Pub. 62 2021-2022 Issue 1

37 FALL 2021 Suggestions An organization’s internal controls require a “dual control” for making or receiving payments of any kind. Never have the same employee write the checks and reconcile the bank account. A best practice is always to have at least three separate employees to: 1. Have one employee write the checks; 2. Require a second employee to reconcile the bank account(s); and, 3. Involve a third employee to sign to authorize payments. The person who opens the mail should never be the same person who is responsible for accounting functions. For example, credit card statements frequently include “checks” to use on the credit card account. Many businesses have discovered, after the fact, that those credit card checks are used for an employee’s personal purchases. The check then appears on the credit card account. The same employee who writes the dealership’s checks for payment, i.e., to the credit card company, is now the same employee who opened the credit card statement and used the credit card checks for personal use. Reconciling credit card statements should be done by an employee other than the person writing the checks for payment and opening the mail. The person who opens the mail should keep track of checks in a physical log of what checks are received and when. The checks should then be given to an accountant or bookkeeper with a copy of the list. According to one accounting firm, one of the best ways to protect cash is by separating duties. An effective cash control system not only separates responsibilities, but also minimizes the number of people who handle the cash before it is deposited. Divide the following duties by having different employees to: • Receive and deposit cash • Record cash payments to receivable records • Reconcile cash receipts to deposits and the general ledger • Follow up on the collection of returned checks • Distribute payroll or other checks Cash accountability requires proper documentation. It also requires that the cash is properly secured and traceable to a specific cash handler. Can you answer: • Who has access to cash? • Why do they have access to cash? • Where is the cash at all times? • What occurs from the transaction’s beginning to end? Best practices: • Record cash immediately upon receipt • Give the customer their receipt • Keep cash secured • Document transfers • Have supervisors verify cash deposits • Require supervisors to approve all voided refund transactions • Perform periodic “surprise” cash counts The Assistant AG who handled the prosecution for the Attorney General’s office gives the following advice: • Never put all the authority for accounting in any one person’s hands. • An independent third party, independent from the controller, must check the work of the controller and the accounting department. • Cash is the most difficult to track, and proper paperwork and reconciliation are a must. A dishonest employee, once allowed in, can wreak havoc on the dealership’s employee morale, line of credit, insurance expenses, and franchise relationships. Unfortunately, this employee worked at other dealerships before his conviction.  Thepersonwho opens themail should never be the same person who is responsible for accounting functions. For example, credit card statements frequently include “checks” to use on the credit card account.