As you steward the financial resources entrusted to your ministry, one way to deter fraud is to establish internal controls around your checking account activities. Here are some best practices you should consider adopting:
Examine your bank statements quickly: When you opened your checking account with your bank, you entered an agreement (usually communicated through your account disclosures) that requires you to review your bank statements promptly and report losses as soon as possible. If you delay this review, fraudulent activity can go undetected. Even worse, it may escalate and you may become liable for the loss or future losses. Be sure you understand the requirements in your account agreement for timely statement review.
Use online banking features: Most online banking systems have a feature that allows you to set up account alerts that can be configured to inform you when checks clear and if balances fall below specific thresholds. Alerts are a strong tool in your early fraud detection arsenal.
Instill segregation of duties for check responsibilities: “Opportunity” is a common risk factor for internal fraud or embezzlement. You can minimize opportunities to commit fraud by implementing an internal control known as segregation of duties. An example would be assigning different people in your organization to prepare and reconcile checks. This way no transaction is handled by only one person from beginning to end.
Perform spot checks: Performing occasional surprise checks of the processes you have put in place shows you if those processes are performing as they should and that duties are indeed segregated.
Keep your check stock secure: You can keep check stock secure by restricting access to it. One good option is a locking cabinet that is accessible only to those individuals who are responsible for issuing checks. A cabinet with two locks is even better. The check reorder form should also be stored securely. Otherwise, a forger could easily reorder checks with the form and have them shipped to another location. It’s also a good idea to do occasional surprise inspections of your check inventory.
What internal controls do you have in place to protect the funds in your checking account?