Pub. 8 2013-2014 Issue 1

www.nebankers.org 22 Extraordinary Service for Extraordinary Members. If a reconciling item is more than five days old, the item needs to be researched to determine whether the correspon- dent bank records or your bank records are in error. There should be no reason that any reconciling amount is carried on the books for more than a couple days. The carrying of a reconciling item for more than a day or two indicates that the books of the bank are out-of-balance with the actual funds in the correspondent account. When a second person balances the correspondent ac- count at least monthly, such person needs to complete the full balancing process from start to finish including both the determination of which reconciling items are necessary and whether each reconciling item is valid. Simply adding up the columns to see if the reconciliation is mathematically correct is not the same as having a second person balance the account. To be an adequate procedure, the second person needs to have a complete understanding of the process and verify the validity of each reconciling item. The over-helpful bookkeeper problem as described above is only a small part of the problems that develop when a bank chooses not to properly balance its correspondent account, transit account, or suspense account. Allowing these accounts to remain out-of-balance can result in embezzlements in bank- ing. The correspondent account, transit account, and suspense account are used most often by dishonest employees. Many of these embezzlements start as small amounts that the embezzler justifies in his own mind as “borrowing“ the money. He simply pulls a check drawn on his own account from the processing stream to prevent the check from being processed and bouncing. The result is an out-of-balance cor- respondent account or transit account. Occasionally, after payday, the employee will go ahead and run his check through processing, charging his account for the check. However, once the line is crossed, it is easier to steal money again the next time his account is short. These types of embezzlements usually start small and grow larger and larger until the theft is discovered. These kinds of losses can be discovered quickly while they are still small if a bank uses proper procedures in balancing its correspondent, transit, and suspense accounts daily and always has a second person balance the accounts at least monthly. Z For more information, contact Kansas Bankers Surety Co. at (785) 228-0000. Q Large Losses — continued Rothgerber Johnson & Lyons LLP Banking Group One Tabor Center, Suite 3000 1200 Seventeenth Street Denver, Colorado 80202 • Affiliate Transactions • Asset-Based Lines of Credit • Bank Operations • Branch Banking • Compliance and Disclosure • Consumer Finance • Credit Document Drafting and Review • Creditor’s Rights/Bankruptcy • De Novo Financial Institutions Charters • Factoring • Foreclosures and Collections • Holding Company Formations • Lender Liability • Lending Limit Advice • Leveraged Acquisitions • Litigation • Loan Originations and Modifications • Loan Restructuring • Mergers and Acquisitions • New Product Development • Project Finance • Recapitalization • Regulatory Advice • Regulatory Enforcement Defense • REO Disposition • Stock Offerings • Strategic Planning • Subchapter S Corporate Restructuring • Uniform Commercial Code • Use of ESOPs Nationally recognized for our corporate, regulatory, and litigation practices for community banks Contact: Karen L. Witt 303.623.9000 · www.rothgerber.com Denver · Colorado Springs · Casper Creative Solutions Since 1903 Robert S. “Sam” Arthur, Jr. Justin H. Boyd Kristin M. Bronson Philip A. Feigin Tennyson W. Grebenar Stephen T. Johnson William P. Johnson Kevin M. Kelly David P. Kunstle Lindsay L. McKae Mark A. Meyer Bruce N. Warren, Special Counsel Karen L. Witt Advertising Material