COMMON AUDIT ISSUES
Check Handling
It seems the auditors always recommend that we endorse checks "for deposit only" at the time of receipt. If it's payable to a program or department it can't be cashed by anyone else can it?
Unfortunately it can. Banks today handle thousands of checks and often look only at the endorsement, not the payee on the front of the check. In addition, if the check is not payable to the UW- Madison the risk of it being deposited by someone else is even greater.
There are two steps every department handling money needs to take.
First look at all your forms and promotional material and make sure it clearly states who the check is to be made payable to, and where to send it. For revenue producing activities we suggest it be "UW-Madison/Department Name," and for gifts, grants or contracts it be the "Board of Regents of the University of Wisconsin." This clearly communicates to those making payments the way checks are to be made out, and reduces the risk of their being diverted by someone for personal gain. In the event payments are diverted, the bank(s) cashing such checks are clearly liable and recovery of losses from the bank is much easier.
Second, a process must be in place to endorse checks upon receipt, preferably with a stamp, "For deposit only, UW-Madison/Department or Program Name." It is virtually impossible for someone to misappropriate stolen checks that have such a restrictive endorsement. If checks are stolen before they are endorsed there is a high risk they can be converted for personal gain.
Business Services News - March 2000