"Dear customers, when it comes to control over checking accounts, do as we say, not as we do."
Bank Controlled DDA Accounts
Control over our own DDA accounts used for operational or administrative purposes is just as important for us as it is for our customers. The number of DDA accounts that we use for various purposes seems to be growing exponentially as we get larger and/or extend our reach into electronic banking and the Internet. These DDA accounts are found throughout the institution including human resources, branches, accounting, the note department, and the holding company. In many instances they are created without a thought to control and reconcilement. This is especially true in the administrative departments like human resources and the holding company. But I have found many Bank Controlled DDA Accounts at the branches that get little or no review or reconcilement. Lack of control over these accounts is an opportunity for an employee to commit undetected theft and can be a serious internal control weakness.
The process needed to create good internal control over your Bank Controlled DDA Accounts is basically as follows:
Create a report writer program that searches for all DDA accounts with the tax id of each of your companies. Remember that if you are a holding company with a number of subsidiaries you must use the tax id of each company.
Determine where each account is located, it's use, and who is responsible for the account. The first time you do this, if your bank is like most of my clients, the process of determining what the account is used for and who is responsible will require some detective work. The common problems are that the accounts are not clearly labeled and there is no one person who has a good institution wide picture of their uses. It is a good internal control procedure to require that each account be set up so the title and address line be clearly labeled. For example:
Holding Company
Payroll account
Accounting
Attention: Mary Smith
Ensure that each account is being reconciled monthly or more often using basic checking account reconciliation procedures. Remember that segregation of duties requires that the personnel creating the data should not be the one reconciling the account. This is also a common weakness found in many bank controlled account processes.
Ensure that each account is on the department's monthly certifications.
Close accounts that are no longer in use. Many users no longer have need for their DDA accounts and forget this basic control procedure.
Ensure that internal audit does a review of these accounts either during department audits or as part of an institution wide Bank Controlled DDA Account audit.
Is there a Bank Controlled DDA Account internal control weakness in your control structure? If so, make it a priority to fix this weakness now.
-----------------------------------------
Gene Bucciarelli, MBA CPA is the principal of Internal Control Systems, a community bank auditing and consulting firm. He can be reached at genebucc@aol.com and 925.828.7360.
BankersOnline is a free service made possible by the generous support of our
advertisers and sponsors. Advertisers and sponsors are not responsible for site content. Please help us keep BankersOnline FREE to all
banking professionals. Support our advertisers and sponsors by clicking
through to learn more about their products and services.
Print Friendly!
Email This Article!
Discuss NOW!
