Lessons learned: Helpful hints for supervisory committee cash counts

How could more than $80,000 in cash disappear from a credit union if the credit union’s supervisory committee did cash counts once a month? It all started with a credit union’s question about a loan to LEVERAGE Audit & Consulting staff and a letter from an attorney who needed to close out an estate of a member that passed. Read on to find out what happened and steps to prevent it.

The attorney wanted to confirm that the deceased member had a CD balance of $9,000. When the credit union looked up the balance, it was zero. After investigating the transaction, they found a certain employee (let’s call her Employee A) closed out the CD. Turns out, this was just the tip of the iceberg.

Since cash is the most liquid asset of a credit union, it is always susceptible to being misappropriated. To prevent and detect fraud in the cash area, many supervisory committee members count cash on a quarterly basis.

Once it is decided to count the cash, the committee must make sure the count is completed on a surprise basis. In the above case, Employee A, the person who was committing the fraud, was the one tasked with sending out the notice to everyone, letting them know that the supervisory committee would be performing a cash count. The element of surprise is the most powerful tool the committee possesses. The day of the count should be varied from month to month or quarter to quarter. Care should be taken not to forecast the count by falling into a pattern of performing counts after each meeting or on the same day (such as the second Tuesday of each month).

Starting in 2009, Employee A manipulated the teller machine to show what her cash balance should be. For example, when the supervisory committee came in to count cash, Employee A would make an adjustment so her cash balance was whatever she had in her cash drawer. So rather than Employee A’s cash showing $50,000, she made the adjustment so it would show she only had $2,500. When they left, she would put the balance back to what it was before they counted it. Looking back at the cash counts, it showed Employee A had the exact same amount of money twice in one year with only a small difference in the denominations.

When counting a teller supply, vault, dispenser, or ATM, a tally for each denomination needs to be recorded on the count sheet and balanced to the supply shown by supporting documentation. Have the teller provide a printout from the teller machine, showing the cash they should have on hand. Once total cash counted balances with the total from the system, repeat the procedure for the reserve drawer. This also includes counting all cash held in a reserve vault. If the reserve vault has a time lock, the timer should be set, and the cash counted when the vault is opened.

During the count, determine whether the teller is holding any type of cash item in the drawer that is included in the cash total. For example, any unprocessed checks in the drawer need to be included in the cash total. A teller should not be holding a check from a member or co-worker that has not been processed.

Next, ask the teller to state the cash limit for their drawer, and record the amount on the cash count sheet. Ask each teller this to determine if they are aware of a limit. This applies to the vault, dispenser, and ATM. Make sure teller only has limit in drawer. If they have $10,000 in drawer but are only supposed to have $5,000 and they get robbed, NCUA will only reimburse $5,000.

Once the cash supply has been counted and balanced to the supporting documentation, always make sure to get the cash count sheet signed by the teller. Have the teller to sign a statement that declares that the cash totaling the amount counted was returned to them. This protects the committee member if the teller has a shortage at the end of the day.

After counting all cash supplies, always reconcile the cash count sheets to the general ledger total for cash. In this case, Employee A’s cash was counted in her drawer but not balanced back to the general ledger. When cash counts are performed before the credit union opens, reconciliation to the general ledger should be seamless. When counts are conducted during the workday, reconciliation is not easy. Adjustments need to be made for cash transactions that occurred before the count.

After completing the count, compare the actual cash on hand to the cash limits as stated in the policy of the credit union. A few questions to consider after the cash count is complete are:

  • Where any cash supplies over the cash limit?  If so, why?
  • Were the tellers aware of the correct cash limit?
  • Were the vault, dispenser, and ATM cash supplies within policy?

When cash counts are conducted properly, they will detect cash shortages before they present a serious problem to the credit union. All supervisory committee members deserve a “thank you” from the credit union members for taking on this tremendous responsibility. Whether through appointment by the board, some gentle arm-twisting to serve, or volunteering outright, supervisory committee members continue to ensure the safety and soundness of the credit union through diligence, devotion, and attention to detail.

Kevin Lytle

Kevin Lytle

LEVERAGE, the Service Corporation for the League of Southeastern Credit Unions, is the business services provider that leverages credit union system resources, relationships, and industry knowledge for optimal performance and ... Web: www.myleverage.com Details