The bulk of this Publication originated in January 1998 and was . UPTD: June 04, 2008
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TO: Interested Ministries FROM: Jim Bramer, Retired Auditor-CPA
Matthew 7:7 FILE: 0066-02/allRE: Check Signing at a Ministry Originated January 1998
Below is a hypothetical Online Email (EML) thread between any one of the following Ministry Finance Team (MFTeam) members: PAT (Ministry Chief Executive), LEE: (Ministry Volunteer Treasurer), or FRAN: (Ministry Computer Bookkeeper) and Jim@bcidot.org Click here and go to List of threads (THRDs) at www.bcidot.org
TO: JIM - - - FR: PAT
Fran and I are EXTREMELY frustrated with our Ministry's required "two-signature" check signing policy. Every one of our checks require signatures by two different unrelated Ministry officials; at least one Signer is a volunteer Board Member. All too often we have to chase down one or two Board members in order to get bills paid timely. Also through no fault of ours, we sometimes MUST process a check right now!
We know that it is 'taboo' to pre-sign checks, but ..... getting two signatures is such a "PAIN". I have to admit that we will often write out a check that includes the Payee, but not the amount...then fill out the amount later. I am sorry to admit, but our officials have even pre-signed blank checks. I know .... I know!!!! Jim, we know that people have stolen money from Ministries, and we genuinely want to be good financial stewards, but there has to be "A BETTER WAY" as we simply waste too much time in this process. Any Ideas?TO: Pat - FR: JIM
Pat, some background first. This dual signature practice stems from the need to comply with financial internal control principles. The ideal Ministry financial internal controls include:
- Expenses need to be pre-authorized;
Within these constraints, an official buys something; An unrelated person pays the bill and produces a check; Two independent officials sign the check --- each view the various buying documents and; The last one voids them so they cannot be fraudulently re-used. There are regular "Budget to Actual" reports in order for the right officials to monitor what HAS ACTUALLY HAPPENED as compared to what SHOULD HAVE HAPPENED.
There should prudently be 'more', rather than 'fewer', people involved when you are acting as a financial trustee and disbursing someone else's money; this way people are checks and balances on one another. Further, it takes more people to get into collusion and do something wrong.
TO: JIM -
This is good, Jim, to get the 'big picture' and I value your comments and referenced resources above, but do we have any alternatives that still allow us to be within these valuable principles?
TO: Pat
Yes, I believe you do; please consider the following:
A> If some disbursements are 'emergency' in nature and must be paid right now, you might consider the following:
- Set up separate limited sums of money for specific purposes. Examples are your existing $100.00 Petty Cash, or have a separate checking account, for a sum like $1,500.00. Certain officials are entitled to immediately disburse money from these sources up to that limit only. Click Here for some details.
B> When used properly, mechanical Check Signing Devices can contribute to efficiency within these Internal Control principles.
C> It is now VERY proper and efficient to pay bills electronically. But the process MUST be well documented and controlled since there is a limited paper trail involved. This process especially applies to repetitive and/or regular vendors. Go to 0072 for more information about these un-signed transactions.
TO: JIM
Very helpful, Jim.... do you have anything else that might help us along these lines?
TO: Pat
Yes, below is a copy of my generic memo to "Chief Financial Officer" Joe XXXXX , of a somewhat larger Ministry than yours; but it should give more insight on this subject.
TO: Joe XXXX FROM: Jim Bramer
RE: Checking Signing Protocol DATE: xx/xx/xxxx
Joe ....
Thanx for quality time earlier today, Joe. As promised, below are some thoughts as I "debrief" our comments resulting from today's meeting on this "Check Signing Protocol" topic. I look forward to closure on such matters 'downstream'.
******
W H A T (does the Ministry want to accomplish??)- - -
The system needs to do at least the following:
1> Insure proper Ministry internal financial controls. This includes division of such duties to preclude collusion and improper disbursing of the Ministry's money, or the people involved are an independent check and balance on the other.
2> Pay authorized Ministry bills more efficiently whereby the Ministry: ALWAYS pays bills in time to get discounts; but INSURES that "you jump through the necessary hoops'" to insure expense/bill authorization; and NEVER have to "leave the office and run down a volunteer" to get required signatures.
H O W (might the Ministry go about accomplishing these goals???)
First, I suggest that the Ministry view the people involved at different "People Levels", as follows:
AA Level" --
Staff who incurs the expense (Usually a Ministry Department Head).
"BB Level" --
Staff who processes the documentation within the Ministry's "Accounts Payable" Department.
"CC Level" --
Named Staff who are NOT directly involved in "Level AA or BB" functions; such as applicable Supervisors within the Ministry's office.
"DD Level" --
Staff, or Volunteers, NOT involved in any of foregoing processes.
- - - ANTICIPATED PROCESS - - -
- Pre-approval of expense via a Budget process ...
- Purchasing Agent/Department Head (AA Level) makes an authorized purchase and provides (often via use of the use of a rubber stamp) authorization, Chart of Account coding, and related documentation to your "Accounts Payable" department.
- The "Bill Payment" process includes verification of "AA Level" authorization and coding by a "BB Level" person; this process ultimately results in either 'cutting' a check for processing below, or payment of certain bills electronically.
- The "CC Level" person uses a "(1)DEVICE" to place a manual signature alternative on the check. This "CC Level" person functions as the first of two necessary signatories; this person is privy to the "DEVICE"’s password and other of the "DEVICE's" security features. This "CC Level" person also verifies validity of bills paid electronically, including certain Post-approval Documentation steps appearing below.
- The "DD Level" person physically signs as the second authorized signatory on the check and is satisfied with the accompanying Documentation etc. "Documentation" includes duplicate copy of check and coded supporting invoices/check requests/statements etc.
- Any "Level" person timely processes the check on to the Check recipient.
Post-approval of check (After the fact) ....
The appropriate official (CC or DD Level) then views the 'Documentation' and writes dates and writes something (perhaps signs/or simply initials) on the duplicate copy of the check indicating that the paper check or electronic check is proper.
Then a Staffer (BB Level) files the documentation in the approved manner (alpha-numeric, etc.) so it can NOT be fraudulently re-used. And it can be readily located for authorized internal and external reference or auditing purposes.
(1) A "Check Signing" mechanism, or DEVICE, that 'presses' someone's name on a check but includes such features as Passwords and other safety features. The person controlling this DEVICE is a virtual authorized manual Check Signer. The name within the DEVICE is usually the Ministry's Board, or Corporate, Treasurer (or Corporate Board Chairman); but, not anyone at the foregoing "BB or CC Levels". This DEVICE is extremely volatile and MUST ALWAYS be in a controlled safe place.e.
Of course, Pat, the foregoing does not "cover all of the bases", but there are some procedural possibilities here that might be responsive to the frustrations of you and Fran .... and yet accomplish the necessary Financial Internal Controls that you and I both desire.
By the way, you might find the following "Check volume and analysis" of an actual Ministry of interest.
Check volume and analysis
Jan thru
. . . . Checks . . . .
January
%
February
%
March
%
March
%
Online Payments
31
21%
18
16%
25
17%
74
18%
Manually Signed
117
79%
98
84%
122
83%
337
82%
Total
148
116
147
411
Two signatures for $1,000 and over
13
9%
17
15%
12
8%
42
10%
TO: JIM
Thanx, Jim, this adds perspective and helps a lot ..... will be in touch as we think through implementing some of these options.
The bulk of this Publication originated in January 1998 and was . UPTD: June 04, 2008
HOME | ABOUT US | OUR PURPOSE | SITEMAP | COMPUTER FUND ACCTG | HELPS | GLOSSARY
(1) An Onliner Document, or WRIT (Writing), may be applicable to all Ministries, or it may be designed for just groups like: Evangelical Church, School, Missionary Agency or Organization, Christian Camp / Conference, or other named group.
(2) WRIT formats include the perspective of Jim@bcidot.org via IOMs (Inter-Office Memos) to the Ministry Finance Team (MFTeam); THRDs, a hypothetical Online conversation with members of the MFTeam; GLEANINGS, or Scripture within context of the MFTeam; FWIW; A periodic editorial (For What it is Worth); TRUISM, or believed Ministry Finance principles; and via FAQ, response to Frequently Asked Questions
