with the cashbook balance. A negative running cash balance is a warning because a cashbox cannot physically pay money it does not hold. It may indicate a missing cash receipt, a wrong date or a payment recorded in the wrong cashbook.

Keep running-balance checks at transaction level even if the donor template asks only for totals by budget heading. Prepare the detailed ledger first, check it, and then summarise the verified transactions into the donor's categories.

• Reconcile the whole bank account to the statement.
• Calculate the donor balance in a separate donor ledger.
• Record transfers between bank and cash without treating them as expenditure twice.
• Compare the petty-cash book with a physical cash count.
• Summarise by budget heading only after checking transaction-level records.

Know what the check cannot tell you

A running-balance check is strong at finding omissions, duplicates, sign errors and transactions recorded in the wrong order. It does not prove that the underlying activity was proper.

A payment can appear once, for the correct amount, and still be charged to the wrong project. A receipt can support a purchase but lack the required approval. A correctly entered transaction can fall outside the grant period or exceed a budget restriction.

After the running balance agrees, review each reported transaction against the donor agreement and your organisation's procedures. Check the project, budget line, reporting period, description, approval and supporting record.

Also compare the detailed ledger totals with the figures copied into the donor template. A correct ledger can still become an incorrect report if a subtotal is copied into the wrong row or a spreadsheet formula excludes part of the transaction range.

Keep evidence of the completed checks. This might be a dated reconciliation sheet, a spreadsheet difference column showing zero, a list of timing items and brief notes for corrections made. The purpose is not to make the file look complicated. It is to make the route from source record to reported total understandable.

• The transaction belongs to the correct donor and project.
• The cost falls within the reporting and grant period.
• The budget heading is correct.
• The amount has suitable approval and support.
• Ledger totals agree with the donor template.
• Any corrections or timing items are documented.

Questions

A report can reach the correct closing balance by the wrong route. Recalculate the balance after every transaction, compare it with the source record and investigate the first unexplained difference. Then complete the separate checks for eligibility, coding, approval and support. Honest Record can automate parts of the matching and running-balance checks, while the organisation remains responsible for reviewing the underlying transactions and donor rules.

More guides

• Matching cash withdrawals to several receipts
• Organise receipts monthly and report faster