Pub. 6 2011-2012 Issue 3

www.nebankers.org 12 Extraordinary Service for Extraordinary Members. SECURITY OFFICER’S BY-WORD A BANK EMPLOYEE COMPARED THE total of the reconciling items plus the amount shown in the account by the correspondent bank to the amount in the bank’s general ledger for the correspondent account. The balancing function ro- tated regularly between three different people. Occasional balancing problems led to the discovery of inadvertent er- rors, which were quickly corrected. A new employee, who was being trained to help with the balancing of the correspondent account, started by deleting all of the prior entries on the spreadsheet. This revealed that the to- tal in one column was $67,000 instead of zero. After researching the issue, the trainer found that a fixed number had been buried in a formula, which added an extra $67,000 to the total on one side of the spreadsheet. The employees then used a calcula- tor to add up the columns on the previ- ously printed reconciling spreadsheets. They discovered that one column had not been added properly for more than ninemonths and the amount of the dif- ference had grown over time. The bank then determined that one of the employees, who sometimes reconciled the correspondent account, had been stealing money. She was hiding the theft by debiting the cor- respondent account the day before she was scheduled to balance the cor- respondent account, then changing the formula so the total would be the actual total of the reconciling items plus the amount she stole. As long as no one added the columns by hand, the correspondent account appeared to be in balance. At another bank during a routine exam, a meticulous examiner added the demand deposit accounts, which resulted in a total of over $3 million more than the control total shownon the demand deposit account general ledger (DDA GL) of the bank. The examiner asked the bank to provide its regular reconciliations of the deposit accounts to the control total, which appeared to always balance. The bank generated its normal balancing report and the subsid- iary ledger totals appeared to balance with the control totals in the general ledger. When the bank examiner added the individual totals of the various types of demand deposit accounts, the result was a much higher number. The bank determined that the report programs had been modified. When the sumof the various types of demand deposit accounts were totaled, the for- mula also subtracted a specific amount. This forced the total amount to agree with the bank’s general ledger control totals. The bank actually had over $3 million more in customer deposit accounts than it carried in its general ledger as the demand deposit account control total. Further investigation revealed that, over a period of several years, a bank officer had been wiring money to an account he had set up in another bank. That account had a similar name to the bank’s discount broker partner. After wiring the money, the bank officer would complete debit and credit tick- ets crediting the Fedwire account and directly debiting the DDA GL control Does It Add Up? Always Verify! Charles M. Towle , Senior Vice President, Kansas Bankers Surety Co. A bank used an Excel spreadsheet to balance its correspondent account. Each week the items recorded in the bank records but not yet recorded by the correspondent bank (and vice versa) were listed on a spreadsheet.