Ch 18

Key Control Considerations for Treasury Policies

1. Structure of Controls 2. Segregation of Duties 3. Delegation of Authority 4. Roles and Responsibilities 5. Records Retention 6. Moving from Controls to Policies and Procedures

How do treasury policies and procedures regulate behavior?

By assigning specific duties, documenting their assignment to designated parties, and setting penalties for violations to establish acceptable behavior.

In establishing and documenting controls, some of the items to consider are:

Internal and external controls Reporting and audit trails Controls on third-party service providers Compliance with regulatory requirements of major stock exchanges (e.g., Section 404 of the US Sarbanes-Oxley Act [SOX] for organizations listed on a US exchange or the UK Corporate Governance Code for all companies with a premium share listing on the London Stock Exchange)

There are five primary reasons why treasury policies and procedures are necessary:

Organizational needs. To provide a documented guide to best practices to ensure fundamental operational processes are performed in a consistent manner that meets the organization's needs. Risk management. To provide and document a control process to mitigate identified risks in the operation. Roles and responsibilities. To provide a clear definition of the roles and responsibilities within the treasury function. When problems occur, documented policies and procedures can provide guidance on how to correct or mitigate the concern. Policies and procedures also provide clarity when dealing with accountability issues. Compliance. To provide an effective internal audit and control environment that helps ensure compliance with regulatory and legal requirements. Good governance. To grant and delegate the authority required to conduct treasury procedures. Formal approval for a set of treasury policies is sound governance practice as it shows the board has exercised control over treasury activities, especially in a large or decentralized organization.

Key Control Considerations for Treasury Policies: Delegation of Authority

Policies and procedures should address the delegation of authority. Generally, this is accomplished by a board of directors' resolution outlining the responsibilities that are delegated to a particular management position within the treasury operations area and identifying any designated limits, such as signing limits, on that authority EX: Signature authority on bank accounts (i.e., check-signing authority)

Key Control Considerations for Treasury Policies: Roles and Responsibilities

Policies and procedures should define the role of key personnel in the treasury organization, specifically identifying responsibilities and authority for each position and function Roles and responsibilities should also be reviewed regularly (e.g., annually) as jobs may have changed.

What is the role of treasury policies and procedures?

They provide a framework for designing workflows and controls that support operational, financial, and treasury management objectives.

Why should an organization formalize its treasury policies and procedures?

To inform employees, agents, contractors, and vendors of expected practices, review standards regularly, and incorporate relevant changes while serving as training tools for best practices.

Key Control Considerations for Treasury Policies: Structure of Controls

no standard structure for determining the optimal level of controls that should be in place, but there are certain best-practice standards that should be followed, especially from an audit perspective Understand, proper documentation & correctly designed, operated, updated and monitored controls can not only assist in preventing financial losses, but can also result in more effective management of the organization

Key Control Considerations for Treasury Policies: Records Retention

regulations relating to the retention of records, especially for compliance with regulatory and tax authorities -there are severe penalties for failure to maintain proper paperwork -supports internal audit and performance reviews

Key Control Considerations for Treasury Policies: Segregation of Duties

the concept of having more than one individual involved in a process to complete a task, which significantly reduces the risks of fraud and human error. Ex: dual control on wires or on a expense report

Key Control Considerations for Treasury Policies: Moving from Controls to Policies and Procedures

the treasury policies development process should build in the desired controls for each function. As control requirements change over time in response to new developments and technology, so should the related policies and procedures. In general, policies should only change with board approval. Procedures may change more often, but any amendments must remain consistent with the policy.