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  1. 1. Key Management Control Checklist for MWR Programs Banking Operations CONTENTS FUNCTION 2 PURPOSE 2 INSTRUCTIONS 2 COMMENTS 2 KEY MANAGEMENT CONTROL CHECKLIST 3 INTRODUCTION 3 LOCAL BANK ACCOUNTS 3 GENERAL 3 ESTABLISHING ACCOUNTS 4 ACCOUNT DOCUMENTATION 4 COLLATERAL 5 BANKING OPERATIONS 6 DEPOSITS 6 TRANSFERS 6 RECONCILIATIONS 7 SERVICE CHARGES 7 CENTRAL BANK ACCOUNTS 8 This checklist was prepared by Financial Management Directorate Family and Morale, Welfare and Recreation Command Telephone DSN 261-7295 Commercial (703) 681-7295 FAX (703) 681-7348
  2. 2. Function The function covered by these checklists is the administration, operation, and management of Morale, Welfare, and Recreation (MWR) Programs and Nonappropriated Fund Instrumentalities (NAFIs). Purpose 1. The purpose of these checklists is to assist the IMCOM Region and garrison personnel responsible for-- a. MWR programs and NAFIs in administering APF and NAF resources b. MWR program reporting requirements c. Managing MWR programs d. Other NAFIs in evaluating the key management controls related to the areas listed below. 2. Many of the questions are also pertinent to NAFIs other than Garrison MWR Operating Entity programs. 3. These checklists are not intended to cover all controls. Instructions Answers must be based on actual testing of key management controls, such as document analysis, direct observation, interviewing, sampling, and simulation. Answers that indicate deficiencies must be explained and corrective action indicated in supporting documentation. These management controls must be evaluated at least once every five years. Certification that this evaluation has been conducted must be accomplished on DA Form 1-2-R (Management Control Evaluation Certification Statement). This form is available on the world wide web at the following internet address: More information about the Army Management Control Process can be obtained at the Army Internal Review website: or by contacting the FMWRC Management Control Administrator, Gary Gregg at (703) 681-7414 or via email at: Comments Help make this a better tool for evaluating management controls. Submit comments to the Commander, Family and Morale, Welfare and Recreation Command, ATTN: IMWR-IR, 4700 King Street, Alexandria, VA 22302-4410. 1
  3. 3. BANKING OPERATIONS These checklists are designed to help management assistance teams, garrison commanders, and garrison managers of nonappropriated fund activities identify weaknesses in banking operations. When banking operations are evaluated, the various banking practices and conditions at each garrison must be considered. The checklists focus on key operations and are not intended to be all-inclusive. Limited analysis of bank records will be needed to obtain initial "yes" or "no" answers. A "no" answer to a checklist question indicates a problem may exist in banking operations. When answers to several questions are "no," the potential for a serious problem or problems increases significantly. Additional analyses may be needed to identify the causes of any problems found and to plan corrective actions. Plans should be aimed at both short- and long- range corrective actions. A – LOCAL BANK ACCOUNTS Requirements for establishing and documenting bank accounts may vary due to the availability of on-post banking facilities or the terms of overseas military banking contracts. For example, OCONUS locations are not required to request collateral. However, OCONUS accounts must be documented by semiannual reports to IMWR-FM-B to make sure appropriate Federal insurance and collateral is obtained. Therefore, when using these checklists, managers must become familiar with local banking requirements and apply the checklists as applicable. Test Questions GENERAL 1. Has the garrison received and made available to its managers current copies of pertinent regulatory guidance (AR 215-1 and DOD Instruction 1015.15) on the Central Banking Program? 2. Has the garrison developed local guidance for establishing and monitoring bank agreements? If yes, does the guidance clearly identify and establish the: - Individuals authorized to establish local bank accounts? - Acquisition procedures to be used when establishing bank accounts? - Maintenance of banking agreements and related documentation? - Procedures for periodically reviewing and updating account documentation, including signature cards? 2
  4. 4. - Managerial responsibilities for monitoring and analyzing banking operations? - Procedures for coordinating with the garrison bank liaison officer? ESTABLISHING ACCOUNTS 3. Does the garrison have a banking facility located on post? If yes: - Did the garrison agreement provide for the bank to service nonappropriated fund instrumentalities? If yes: - Were the types of accounts to be used and the service fees included in the agreement? - Are all bank accounts for nonappropriated fund instrumentalities maintained at the on-post banking facility? 4. Are contract files maintained to cover bank account agreements for all nonappropriated fund instrumentalities? If yes, does the file include: - A copy of the bank agreement(s)? - A copy of the contracting authority issued by the garrison commander? - A copy of the justification for not using the on-post bank, if using other financial institution. - A cost and pricing analysis of the types of accounts offered by the on-post bank for the proposals submitted by the off-post banks? - A review of the legal sufficiency of the bank agreement? 5. Based on the cost and pricing analysis, were the most advantageous banking services obtained? 6. Do fund managers/entity administrators or central accounting officers contact local bank officials periodically to determine if any new types of accounts or services are offered which would be more advantageous? ACCOUNT DOCUMENTATION 7. Are there formal bank agreements to cover the bank accounts of all nonappropriated fund instrumentalities? 3
  5. 5. If no, is there documentation available (such as memorandums of agreement or signature cards) to show the type and terms of the accounts? Does account documentation: - Identify the fund manager/entity administrator as the official fund custodian? - If no, are personnel entering into the agreement or listed on signature cards identified as agents, acting in a fiduciary capacity, for the official fund custodian? - List as having signature authority only those individuals currently assigned banking responsibilities? - Restrict withdrawal of funds except for transfers to the central bank? COLLATERAL 8. Did the central accounting office or fund manager/entity administrator submit DA Form 3830-R (Nonappropriated Fund Bank Balances) for the last reporting period (reporting periods end on 31 March and 30 September)? If yes, review the DA Form 3830-R for the following: - Did the actual balance reported in column (b) agree with the balance in bank statements? - Was the estimated high balance for the next 6-month period shown in column (c) reasonably estimated (that is, was it based on an analysis of the prior 6 months' actual bank balances)? - When estimates in column (c) were determined, were changes in mission or activities considered that could affect bank balances for the next 6 months? - Was the amount of Federal insurance coverage for each official fund custodian calculated correctly (limited to $100,000 per bank) and recorded properly in column (d)? - Were uninsured amounts (collateral requirements) correctly stated in column (e)? 9. Do bank statements show that daily bank balances were maintained below the amount of insurance and pledged collateral (if more than one checking or savings account is maintained, the total of the daily balances for each type of account for each fund custodian should be used)? If no: - Was a revised DA Form 3830- R submitted to request increased collateral? 4
  6. 6. - Did the central accounting office or fund manager/entity administrator take action to transfer sufficient funds to ensure balances were covered by pledged collateral? BANKING OPERATIONS Responsibilities and duties for banking operations vary at the local level depending on how accounting services are provided or what the provisions of local bank agreements are. For example, at some installations a central accounting office on post furnishes accounting services. At other installations accounting services are furnished by a centralized accounting office. In overseas areas, such as Europe and Korea, bank agreements provide for a sweep account that accumulates funds from communities or areas, in one account for transfer to the central bank. Generally speaking, the accounting office will have signature authority for the local bank account(s). Whenever possible and economically feasible, local banks provide information on collected account balances to a centrally contracted data collection service, which initiates a transfer of funds excess to a predetermined target balance. In those instances where the local financial institution cannot provide this service, the fund manager/entity administrator or accounting office personnel may have responsibility for telephoning deposit information to the data collection services. Test Questions DEPOSITS 1. Are activities depositing cash receipts daily or, for small activities, weekly (every 7 days) or whenever cash reaches $500? 2. Do activities provide deposit documentation within 2 days to the central accounting office? 3. Does the central accounting office monitor deposit documentation to make sure it is received promptly? If yes: - Does the central accounting office notify the fund manager/entity administrator if documentation is not received? If yes: - Does the fund manager/entity administrator follow up with activities to determine the cause for delays and ensure that corrective action is taken to promptly provide documentation to the central accounting office? TRANSFERS 4. Are account balances being reported to the data collection service automatically? If no: 5
  7. 7. - Does the central accounting office or fund manager/entity administrator monitor bank balances daily to determine fund transfers? - Are funds transferred to the central bank daily? - Is a log kept of all transfer requests, to include person calling, time called, and reference number provided as part of the transfer procedure, and any other pertinent information? - Were account balances maintained only to cover required compensating balances and/or returned checks? If yes: - Is the central accounting office or fund manager/entity administrator verifying monthly that balance reporting is occurring regularly, and that there are no gaps in reporting of more than 2 business days? - Is the target balance adequate for returned items? 5. If excess funds were maintained in bank accounts, has an analysis been made to determine the amount of interest lost by not promptly transferring funds to the central bank? RECONCILIATIONS 6. Are bank statements for all accounts issued as of the last working day of each month? 7. Are bank accounts reconciled with the general ledger monthly? 8. Are bank reconciliations made prior to the monthly closing of the books? 9. Based on the reconciliation, are adjustments researched and documented by a journal voucher? 10. Is the fund manager/entity administrator provided copies of bank reconciliations along with the monthly statements? 11. Are daily balances on the bank statements reviewed each month to make sure Federal insurance plus any pledged collateral was not exceeded? 12. If insurance plus pledged collateral was exceeded, was a revised DA Form 3830-R submitted as required by AR 215-1 and in accordance with DOD Instruction 1015.15? SERVICE CHARGES 6
  8. 8. 13. Does the bank provide a monthly analysis of the activity of each account (such as total transactions, service fees, interest earned)? 14. Are required compensating balances reviewed to ensure that they are not excessive? If yes, do reviews consider the following: - Is interest or an earnings credit received on the compensating balance? If yes: - Is the interest or earnings credit used to offset monthly service charges? If yes: - When the interest or earnings credit is in excess of service charges, is the excess credited to the account? If no: - Has an analysis been performed to determine how much interest has been lost and whether the compensating balance can be reduced? If yes: - Was action taken to reduce the compensating balance? 15. If account balances are maintained only to cover returned checks, are the balances reviewed periodically against the amount of checks returned and kept to a minimum? 16. Are service charges analyzed to determine whether fees can be reduced? If yes, did the analysis consider reducing service charges by: - Combining deposits for activities making multiple daily deposits (such as separate deposits for cash and checks, or deposits by department, activity or shift), thereby reducing fees charged for each deposit? - Maintaining sufficient funds in the account to cover uncollected checks, thereby incurring no service charges? - Closing bank accounts with deposits made up of checks or accounts with limited use (Civilian Welfare Fund is a good candidate) and sending deposits directly to the central bank, thereby eliminating account maintenance fees? 17. Is a copy of the bank account analysis statement for the months of March and September sent to the Family and MWR Command? 7
  9. 9. B – CENTRAL BANK ACCOUNTS This checklist is designed to ensure effective controls for the preparation and processing of checks. Test Questions 1. Are prenumbered checks used to withdraw funds from the central bank? 2. Are storage and controls for blank checks in accordance with procedures established in DFAS guidance? 3. If check-signing equipment is used, are the signature plates, key to the machine, and the machine itself properly protected in accordance with DFAS guidance? 4. Are duties for the administration of bank accounts properly separated so that a different individual performs each of the following steps: - Authorizing payments? - Preparing checks? - Signing checks? - Reconciling bank accounts? 5. Do signature cards show only those individuals currently assigned banking responsibilities? 6. Are procedures established to make sure signature cards show changes in personnel? 7. Are countersignatures required and used when: - Checks issued by the fund manager/entity administrator exceed $2,500, or the level established by the fund/entity council as appropriate? - Checks issued for expenditures by an IMCOM Region exceed $10,000? - Checks issued exceed the signer's fidelity bonding coverage? - Duties for the administration of checking accounts have not been properly separated? 8