The internal control checklist for check signers vary between organizations. Each company must determine a sound plan for risk management in order to eliminate the potential for dishonesty and prevent fraud. For some entities, the process starts with ordering checks and ranges from check storage to the requirement for two signatories or special approval for checks that exceed a specific amount. Periodically review the rules to ensure they encompass the best practices.
Put internal policies or controls in writing that spelled out the organization’s controls for checks from ordering and receiving to actually signing. Design tools consisting of documents and records to records all check writing transactions and events. Make sure the facility has adequate storage and computer programs have adequate authorization security.
Blank Check Stock
Many organizations have individuals or custodians who have the responsibility to keep the control sheet for blank check stock. The process may entail the following steps: recording the delivery date of blank checks and indicating the sequence of the checks received. Enter missing check numbers on the control sheet. The individual who receives the batch of blank checks must date and sign for each shipment. In addition, record the date and sequence of unused checks returned to storage. Verify the last check issued; this ensures keeping the check sequence intact.
Independent Checks & Balances
Independents checks and balances make for best practice when it comes to internal controls for check signers. This includes ensuring the amounts of the checks, reconciliation have the correct amounts, including clerical checks, comparing assets with recorded accountability, computerized controls. In addition, review management of accounting reports, such as aged trail balance reports and other automated reports.
Sometimes it may not be practical for an organization to divide tasks; in this case, the administrator should conduct routine reviews to ensure the integrity of the check writing process. Only sign checks with the proper documentation and make sure that the individual signing the checks mails the checks from the office. When possible, do not return the checks to the person who maintains cash disbursements and accounts payable records. As a matter of policy, do not make out checks payable to "Cash.”
Establish a minimum of two separate bank accounts for your company. Deposit all funds and receipts in the first account. Transfer just enough funds into the second account to cover the checks you write. A board member or other designated individual should have the authorization to transfer funds into the account. In addition, create a separate account for payroll; again, transfer only the amount necessary to meet the payroll.
Some boards may require two signatures on checks. However, getting two signatures may be cumbersome and require having blank checks signed in advance. If the policy does not work for your organization, change the policy to a requirement of one signatory up to a specific dollar amount. Also, set up a direct deposit for employees and use a third-party payroll service.
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