Are Your District’s Electronic Payments Protected?

Even the Latest Technology is Safer with Old-School Controls

Do worries about electronic payment errors ever keep you up at night? What protects your district from a fraudster stealing taxpayer funds you’ll never recover?

The good news is that you can protect your payments. Maintaining strong controls can be challenging, especially in smaller districts with few employees available to process transactions or serve as backups. But with a little time and effort, you can make sure your district’s funds are protected.

The best banking controls in the world won’t protect your account if you don’t practice basic internal controls: segregation of duties, consistent invoice review and approval, and strong user access controls. Training staff to observe these controls — every time, for every payment — makes them more likely to process transactions correctly and avoid costly errors.

Use Positive Pay and Other Dual Controls

Be sure your district has dual controls over sending all forms of electronic payments, with the bank requiring two authentications: a transaction initiator and an approver.

Take advantage of Positive Pay, if your bank offers it — and request this service if it doesn’t. Positive Pay requires the payer (you) to send a separate file listing payees and amounts to be paid each time payments are disbursed. If an EDI payment request comes through that doesn’t match the Positive Pay list, the bank will reject it.

Segregate the responsibility for creating the Positive Pay list from the ability to prepare EDI payments themselves. This reduces opportunities for errors or fraudulent payments.

Timely Reconciliation is Key

Years ago, when districts made most payments by paper check, the check could be cancelled if a payment was made in error. But with electronic payments, recall is not an option. The money is gone as soon as the transfer is approved.

That’s why it’s critical for your district to have timely reconciliation of accounts. This way, if an unauthorized payment slips through, you’ll be more likely to recognize it in time to recover the money.

Data Analytics to Review Payment History

Consider performing a periodic data analytics review over payment histories to identify entries that should be scrutinized. Data analytics can help find duplicate entries, such as multiple suppliers with the same address, or potential signs of fraud, such as a vendor address that matches an employee’s. Your internal auditor should be able to perform these analytics; ask if they have this capability.

Electronic payments are easier and faster than printing and signing hundreds of checks, but you need to have the right controls in place, especially at this time of year. You’ll sleep easier if you do. For more information regarding how to keep your districts electronic payments protected, contact a Weaver professional today.

Authored by Dan Graves, CPA.

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