I'm interested in hearing what controls other banks implement over general ledger entries. Currently, we require 2 sets of initials on all general ledger tickets..one of which has to be an officer's. I'm not sure this is really effective...(a)initials are easily forged and (b)I'm not sure that the officers pay close attention to what they are approving...plus, the requirement slows down the process of the work getting to the proof department. So, we are looking for ways to improve our procedures, but still maintain some control. I'm open to all suggestions!

Stay with the two initials required with one being an officer as that is standard procedure throughout the banking industry. And yes, it’s a hassle and slows thing down, but you just cannot have one person set up to pass GL entries without “supervision,” meaning in this case a second initial.

If you continue to be worried about the effectiveness of the procedure, perhaps someone needs to review all GL tickets the next day. Also, most systems have reports that may be helpful, like a report that tells you if a debit has been processed to a credit only account, etc.

Anon,

Normally I am not one to reiterate what another poster has already said however, almost the identical problem reared its ugly head over the past few days. So I am gonna do it anyway!

I echo what Grist has said. I have had numerous calls and e-mails in the past 2 days from our tellers and loan processors and others complaining that it's too difficult sometimes to find an officer to initial the ticket. I didn't say it but I thought

• "Yeah right! Banks pass out officer titles more than toaster ovens or cheap pens!"
• "You can be blindfolded and still hit a bank officer easier than a piñata!"
• "Your chance of getting an officer title is 10 times better than getting a raise!"

You're not being unrealistic. It raises my suspicions when tellers, processors, etc. ask us to reconsider the process. Require the two signatures and establish a daily, weekly, or monthly review of the tickets just to be sure that the procedure is being followed.

MarkB

More importantly than requiring the two intitials is having an ongoing internal control system consisting of timely account reconciliations by a disinterested third party and periodic audits of your high risk GL accounts. While the two initial rule sets up a good front for an appearance of security (however false it may be), it really does little to prevent fraud in the cases that I have investigated.

Although I do recommend this policy requirement, I ditto Randy's thoughts. I would further add though, that the procedure can be strengthened by requiring second approval by a knowledgeable supervisor vs. Officer. I want someone who knows what they are looking at to do the approval. It's still not fail safe, but it can add a little more sincerity to the requirement.

I have also seen the "Officer" requirement work against the intent. Departmental supervisors may not always have an official officer status, but may be the most appropriate to do the approval.

I'll second your post, in that senior non-officers are very often perfect for the approval task, as long as they don't approve their own tickets.

One method that I've used to cut down on required approvals relates to fee income. Switching fee income, e.g. cashiers checks, etc. to a bancontrol deposit account that is swept into a GL account eliminates expense (GL tickets are more expensive than deposit slips) and improves production. Of course, periodic audits needs to be performed to make sure the fees are being credited.

Grist, I am interested in hearing your process. The small/nominal entries that frequently occur are usually the items that "start the squeaking". How does your automated system know whether a fee has been charged or not?

Addition to my previous post: The bank environment that I have always lived in requires me to tailor my control recommendations. With a F/I size in excess of $500M and several branches that may range from 50+ employess to one with 4 employees, dual control is always an issue. To make a Fox News like stmt(fair and balanced ) I can, in some cases, relate to the cries of inconvenience. In those instances, I still do not agree in adopting a "forget controls" attitude. For procedures that require the approval or presence of an Officer, I have often recommended that policy allow mgmt the ability to specifically appoint or designate another employee to assume the responsibility if an officer or supervisor is not available.

I also encourage Sr. mgmt to stress to those who are approving entries and reconciliations that they are accepting responsibility for their validity and accuracy, and may be held accountable for errors and/or fraudulent trans. Trust should NEVER be used as a control!

Trust in God, but tie up your Camel!

Anyway, depending on how your system works and the level of automation, if it’s necessary to generate fee income tickets all day long, they can (in some environments) be set aside by each teller or each group of tellers and batched as one entry or directed to a bancontrol deposit account with that account either cleared daily if a sweep element is part of the system or monthly by a designated person.

As stated above, the use of GL tickets is an expensive method of passing small entries and deposit tickets are inexpensive. Line people are actually correct RE: it’s a time consuming chore to have to approve GL tickets for such small amounts. Just run the income to a bancontrol account and clear it daily (sweep) or periodically (manual).

A piecemeal audit of a random day, comparing charges to account activity should verify that entries are going being misrouted to, say, employee accounts. Even a month-to-month comparison of fee income within each category is sufficient.

It’s simply a time and motion scenario when you are working with $1. Why spend 95¢ to finalize payment? Why not just have worker bees and officers go through the signing/approval dance only if the amount is also of substance?

I had similar concerns about the lack of dual signatures on gl tickets several years ago. We consulted with our CPA's and came to a compromise that certain gl accounts needed dual signatures (i.e. Allowance for Loan Loss, Teller Differences over $x)This seems to be a happy compromise.

Okay, I tried not to put in my two cents worth....but it is a slow day here so here it goes. There is a time and a place for all internal controls. We can implement controls to assist in the prevention and detection of fraud, but they only work if they are practical in nature.

I have noticed during my reign as auditor that there are a lot of control programs that may be misplaced. For instance, we have certain departments and certain transactions that prompt the two signature requirement...(such as the trust department and wire transfers), however we do not require every GL ticket throughout the bank to have two signatures as this ties up time and resources from our employees and I am not convinced this method is much of a deterent. Perfect example, I was performing an audit and I was reviewing an account that they had not been reconciling...in oh say...weeks!!! Anyway, when I was called in to dig through their mess I began looking at the GL tickets and trying to establish where they screwed up and when I began asking the officer, who had co-signed the tickets, what these entries were for, the response was "I don't know, I just sign the tickets."

My own opinion is that a stronger control is through the reconciliation process, whether it be daily, weekly, or monthly determined upon the risk associated with the account. Also, since we are a smaller bank we have the luxury of reviewing a GL report daily and responding to unusual variances or items. There are other controls you can implement to compensate for not having to track down an officer or even a supervisor to run a ticket. Actually, you may even have many of these types of controls in place, so maybe you could make a recommendation based on a risk assessment of where you could ease up in some areas and remain status quo in others.