Proof work

Our bank is converting to imaging within the next month or two. Each branch will have a "proof" machine and will be proofing their branches own work. Are there any no-no's here as long as the teller doesn't proof his/her own work? I'm pretty concerned about this and need to know how to advise.

I see this arrangement quite a bit. IMO ... you should be sure the same controls are in place at the individual branches as when your bank had a centralized proof function. One of the primary controls is to make sure proof employees do not have incompatible duties in other areas of the bank (e.g., teller, handling returned and hold-over items, reconciling correspondent bank accounts, or preparing/mailing account statements). Also, another good control procedure would be to rotate the proof operators on periodic basis (if your staffing allows this). And two more items -- do not let proof operators make changes or corrections directly to the source documents ... and see if you can "train" the proof operators to run G/L tickets only if they include two separate initials of bank employees (the person who originated the ticket and the person who approved the ticket) -- maybe for larger-dollar entries.

That's the problem...the bank is expecting the tellers to do the proofing and make the necessary corrections. Where can I find some documentation to back me up when I explain to the BOD next week that we can't do what they're asking? I'm really in a pinch.

Doesn't the tellers have to log into the computer in order to begin the balancing? If each teller has their own log on and the checks are encoded with sequence numbers, theoretically in the event that you would need to, you could match the sequence number up to the person that was balancing.

Just a thought. We don't have this yet but I've seen demo's.

The FFIEC IT Booklet on "Operations" provides examination procedures on imaging systems and proof operations. Refer to p.59-60 this booklet -- see link below. These pages include regulatory examination procedures and steps to ensure appropriate separation of duties.

http://www.ffiec.gov/ffiecinfobase/booklets/operations/operation.pdf

Chiquita Banana ... with the arrangement you described ... are there security controls and/or edit checks within the system that identify instances when a teller may be proofing his/her own work? (I wonder if the teller system and proof software "communicate" with each other?)

Otherwise ... even though an audit trail exists ... the tellers are basically on the "honor system" to ensure they don't proof their own work. If the internal auditor included this area as part of the internal audit program (e.g., periodic spot checks or something similar on an unannounced basis) ... it would help mitigate the risk of a potentially dishonest teller.

Many of these new distributed image capture solutions are intergrated directly into the teller solution. In those cases, the tellers are "proofing" their own work, capturing images, even potentially making customer adjustments at the time they process the transaction for the customer. The "back counter" solutions that are not integrated are more common, and you might want to create a rule where the teller that ran the work doesn't image/proof their own work. Or maybe not. Since you have to sign-in to these systems, you have an audit trail on who did what that you can fall back on. That might be enough of a control for your bank. It is for many switching to distributed image capture.

Thank you all for your input. Now I know what questions to ask since I am not "high tech". I really appreciate you all. Thanks!

I think that you are going to find as you move toward the process that you will still have to balance the items and sort them as to whether they go to Fed, other banks, on-us items etc. All of this will have to balance. You will also have to deal with systems going down. When it's centralized and one machine goes down, you move to the others. When it's spread out over several branches/tellers, you have the opportunity for lost time trying to keep more machines running and how are we going to process this work when we don't have a machine working. Also, more hands in the pot means more room for error.

I think in the long run, you will find that balancing and corrections especially of main runs should be centralized.

We have recently gone to an all image environment. The tellers actually image the transactions as they happen at the window. The teller cannot "fudge" the amounts because of the software. It requires the transaction to balance before the transaction can be closed. The same is true of the software for the back counter capture. We have several people that run the proof machine through out the day. As smcfarland stated, the items have to balance. If a teller does key in something wrong or it does not balance correctly we will know. Also, the teller is not the final one to proof the work. We have a proof and clearing department that views the transactions and looks for mistakes. Early in our imaging days, the teller would capture the work, but did not see images, so they could not make changes. This was done at a data center that processed our work.

I'm feeling better - still not "high tech". Thank you for your input with this.