Internal Control and Banking
V. Internal Control & Banking Relationship
Basic Controls Internal control refers to a system of financial checks and balances designed to minimize errors or misappropriation of assets, maximize the detection if it occur and protect the association overall. It is the treasurer’s responsibility to safeguard the assets of the association by ensuring these controls are in place. One of the basics of good internal control is that no one person handles all aspects of any financial transaction. This creates the system of "checks and balances." An example would be the person who approves a bill to be paid should not be the same person who signs the check to pay it. However, it is likely that your association does not have paid staff support, there are only one or two bank accounts (checking and savings) and there is only one person handling everything - the treasurer. It may not be easy or practical to involve several people in all financial transactions and therefore you may assume that your association will have poor internal control. In spite of this situation, there are some possible safeguards to alleviate this potential problem.
Listed below are some basic internal controls applicable to most local associations. Refer to Section IX – Financial & Operational Standards – for Internal Control Policy and additional internal control activities and questions.
1. Cash Receipts:
* Incoming mail should be opened and listed by persons other than those with access to cash receipts journals and accounts receivable records. The purpose of making a list of all checks and cash received is to insure that a record is made of the amount that was received. * A person with no access to cash should compare cash receipts records to deposit slips. * The person opening the mail should stamp Receipts/Checks “For Deposit Only.” * Pre-numbered receipts should be given for contributions, gifts, etc. * Persons other than those opening
Basic Controls Internal control refers to a system of financial checks and balances designed to minimize errors or misappropriation of assets, maximize the detection if it occur and protect the association overall. It is the treasurer’s responsibility to safeguard the assets of the association by ensuring these controls are in place. One of the basics of good internal control is that no one person handles all aspects of any financial transaction. This creates the system of "checks and balances." An example would be the person who approves a bill to be paid should not be the same person who signs the check to pay it. However, it is likely that your association does not have paid staff support, there are only one or two bank accounts (checking and savings) and there is only one person handling everything - the treasurer. It may not be easy or practical to involve several people in all financial transactions and therefore you may assume that your association will have poor internal control. In spite of this situation, there are some possible safeguards to alleviate this potential problem.
Listed below are some basic internal controls applicable to most local associations. Refer to Section IX – Financial & Operational Standards – for Internal Control Policy and additional internal control activities and questions.
1. Cash Receipts:
* Incoming mail should be opened and listed by persons other than those with access to cash receipts journals and accounts receivable records. The purpose of making a list of all checks and cash received is to insure that a record is made of the amount that was received. * A person with no access to cash should compare cash receipts records to deposit slips. * The person opening the mail should stamp Receipts/Checks “For Deposit Only.” * Pre-numbered receipts should be given for contributions, gifts, etc. * Persons other than those opening