Performing a Treasury Audit: Making it Valuable

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Performing a Treasury Audit Making it Valuable

• TEXPO 2001
• Mike Gallanis, CCM, CPA, Principal
• Mike Hunstad, Consultant

2
The Facts.

• 360 billion is left idle in DDAs each
  day
• A surprisingly large number of organizations
• Dont know how many bank accounts they have
• Fail to utilize the proper technologies
• Dont maintain adequate policies and controls
• Fraud is on the rise - an estimated 1.2M
  fraudulent checks enter the banking system
  daily
• Are you using the optimal technology and
  banking structure?
• Are internal controls sound?
• Are policies in place and are practices in
  compliance?

3
The Question.

• How does your company measure up???

4
The Issues for Treasury.

• Is cash utilized effectively within your
  company?
• Are core treasury operations/processes
  efficient?
• Are you using the optimal technology and
  banking structure?
• Are internal controls sound?
• Are policies in place and are practices in
  compliance?

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Treasury Pre-Audit Quiz

• 1. Do you know exactly how many bank accounts
  your company has around the globe? _____
• 2. Does your company perform a monthly review of
  all bank balances and account analyses? _____
• 3. Do you utilize sweep accounts? _____
• 4. Do you have clear documentation identifying
  current authorized signers, transaction limits
  EFT limits by person, by account? _____

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Treasury Pre-Audit Quiz (continued)

• 5. Does your company use a treasury workstation?
  _____
• 6. Does your company use positive pay on all
  disbursement accounts? _____
• 7. Do you have current policies in place
  governing debt/investment practices? _____
• 8. Do you formally review services/pricing with
  your banks at least once each year? _____
• 9. Are reconciliations of all bank and suspense
  accounts completed within 2 weeks of statement
  receipt? _____

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Treasury Audit - What is it?

• The treasury audit is an invaluable exercise
  designed to rapidly assess treasury related
  controls, processes, policies
• Assess where you are now
• Define where you want to go
• Plan how to get there

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Why do a review?

• Things change over time
• Staffing/Management
• Business structure/geography
• Services
• Technology
• Proactive rather than reactive
• The treasury audits will address issues that are
  outside of the scope of other audits
• A chance to identify new opportunities
• Opportunity to update policies/procedures

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The Scope

• Treasury Operations
• Processes, tools and technology which support the
  Treasurers mission
• Resources
• Controls
• Banking Activities
• Specific objectives
• Bank relations
• Architecture/services

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The Review of Treasury Operations

• The Areas to Examine
• Controls, Policy Compliance, Procedures,
• Opportunities
• Daily cash positioning
• Collection
• Disbursement
• Electronic Payments
• Inter-company transactions
• Short-term investing/borrowing
• Accounting/reconciliation
• Risk management
• Foreign exchange
• Reporting/performance metrics
• Other

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The Review of Banking

• Bank Accounts
• Number and purpose
• Structure
• Administration, controls
• Bank Service Utilization and Costs
• Services used/technology
• Pricing structure/balances
• Bank compensation management
• Relationship Management
• Annual review
• Performance tracking/reporting
• Periodic re-bid of providers/services

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When to Perform an Audit?

• When things are changing due to
• Merger/acquisition
• Significant growth
• New products, new locations
• Changes in the organization structure/personnel
• Difficult financial times
• Different situations call for different types of
  review...

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When to Perform an Audit?

• When things are stable, but ..
• Company has new management
• Significant time has passed since last treasury
  audit
• You suspect that something may be wrong or
  broken
• You are considering new technology

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The Audit Process

• Plan the work
• Set objectives
• Identify resources
• Define timeframes
• Define methodology
• On-site interviews
• Observation, testing
• External interviews
• Research
• Data gathering ( questionnaires )

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Types of Data Required

• Data gathering possibilities
• Organization charts
• Process flow documentation
• Policies and procedures documentation
• Remittance or disbursement data
• Set of management reports
• Bank account list
• Bank statements/reconciliations
• Bank account analyses
• Cash position worksheets
• Cash forecasts
• Confirmations
• F/X exposure documentation

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Resources Involved

• Internal
• Treasury staff
• Parent company Staff
• Internal consulting group
• Need cooperation of other internal resources
• Accounting, Systems, Audit, A/R, A/P

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Resources Involved

• External
• Independent consultants
• Banks
• Use external resources when.
• Limited internal resources
• Need objectivity
• Need a fresh approach
• Benchmarks
• Need technical expertise

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Execution

• Work the plan...
• Perform review, and analyses
• Do the math count, add, multiply,divide
• Draw - process flows, information flows, cash
  flows/bank accounts, integration with systems
• Timing of information/cash flows
• Collections review
• Technology assessment
• Gap analysis
• Compliance review (policy Vs. reality)

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The Results of the Audit

• Identify recommendations
• Quantitative cost/benefit
• Qualitative
• Implementation Planning
• Document steps
• Identify the impact
• Schedule

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Benefits to Expect

• Control improvements/less risk
• More efficient processes/procedures
• Quantifiable improvements in cash utilization
• Higher level of staff performance
• Improved information/greater access

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Benefits to Expect

• Reduced processing costs
• Time savings
• Streamlined banking network
• Application of new techniques, technologies
• Increased cash management awareness
• Strategic focus

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Post-Audit Steps

• Document and share your findings
• Be sure to list and quantify all of the
  savings/benefits
• Time savings
• Hard dollar savings (i.e., errors in billing)
• Projected savings from process improvements
• Costs/penalties that were avoided
• Estimates are fine!
• Dont be afraid to go back to service providers
  to seek compensation for errors
• Learn from the process

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Treasury Strategies, Inc.
.

• Founded in 1982
• Consults on matters related to
• Treasury operations
• Treasury performance
• Treasury technology
• Payment systems
• Liquidity management
• Clients include users and providers of treasury
  services
• 20 consulting professionals
• Offices in Chicago and New York

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Thank you, My time is Up.