Disbursement Checks - Controls 2109

  • Hi,
    The Accounts Payable Department processes disbursement checks. The current controls include positive pay, using a special printer (magnetically encodes the MICR numbers on the check stock) and check signing is electronically handled in the system through a computer workflow.
    However, does a risk of fraud occur if the Accounts Payable Department also MAILS the checks to the vendors? If so, what controls are available to mitigate diversion of approved disbursement checks?
    Any feedback and sharing of best practices is greatly appreciated.

  • Would the risk be any less if someone else mails them? A disbursement check is an ‘exchange for cash’ check isn’t it? Therefore it is not secure even when it’s in the mail. Shouldn’t AP be using Remittance Checks or even better, electronic payments?
    Anyway, I am not entirely sure how the checking system works in the US but in the UK the few dinosaurs that still use cheques would print them all crossed ‘account payee only’ meaning that it can only be paid into a bank account in the name of the payee - i.e. it can’t be encashed.
    I would also expect to see some sort of control over the blank cheques (logging of serial numbers), controls over the machine, cheque signing, etc.

  • Denis,
    The check stock is secured from unauthorized access and contains a watermark and other security features. Inasmuch as possible, the Company is trying to use electronic payment in place of paper checks. However, small vendors are not so automated.
    In the US, it is not so easy to prevent an unauthorized person from cashing a check once it is obtained. Although it takes effort, a determined fraudster might succeed.
    Thanks for your feedback. If anyone else has suggestions for improved control and separation of live checks from AP, that would be helpful.

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