Water Ups MPC Internal Control Manual For 2019

WATER UPS MULTI-PURPOSE COOPERATIVE
CDA Reg. CDA Reg. 9520-13017547

P-6 Mahayahay, San Jose, Dinagat Islands
Manual of Internal Control
Risk Based Evaluation Supervision: Supervision and

Institutional Diagnostic Services
Manual of Internal Control Page 2 of 96
Water Ups Multi-Purpose Cooperative
This is the Internal Control Policy of Water Ups Multi-Purpose Cooperative

A GUIDE IN CREATING A SYSTEM OF INTERNAL CONTROL FOR

WATER UPS MULTI-PURPOSE COOPERATIVE
TABLE OF CONTENTS
Overview of the Manual ________________________________ 4

Objectives of Internal Control ____________________________ 4
The internal Auditor ___________________________________ 5
PART I – ELEMENT OF INTERNAL CONTROL
Proper Accounting Record ______________________________ 6

Independent Balancing ________________________________ 6
Division of Duties & Responsibilities ______________________ 7
Joint Custody ________________________________________ 8
Signing Authorities ____________________________________ 9
Dual Control _________________________________________ 9
Physical Control ______________________________________ 9
Number Control ______________________________________ 10
Rotation of Duties _____________________________________ 10
Independence of Internal Auditor _________________________ 10
Direct Verification _____________________________________ 11
Other Internal Control Standards _________________________ 11
Outside Activities of Employees __________________________ 12
Mandatory Vacation Policy ______________________________ 12
Sounds Personnel Policy _______________________________ 12
Fidelity and Other Indemnity Protection ____________________ 13
Other Elements _______________________________________ 13
PART II – SPECIFIC INTERNAL CONTROL STANDARDS BY ACCOUNTS AND

OPERATIONS
Cash _______________________________________________ 14
Check and Others Cash Items ___________________________ 15
Due from COOP/Cash in COOP __________________________ 16
Investments __________________________________________ 17
Loans and Discounts ___________________________________ 18
Coop Premises, Furniture, Fixture, and Other
Properties Owned or Acquired _________________________ 21
Other Assets _________________________________________ 23
Manager’s/Casher’ Checks ______________________________ 24
Current, Savings and Time Deposits _______________________ 24
Bills Payable and Other Borrowings ________________________ 29

Capital Accounts _______________________________________ 30

Income and Expense Accounts ___________________________ 31
Safety Deposit Boxes ___________________________________ 33
Collections Items _______________________________________ 33
Transportation of Cash & Securities ________________________ 34

Shipment of Securities __________________________________ 34
PART III – INTERNAL CONTROL QUESTIONNAIRES
General Safeguard _____________________________________ 35

Specific Safeguard _____________________________________ 37
PART IV – CODIFIED APPROVING/SIGNING AUTHORITY
Lending Operation _____________________________________ 62

Deposit and Transfer of Funds ____________________________ 63
Personnel and Matters __________________________________ 64
General and Administration Functions ______________________ 65
Accounting, Finance and Budget Functions __________________ 67
Miscellaneous _________________________________________ 69

Date Approved:
Resolution Number: Effective Date:
Issued By: Revised Date:
Approved By: Last Board Review Date:
MANUAL OF INTERNAL CONTROL
Overview of the Manual
This manual, serve as a guide for; (a) the board of direction and management of Water
Ups MPC in adopting a comprehensive system of internal control required by the MORR
and (b) the internal auditors in the evaluation of the internal control system of such Water
Ups MPC. The primary aim of the auditors in evaluating the internal control system of the
coop is to disclose the nature or the internal control being implemented, whether these
controls do reduce to a minimum the possibilities of errors and defalcation and whether
they are maintained effectively. The result of the evaluation may determine the extent of
audit procedures to be conducted and may also give possible suggestion for the
improvement of the controls.
This manual is divided into four parts.
Part I describes the broad elements considered to the operation a sound internal control
structure. One of these elements or a combination of them underlies each control
features found in the succeeding sections.
Part II are standard controls arranged by account or operation common to most Water
Ups MPC. The specific controls are to be applied in so far as each is related to the
operation to the particular of Water Ups MPC.
Part III deals with internal control questionnaires. These are list of questions related to
the controls given in the preceding two sections and are to be used as a guide in the
evaluation of the system of internal control by the auditor.
Part IV is a format summarizing the approving and signing authorities of the board of
directors and those delegated to committees and management relative to the Water Ups
MPC operation.
It may be used as a guide in the preparation of an operation manual for Water Ups MPC.

Objectives of Internal Control
Internal control in a Water Ups MPC covers its organizational structure, director’s
policies, management directives, adequate personal and the checks and balance
incorporated in its day-to-day operation. These components interact to assure the
achievement of managerial objectives related to safeguarding assets, checking the
accuracy and reliability of its accounting data, promoting operation efficiency and
encouraging adherence to prescribed managerial policies.
In fulfilling its role of safeguard assets and assuring the accuracy and reliability of
the financial records, the system of internal control can have a significant bearing on
the fairness of the presentation of the Coop’s financial statements. Failure to provide
controls can increase the temptation to commit fraud and theft for both
officers/employees and outsiders.
Directors and management of Water Ups MPC have a primary responsibility for
creating, implementing and policing the system of internal control. Any system of
internal control, regardless of its fundamental soundness, may deteriorate if it were not
reviewed periodically. The system of internal control should be under continuing
supervision to determine whether; (a) prescribed policies are being and interpreted and
carried out property; (b) changes in operating conditions have made the procedures
cumbersome obsolete or inadequate; and (c) effective corrective measures are taken
promptly whenever breakdown of the system appear.
The Internal Auditor
The Internal Auditor shall be responsible for developing and implementing

comprehensive program of internal audit in the Water Ups MPC – head office and
branches. He shall have full and unrestricted access to all records of Coop transaction
including properties and personnel matters.
The Internal Auditor shall be independent form the Water Ups MPC management
and shall be directly under the supervision and control of the Board of Directors. He
shall see to it that management activities are in accordance with existing laws, Bangko
Sentral ng Pilipinas rules and regulation, and polices promulgated by the Board of
Directors. In addition to the functions and duties as prescribed by the by-laws, the
Internal Auditor may be assigned or delegated other duties and powers by the Board of
Directors, provided such duties and powers are not in conflict with principal function as
Internal Auditor.
Specifically, the Internal Auditor shall have following responsibilities:
1. Plan out the audit program and schedule its implementation with respect to the
Water Ups MPC and each of its branches. The audit program shall be primarily
geared toward the evaluation of management performance and effectiveness of

control, as well as operation procedures both at head office and in the branches, on
the basis of conformity to the established standard and rules and regulations;
2. Execute the developed audit program and recommend improvements whenever

necessary;
3. Apprise the branch managers, thru the President, of deficiencies in their

respective work and require corrective measures to rectify them;
4. Conduct special audits as may be requested by management and regularly review

complaints made by clients of the Water Ups MPC and its branches;
5. Regularly visit the branches to determine effectiveness of branches in the

management of the Water Ups MPC resources and its compliance with established
policies and procedures.
PART I
ELEMENT OF INTERNAL CONTROL
The following are some of the elements of internal control recommended for
adoption as minimum internal control standards in all financial intermediaries. These
controls should be incorporated into all the daily operations of financial intermediaries
and should become a “way of life” for all their officers and employees.
Proper Accounting Records
The Water Ups MPC should maintain true and accurate accounts, record or
statement of their daily transaction in accordance with the uniform accounting system
prescribed for use of financial intermediaries by the Bangko Sentral ng Pilipinas. These
records should be kept currently posted and should contain sufficient details so that an
audit trail is established. All entry ticket should bear official approval and should be
initiated by person originating and another person checking them.
Independent Balancing
Independent balancing shall mean that record posted by a person or cash held by a
teller or cash shall be balanced or counted by another person. One person should be
given the responsibility of maintaining a schedule of the independent balancing
procedures and also of determining that the procedure is carried out. Management
should establish the intervals between balancing and should require regular reports
made in compliance with the procedure.

Independent balancing provides some assurance that deposit ledger has not been
suppressed and that the loan ledger cards or other asset records have been set up as
required. Water Ups MPC should adopt this internal safeguard as a loss prevention
measure.
In branch system, independent balancing is considered a necessary procedure before

report are made to the head office.
The minimum independent balancing procedures adopted are the following:
1. Monthly reconcilement of general ledgers balances against their respective

subsidiary
2. ledger and supporting records and documentation by someone other than the
3. bookkeeper or the person handling records.
4. Irregular and unannounced count of teller’s cash and checks and other cash items
at
5. least twice a month by the auditor/control officer or by an officer not connected

with
6. the cash department.
7. Monthly reconcilement of due from Water Ups MPC /cash in Water Ups MPC
accounts (domestic and foreign) and due from/to head office/branches by someone
other than the person handling the records or posting the general ledger entries.
8. Periodic verification of securities and collateral by someone other than their

custodian.
9. Periodic verification of the accuracy of the interest credits to deposit liabilities

accounts.
Division of Duties and Responsibilities
The duties of all officers and employees should be clearly defined and understood
before they are segregated into effective function. In this respect, organization charts,
written operation procedure and flow charts are most helpful in separating the various
facets of a function.
Duties should be segregated to allow the proper functioning of automatic checks.

No individual should be permitted to dominate a transaction from start to finish. It is a
basic principle of internal control that the physical handling of a transaction be separated
from its recording and supervision. The most common application of this principle:

1) A person handling cash should not be permitted to post the ledger records. In like
manner, an employee who posts the depositor’s subsidiary ledger should not
perform posting of the general ledger.
a. The accounting officer must be monitor and assign personnel to post
ledger records the ledger, depositor’s subsidiary and general ledger.
2) A loaning officer should never be allowed to disburse proceeds of notes, accept

note payment nor process loan ledgers.
a. The loan officer not allowed to disburse proceeds of notes, accept note
payment nor process loan ledgers.
3) The functions of issuing, recording and signing drafts/checks should be

separated.
a. The separated personnel functions assign for issuing of receipt, recording
and signing drafts/checks for the daily transaction.
4) Checks and other cash items should be maintained either by an employee not
handling cash or by Rack/Distributing Section provided adequate control as to
custody and disposition of funds are property maintained.
a. All checks and other cash items be maintained assign by the employee not
handling cash or rack/distributing section to provide the adequate control
as to custody and disposition of funds are property maintained.
5) The receipt of statement from depository Water Ups MPC should be assigned to
an employee other than the one connected with the preparation, recording and
signing of Water Ups MPC drafts.
a. The receipt of statement from depository of Water Ups MPC should be
assigned by the treasurer, head cashier and bookkeeper are connected
with the preparation, recording and signing of Water Ups MPC drafts.
6) Custodian of securities should be done by an employee/officer other than the one

approving the loans.
a. The custodian of securities should be done assign by the loan officer or
employee in-charge and Chairperson/Manager.
7) An employee other than the bookkeeper should record incoming checks and other
cash items chronologically in register before they are forwarded for posting
purposes.
a. Not the bookkeeper should record incoming checks and cash items
chronologically in register before they are forward for posting purpose we
assigned other employee to record it this transaction.
8) Someone other than lending officers should obtain credit reports.

a.

9) An employee other than the one who granted the loan of the one handling the
records should do mailing of customer’s statements and delinquent notices.
10)Dispatching and delivery of current account statements should be done by an

employee other than those who have something to do with current account
operation such as tellers and bookkeepers.
11) Extensive background checking of persons assigned to handle cash and

securities should be conducted. Frequent follow-up checking after their
employment should also de made.
Joint Custody
Joint custody means the processing of transactions by a person in the presence of

and under the direct observation of the second person. Both persons are equally
accountable for the physical protection of both the items and records involved in
vulnerable transactions.
1) Physical control is established by the use of two locks or combination of a file,

chest or vault compartment.
2) Usually, two or more persons are assigned to each half of the control so as not to
impair operation if one person is not immediately available. A record should be
kept showing the persons who have access to the items or records protected by
joint custody or anyone who is present.
3) Person who are related to each other within the third degree of consanguinity or
affinity should not be made joint custodians.
4) The following should be under joint custody:
a) Cash in vault.
b) Accountable forms.
c) Collateral and securities.
d) Documentary of title and/or ownership of properties or fixed assets.
e) Dormant or inactive deposit ledger and corresponding signature cards.
f) Import documents and trust receipts.
g) Collection/safekeeping items.

h) Duplicate keys, safe deposit, spare locks and keys, unrelated keys to safe
deposit boxes.
i) Vault doors and safe combination.
j) Unused specimen signature books.
k) Test key fixed number unused.
l) Correspondent’s and institution’s own telegraphic or cable test keys current in

use.
Any employee of the Water Ups MPC who given either a combination or key should
guard it carefully. He/She should never it in unlocked drawers or in anyplace accessible
to other members of the staff. The combination should be so operated that persons
nearby observe the numbers. Spare keys or combinations should be kept in sealed
envelopes with holder’s signature written across the flap. The seal of this envelope
should never be broken except in the presence of two persons. All the facts and reason
for opening the envelopes should be recorded and initialed by those present. The best
joint custody system will break down unless these precautions are observed.
Signing Authorities
The board of directors should approve signing authorities for the different levels of
officers to sign for and in behalf of the Water Ups MPC and the extent of their authority
should be clearly defined. These signing authorities should include but not limited to the
following:
1) Lending and Investment.
2) Approval of expenses/disbursements.
3) Various supervisory reports.
4) Water Ups MPC drafts, Manager’s/Cashier’s Checks, Certificate of Time

Deposits.
Dual Control
Dual control means the work of one person is to be verified by a second person to
determine (a) proper authority has been given to handle the transaction. (b) the
transaction is properly recorded; and (c) the proper settlement of the transaction is
made. The routine of this transaction should be designed so that at least two or more
individuals are involved in the

completion of every transaction.
The following accounts/transactions should be under dual control:
1. Cashier’s/manager’s checks and telegraphic transfers. The signature of least two

officers should be required in the issuance of cashier’s/manager’s checks and
telegraphic transfer. The board of direction may, however, prescribe a certain
predetermine amount by which one senior officer could sign checks or telegraphic
transfers, subject to appropriate control measures.
2. Certificate of time deposits. Two authorized officers should sign all certificates of
time deposits issued jointly.
3. Water Ups MPC drafts. The signature of at least two authorized officer should be
required in the issuance of the Water Ups MPC drafts.
4. Borrowing. The signature of at least two authorized officers should be required.
5. All transaction-giving rise to “due to” or “due from” account and two authorized
officers should approve all instruments of remittance evidencing these
transactions, particularly those involving substantial amounts.
Physical Control
The safeguarding and housing of assets (including the vault and the building
quarters) demand adequate physical protection. Physical control should include the vault
day gate, key that either make equipment inoperative or guard lock-in totals, alarms, and
other physical devices to protect the premises.
Number Control
Sequence number controls should be incorporated in the accounting system and should
be used in registering notes, in issuing official checks and in other similar situation.
Numbers on transactions should serve two purposes: (1) to control processing and
(2) to identify individual transactions. A person designated by senior management who
should be detached from the particular operations involved should police number control.
The following are the form, instruments and account that should be numbered-
controlled.
1) Water Ups MPC drafts.
2) Manager’s and/or Cashier’s checks.

3) Promissory notes.
4) Savings deposit accounts.
5) Demand deposit accounts.
6) Time deposit certificates.
7) Letters of credit.
8) Collection items.
9) Official and provisional receipts.
10)Certification of stocks.
11) Loan accounts.
12)Expense vouchers.
Rotation of Duties
A schedule of rotation of duty assignments should be prepared and kept by a

disinterested person. The duties of personnel handling cash, securities and bookkeeping
records should be rotated.
Rotation of assignment should be regular, unannounced and long enough to permit

disclosure of any irregularities or manipulations. Rotation of duties is not only a basic
internal control safeguard, but also a valuable aid in the training and development of
employees. As a program, it will develop among employees the necessary skill and
experience which they would need when they substitute for staff members who become
absent because of illness or vacation. It will also prepare them for positions of greater
responsibility.
Tellers should be relieved of their duties during the actual count of their cash
accountabilities performed during annual Water Ups MPC examinations.
Independence of the Internal Auditor
Internal auditing is a strong factor in the system of internal control. It audits all
departments hence, to be effective; it should be independent of Water Ups MPC
management. The creation of the position of auditor, along with his duties and
responsibilities and the scope and objectives of internal auditing, should specifically

provided for in the by-laws of Water Ups MPC. In this connection, the auditor should
submit his audit reports directly to the board of directors.
The internal auditor, to be completely objective, should not develop and install
procedures, prepare records nor engage in any activity, which he normally would be
expected to review or appraise.
Direct Verification
Direct verification is another safeguard which Water Ups MPC should adopt to
protect themselves against losses. It means the confirmation of accounts or records by
means of correspondence with the Water Ups MPC customers. These accounts or
records include loans, deposits, collateral, safekeeping, escrow balances and all other
items, which can be corroborated by the customer.
Through direct verification, the following major benefits can be derived: (a) detection of
previously undisclosed defalcation, and (b) prevention of frauds about to be committed
by the employees.
The following accounts, among other things, should be subjected to direct

verification by the auditing staff at least once a year:
1) Balances of loans and credit accommodations of borrower.
2) Deposit account balances, particularly new deposit accounts, inactive or dormant

accounts and closed accounts.
3) Outstanding balances of borrowing and other liabilities.
4) Outstanding balances of receivable and payable.
Other Internal Control Standards
1) Entries to dormant account ledgers should be verified and approved by a

designated officer whose initials should be placed next to the entry on the ledger
sheet.
2) Dormant accounts should be segregated from active account ledger with a

separate subsidiary control.
3) Signature cards for dormant accounts should be removed from actives files.
4) A designated officer should approve all new current accounts.

5) Some form of validation should authenticate signature cards and deposit ledger
sheets. Subsequent changes should also be validated.
6) Signature cards and deposit ledger sheets should be accessible only to

authorized persons.
7) Data appearing on deposit tickets should be occasionally examined at irregular

intervals after they have been posted to determine that posting was made on the
actual date deposit is received.
8) Withdrawals against uncleared check deposits should not be allowed under any
circumstance.
9) Checks should be canceled as soon as they have been paid and posted.
10)All current account statements should be mailed direct to the depositors. An

organizational unit not responsible for demand deposit account processing should
ration undelivered statements.
11) An officer should be designated to attend to customers who report differences on

their statements.
12)Checkbooks should be issued only against requisition forms signed by an

authorized signatory to the account.
Outside Activities of Employees
The board of directors of a Water Ups MPC should maintain a strict check on the
non-working activities of each officers and employees through the control office. Any
sudden change in their appearance or habits may be indicative of misconduct,
particularly when the change reflects spending habits that go beyond the limits of their
income.
One method of ascertaining the financial status of officers and employees is to

secure periodically a statement of their assets and liabilities. Securing financial data from
directors and employees serves as a check on the possible speculation to live beyond
their income and also aids in disclosing their financial difficulties because of illness or
other emergencies. A program can be set up to help an employee solve his/her financial
problems.
Unusually close employee-customer relationships should also be watched for

possible collusion or misappropriation of Water Ups MPC funds. Outside employment for
officers and employees should be discouraged. When permitted, their employment
should be watched closely to prevent a conflict of interest for the employee.
Mandatory Vacation Policy

An uninterrupted vacation of two consecutive weeks from the Water Ups MPC
provides a simple yet effective internal control. An enforce absence from daily labors will
make an officers or employee physically and mentally refreshed. During his absence,
most transactions in process will clear an exceptions can be investigated.
It is important that the employee on vacations stays away from the Water Ups MPC
premises. A person with access to Water Ups MPC records while on vacation can
continue to manipulate them. Employees who, while supposedly on vacation, waited in
the lobby have perpetrated frauds for certain customers.
Sound Personnel Policy
Recruitment – A formal procedure should be followed when employing new people.

A check of their previous employment and credit references should be mandatory. Only
men of competence and integrity should staff a Water Ups MPC.
Fair Salary Scale – To attract and keep honest staff members, Water Ups MPC
should pay a fair salary consistent with the earnings and growth of the Water Ups MPC
and with the ability of the individual to work according to the requirements of the position.
Open Communication Channels Between Employees and Management – An officer

should be appointed to discuss with employees their personal problems. Potential
defalcation can be stopped if Coop officers can establish an atmosphere where
employees are free to discuss their personal problems without fear of criticism or
censure.
Code of Discipline – The Water Ups MPC should have a code of discipline that
serve as a guide for the expected of the officers and employees in their day – to – day
pursuit of company objectives. This code of discipline should also spell out what
constitutes violations and their corresponding penalties. In an organization composed of
many individuals, harmony is best achieved if certain basic measures of control are
uniformly understood and accepted. Discipline places an important role in achieving
efficiency in an organization.
Fidelity and Other Indemnity Protection
The matter of insurance coverage is of great importance because the solvency of a

Water Ups MPC may be affected not only by losses resulting from imprudent or ill-
advised investment policies but also by losses resulting from certain hazards caused by
dishonesty, fraudulent or other criminal acts.

The risks from losses arising from criminal acts divided into external hazards and
internal hazards.
1) External hazards are those result from acts of the general public: such as
robbery, burglary, theft, hold-up and forgery. As protective measure to guard against
these hazards, Water Ups MPC should be provided with adequate vaults and safes,
reliable alarm system and other protective equipment. In addition, Water Ups MPC
should provide insurance coverage against external hazards.
2) Internal hazards arise from the acts of the members of the Water Ups MPC own
personnel. Water Ups MPC should endeavor to protect themselves against these
hazards by maintaining clear records and an effective system of internal routing and
control. Purchasing adequate fidelity insurance or devising an adequate self-insurance
scheme is some of the protective measures against internal hazards.
Other Elements
Aside for the elements given above, for an effective system of internal control, of
Water Ups MPC can also provide safeguard with a minimum of additional expense by
providing valuable silent deterrents to temptation as in the examples given below:
1) Multiple Copy Forms – The use of multiple copies in daily accounting records has
an important deterrent value. This and similar other deterrents remove the temptation to
commit irregularities because of the fear of detection. Hence, the more copies are
required, the more likely hidden anomalies will be discovered.
2) Machine Equipment – Accounting machines and other mechanical device as well

as computers used by Water Ups MPC sometimes contain audit control features which
can check the manipulation of accounting records and misappropriation of funds. Some
of these features are: (1) microfilming of records (2) savings window machines; (3)
commercial teller machines; and (4) proof machines.
3) Manual of Operating Procedures – A manual of operating procedures covering

the important functions of the Water Ups MPC are invaluable from the standpoint of
effective control, training and operations. Such a manual can increase efficiency and
ensure uniform understanding of the Water Ups MPC rules and regulations together with
its operations. The special procedure adopted dealing with various assets of the Water
Ups MPC and to ensure safe handling and run a minimum risk of loss through the
negligence or willful defalcations. The operating procedures should be planned to avoid
opportunities for dishonesty. If any of these procedures are inconsistent with safe
practices then it should revise immediately.
PART II

SPECIFIC INTERNAL CONTROL STANDARDS

BY ACCOUNTS/OPERATIONS
The internal control standards discussed here should not be considered as the only
necessary control standards or measures. Other controls, which are not mentioned,
should also be adopted whenever circumstances and conditions warrant.
Cash
A. Cash in Vault
1) The cash custodian and the control officer or their duly authorities alternates
should establish a system of dual control through the use of cash vault door’s dual
locking mechanism requiring joint access to the currency lockers should control
the day gate key.
2) If possible, sealed currency packages and bagged coins should be placed in

circulations on a first-in, first-out basis.
3) Vault door combinations and/or locks should be changed at least once a year or
whenever any holder of a combinations resigns or is transferred to other
responsibilities.
B. Tellers Cash
1) Each teller should, at all times, have sole access to and be given
responsibility for the cash assigned to him. A person will readily steal if
suspicion can be cast on someone else or if suspicion can be divided among
a number of employees including him. In this regard, the following controls
should be established.
i. Entrance to the teller’s cages should be denied to all individuals

except the teller concerned and other persons performing official
duties.
ii. Tellers should be under strict instructions never to leave their

respective cages without locking them.
iii. If tellers’ cages are not provided, each teller should be furnished a
cash drawer or box this can be locked whenever he leaves his
counter.
iv. Relief tellers should be given their own cash supply, which they
should account for at the end of the day.

2) Transfers of cash between tellers should be duly authorized and evidenced

by transfers lips or tickets initialed by both individuals.
3) Each teller should be asked to prepare a daily statement to prove his cash
accountability. Any cash difference should be reported regardless of the
amount. No teller should be allowed to cover up a shortage nor should he be
allowed to withhold an overage.
4) The accounting department should maintain separate accounts for “cash
over” and “cash short” for each individual teller.
5) If tellers are not required to turn in their cash at the end of the day, they
should exhibit their cash for “sight-checking” to an authorized employee
before placement in the vault.
C. Cash Operations
1) Each teller should validate each transaction he handles by placing his identifying
stamp. And initials on each supporting document and/or by means of a validating
machine provided with sufficient control features.
2) Late cash deposits should be handled by one teller and approved by an officer
Deposits and other cash receipts should be recorded by the tellers ‘validating
machines, which are provided with sufficient control features for protection against
alternation. The keys to the validating machine should be under the custody of the
internal auditor or of a control officer.
3) Receipts other than deposits should be acknowledge through pre-numbered official
receipts duly validated y the tellers’ machine.
4) Checks payable to companies or corporations should not normally be accepted for
deposit for the account of, nor encased for, an individual.
5) Tellers should:
a. Ascertain that every deposit slip or receipt bears the name of the
depositors or payer and an account number if this is in use.
b. Stamp every check received for deposit “Non-Negotiable” and “Paid” in
case of checks encashed.
c. Item counts the checks against the corresponding deposit slip to ensure
that the item count tallies with the number of items listed in the
corresponding deposit slip.
d. Examine each check for regularity and endorsement before encashment or
receiving in payment of an account to the Coop.
6) Tellers should be prohibited from:
a) Preparing customers’ deposit slips,
b) Preparing debit and credit memoranda,
c) Posting to savings, current, or general ledgers,

d) Having access to clearing and bookkeeping items,
e) Holding customers’ savings passbook,
f) Assisting in the preparation of customers’ statements,
g) Holding customers’ statements for delivery,
h) Having access to signature cards,
i) Opening new accounts, and
j) Issuing checkbooks to depositors.
7) When tellers leave on vacation, their cash should be counted and returned to cash
in vault.
8) When tellers are absent, their cash should be counted in the presence of the
auditor or his representative or another person not connected with the cash
department.
9) Unannounced counts of tellers’ and vault cash should be made at irregular intervals
by the internal auditor or his representative or by an officer not connected with the
cash department. Any difference should be reported to the directors in accordance
with established policy. An unannounced count of tellers’ and vault cash is one of
the strongest deterrents to peculation (or stealing). It prevents shortages or from
assuming responsibilities in excess of their authority. It also provides an opportunity
for the control officer, or someone in that capacity, to appraise the various cash
safeguard in use.
10)Cashiers and tellers should take their prescribed mandatory vacation leaves. In this
manner, protracted abstraction of cash may be uncovered.
11)Tellers and cashiers should be rotated at irregular periods and without previous
notice.
12)Tellers’ cages should be free accumulation of memoranda, miscellaneous slips,
checks and other items in order items in order to make it difficult to hide shortages
and irregularities.
13)Where there are separate receiving and paying tellers, all receiving tellers should
turn in all their cash at the end of the day to a designated employee/officer against
receipt.
Paying tellers should, however, exhibit their remaining cash to a designated officer
for “sight-checking” before placement inside their respective vault compartments.
14)Tellers with receiving and paying functions should turn in the amount in excess of
the prescribe maximum level and should exhibit the remaining cash to a designated
officer for “sight checking” before placement inside there respective vaults
compartments.

Checks and Other Cash Items
1) A separate account on the general ledgers should be maintained for checks and other
cash items.
2) An adding machine run-up of all checks held under this account should be attached to
the checks and both should be placed in a box with lock and key. This box should be
surrendered to the cashier/head teller for safekeeping over night and the surrender as
well as it withdrawal on the next business day should be recorded in an appropriate
record of the vault with the proper initials of those concerned.
The auditor or his representative should make a daily examination and proof of the
checks to ensure that no check remains uncleared or that previously cleared checks
are again carried in this account.
3) A register showing the date in the item was placed in the account, its description,
amount and disposition should be maintained and balance with the general ledger.
4) Checks and other cash items should be maintained by an employee not handling
cash or by the rack or distributing department.
5) A record should be maintained for return items.
6) Return items should be checked for authenticity and validity.
7) Return items should be handled by a section or department other than the section
or department, which originally handled them and should be charge back to the
proper accounts on the day of receipt. The checks should be
mailed/delivered/picked up by the depositor as soon as possible. Checks held
overnight should be keep in a vault or safe under the control of an officer.
8) A teller’s cash items should be inspected frequently and he should not be allowed to
carry the checks of officers and employees, nor advances to employees on salaries,
and past due notes in cash items.
9) Financial intermediaries should not accept “stale” and postdated checks for deposit
or in payment of loans.
10)Checks and other cash items that have been debited to the depositors’ account
should be controlled by the auditing department which should perforate them “paid “
by the use of a suitable machine and retain them under custody until the time they
are returned to the respective drawers.
Due From WATER UPS MPC/Cash in WATER UPS MPC
1) Reconcilements should be done regularly by the auditor or by a person other than

an authorized signatory of the account.
2) A permanent reconcilement record should be maintained and checked periodically

by the auditor or a designated officer.

Statements should be obtained at frequent intervals. For very active accounts,

they should be obtained on a daily basis and, for moderately active accounts, on a
weekly or semi-monthly basis. Arrangements should be made to transmit these
statements directly to the auditor of the financial institution.
3) A person, coming preferably from the internal auditor’s office, should be

designated to see to it that statements are received and reconciled promptly. This
person should neither be the general ledger bookkeeper, nor the person who
prepares the draft/check drawn against the account, nor still the person who signs
them.
4) All unissued Coop drafts and/or checks should be kept under dual control.
5) All entries to “Due from Water Ups MPC” accounts should be approved by two
authorized officers.
6) All exceptions in the reconcile record should be followed up promptly to a

satisfactory conclusion. A brief review of the canceled drafts/checks is desirable to
determine, for instance, use of the “Due from Water Ups MPC /Cash on Water
Ups MPC” account for possible abstraction of cash or any other irregularities.
7) Water Ups MPC drafts/checks used by the financial institution to draw against
their “Due from Water Ups MPC/Cash in Water Ups MPC” accounts should be
pre-numbered and issued in numerical sequence. All numbers should be
accounted for either as in stock, issued, or as canceled.
8) Water Ups MPC drafts/checks should never be signed in blank.
9) The functions of issuing, recording, and signing of Water Ups MPC drafts/checks
should be separated.
10)Paid drafts/checks should be filed, controlled and maintained by an officer other

than an authorized signatory.
Investments
A. Purchase/Sale/Pledge of Securities
1) The purchase, sale or pledge of investment securities should be approved by the

board of directors or its committee and recorded in the minutes.
2) Two official signatures should be required on letters confirming purchase, sale, or

pledge of securities.

3) Registered securities owned should be issued in the name of the financial

intermediary or otherwise endorsed to it, or endorsed in the Water Ups MPC, or
accompanied by power-of-attorney.
B. Safekeeping
1) Securities held by financial intermediaries should be under joint custody;

securities held elsewhere (in custody for financial intermediaries) should be
properly acknowledge in writing.
2) Custodians should be prohibited from handling transactions involving securities

and other investments.
3) Securities owned by financial intermediaries should be segregated both physically

and in the records from securities not owned but held by them.
4) Authorization for withdrawal and other documents in support of security

transactions should be kept on file.
5) The movements of securities in and out of the vault should be authorized by two
signatories and recorded in a record book or evidenced by “in” and “out” tickets.
6) All withdrawals or deliveries should be made against receipt duly acknowledge by

the receiver or his duly authorize representative.
7) All unmatured coupons should attached to coupon bonds.
8) Someone other than the regular custodian should physically verify securities at
least quarterly.
C. Recording and Verification
1) An adequate security registered should be maintained.
2) The record keeping function should be separated from the actual execution of
security transactions so that the employee posting the detailed records cannot
originate or handle securities.
3) The processing of transactions should be distributed among several employees,

i.e., one employee should not be permitted to accept the purchase or sales order,
arrange for the actual purchase or sale, and handle the funds connected with the
transaction.
4) An officer or employee not directly connected with the processing, records or

safekeeping of securities should balance subsidiary records of securities each
month to the general ledger control account.

5) An officer or employee, other than the person originating and/or recording the
entry, should review the supporting documents to substantiate each security
transactions entry.
6) Financial institutions should insist that brokerage statements be received regularly

and presented in the original sealed enveloped to an officer/employee other than
the one who handles security transactions.
7) Securities owned by financial intermediaries but are presently worthless or

nominal in value should be carried under accounting control and reviewed by the
board periodically for any possible realization.
8) Documents (brokers’ bill, advices, etc.) in support of security transactions should

be on file.
Loans and Discounts
A. Lending Operations
1) Loan officers or the loan committee should have definite loan authority limits to be
established by the board of directors. The board of directors should confirm the
loans approved within the discretionary loan of limit of an officer or loan committee.
2) The lending policies of the Water Ups MPC should be written so they will be
properly understood and implemented by the loan officers and the loan
committee.
3) All loans granted, renewed or extended should be covered by loan approval

memos, which should contain, among others, the credit basis for the loan.
4) Definite policies and procedures should be established for the appraisal of

collateral and for credit evaluation.
5) Individuals not responsible for approving loans should do appraisals.
6) A number control should be maintained and a number assigned to every new or

renewed note.
7) Officers and employees should be prohibited from accepting notes signed in blank
by a customer in anticipation of future borrowings.
8) Paid or renewed notes should be stamp or perforated “paid” or “renewed” and

should be returned promptly to the borrower or otherwise remove from active file.
This is to prevent the use of some of these paid notes to make up for any
differences in other notes.

9) Note proceeds should be released by credit to deposit accounts or official checks-

never in cash.
10) Officers and employees should be prohibited from receiving loan proceeds in
behalf of the borrower.
11) All loans granted, renewed, extended or restructured should be reported to the
board of directors for notation/confirmation.
12)A central liability ledger record should be maintained and should provide
complete and up-to-date information on all credit accommodations extended to
each customer.
13)The officer concerned to show approval should initial note forms.
14)Loan ledger sheets/register and notes should be kept inside the vault at the end of
the day safeguard them against fire and to prevent abstraction of liability ledger
sheets and/or notes.
15)Loans should be reviewed periodically to determine the status of their

collectibles.
16)The auditor or designated officer should confirm with borrowers (including

directors, officers, employees, stockholders and their related interest) their loans
balances as well as the collateral securing said loans on a surprise basis at
least once a year.
17)A repayment schedule should be required for every loan granted, renewed or
extended.
18)The account officer should periodically visit borrowers with relatively large
balances to gain first-hand information business development, financial
condition and future credit requirements. Any adverse developments are danger
signals, which require closer supervision of loans.
19)Someone other than the lending officer should obtain credit reports.
B. Collateral
1) A central collateral register should be maintained and this should provide complete
and accurate descriptions of all collateral pledge/deposited with the institution.
2) Negotiable collateral should be held under joint custody.

3) All collaterals, as taken from the collateral notes and records, should be physically
verified quarterly against the collaterals on hand by a person other than the
collateral custodian.
4) All collaterals received should be acknowledge with a receipt and all collaterals
released, duly approved by an authorize officer; inward and outward movement of
collaterals, should be evidence by pre-numbered “securities-in” and “securities-
out” receipts, respectively.
5) A designated employee/officer should inspect the collateral and all related

documentation to ascertain that:
(a) The collateral pledge/mortgaged/deposited by the barrower has been properly

recorded;
(b) The financial intermediary has a realizable lien on such collateral;
(c) The income arising from such collateral, i.e., cash dividends on stocks, etc. are
properly accounted for;
d. Securities sent out for exchange, transfer etc. are under the control of financial
intermediary; and
e. The collateral is preserved intact until its release to the barrower when he shall
have paid his loan together with the accounts receivable arising from said loan, or
until the financial intermediary shall have realize the collateral o make good the
loan.
6) Collaterals should be appraised realistically or conservatively to avoid over

appraisal.
C. Separation of Duties
1) Arrangements for loan payments should be made directly to the letter and not to the
bookkeeper or the official who granted the loan or to any employee involved in
lending operations.
2) Different employees should perform the functions of receiving and processing loan
payments and of bookkeeping.
3) A person other than the officer who granted the loan or the person handling the
records should mail costumer statements and delinquent notices.
4) All notes should be run and independently balanced monthly by the auditor or
someone not connected with the granting of loan against the loan subsidiary ledger.
D. Past-Due Accounts

1) Definite policies and procedures should be followed in the collection of delinquent

accounts.
2) Managements and the board of directors should periodically review the status of
past-due loans.
3) Past-due loans should be segregated and placed in a separate general ledger

control account.
4) Past due loans which are subsequently renewed or paid at some later date, should
be check through individually to ensure that proper interest has been received.
5) Past due loans should receive close supervision and administration to effect
collection or to subject them to easy repayment arrangement with the barrower
concerned.
6) If conditions or circumstances warrant, past due loans should be renewed or

restructured.
E. Overdrafts
1) A separate account for overdrafts should be provided in the general ledger.
2) Loan approval memos, showing the basis of the grant, renewal or extension, should
cover regular overdraft lines granted, renewed or extended.
3) A daily subsidiary record of all overdrafts should be maintained in the bookkeeping

department showing the customer’s name, amount of overdraft, date created, and
approving officer. This subsidiary record should be balances daily to the general
ledger control account.
4) Temporary overdrafts should have the prior approval of a duly authorize officer
subject to the limits of his lending authority.
F. Charge-offs
1) The board of directors or its committee without prejudice to further collection for
possible recovery should approve all loans recommended for charge-off by
management.
2) Evidence of un-collectibility should be kept available for examination.
3) All charge-off items should be held under dual control and adequate records should
be maintained of their status so that these items can be reviewed and appraised
periodically with a view toward effecting recovery.

4) In compromise settlements, the debtor and the officer handling the transaction
should sign stipulation. The board other than an active officer should also authorize
this stipulation. It should then be held in the charged-off assets file to protect the
officers from possible stockholder’s claims of improper disposition or negligence.
5) Borrowers with charged-off accounts should not be accommodated for further loans
unless charged-off accounts are paid.
6) Recoveries of write-offs should be properly receipted and recorded in appropriate

accounts.

Water Ups MPC Premises (Real Property Owned), Furniture, Fixtures and
Other Property Owned or Acquired
Water Ups MPC Premises (Real Property Owned) Furniture, Fixtures and
Equipment
A. Recording
1) A detailed subsidiary ledger for each item of fixed asset should be maintained
showing the following minimum information: date acquired, detailed description of
the property, title, (if any), area, location, acquisition cost, etc.
2) These ledgers should be periodically reconciled with the controlling account
balance by an employee other than the bookkeeper.
3) A physical inventory of fixed assets should be taken at least annually and its
results should be compared with the control records.
4) Individual fixed assets should be tagged or otherwise identified and related to

subsidiary records.
5) There should be a well-defined policy governing the differentiation between capital

and revenue expenditures.
6) Fully depreciated assets still in use should be included in the asset accounts at a
nominal value of one peso (P 1.00).
7) Adequate control should be maintained for scrapped and retired items to insure
the reporting of any recoveries of these items.
8) Original invoices should evidence all charges and credits to this account and
vouchers and the reasonableness of the amounts should be approved/verified by
an authorized official.
9) Income and expenses related to Water Ups MPC premises should be segregated
from the other income and expenses of the Water Ups MPC.
10)Depreciation records should be properly set up.
B. Miscellaneous
1) Prior written approval by the board or its committee should be required for:
a) Acquisition of fixed assets in substantial amount;

b) Major additions to and/or major repairs on fixed assets;
c) Sales of fixed assets;
d) Scrapping or retirement of fixed assets;

e) Transfer of fixed assets from one department or branch to another;

f) Adjustments of book record to physical inventory.
2) Appraisals should be regularly undertaken for purposes of insurance coverage.
3) Consideration should be given to the limit set by the General Cooping Act on
investments in real estate.
Other Property Owned or Acquired
1) A detailed subsidiary record for each item should be maintained showing the
following minimum information:
a) From who acquired
b) Date acquired
c) Acquisition cost
d) Description of property
e) Location of property
2) There should be an organizational unit responsible for administration and

disposition of all such assets and, also for the performance of the following function:
a) Maintain proper accounting for all income and all expenses for each assets
held;
b) Make periodic reports to the board of directors as to new acquisitions, sale and
c) Conduct periodic appraisals of asset values to update records with current or

market prices;
d) Maintain adequate insurance coverage of assets.
3) The internal auditor or control officer should conduct a physical inventory of all
items held at least once a year.
4) The board of directors or its committee should review all acquisitions and
disposition of these assets monthly.
5) No asset should be disposed of without prior authority from the board of directors or
its committee.

6) Instruments showing ownership of assets should be held under join custody and
segregated from loan collateral instruments.
Other Assets
A. Advances and accounts receivable
1) A detailed subsidiary record should be maintained for all accounts receivable and
amount; amount due from officers and employees.
2) No advances to officers an employee should be granted without prior approval of an

authorized officer without the liquidation of previous advances of the
officer/employee.
3) All advances to officers and employees, which remain outstanding or not liquidated
for unreasonable period of time, should be reported to the board of directors or its
committee.
4) The internal auditor/control officer should prove the totals of all subsidiary record to
their respective control accounts in the general at least once a month.
B. Petty cash fund
1) A separate account in the general ledger should be maintained for petty cash fund.
2) Disbursements from the fund should be allowed only upon presentation of properly
accomplished and approved petty cash expenses voucher which should be
evidenced by original receipts and invoices duly signed by the supplier and/or
creditors.
3) Petty cash vouches should contain the following minimum information:
a) Nature/description of the expenses account
b) Date
c) Amount
d) Officer/employee preparing the voucher
e) Officer/employee approving the voucher
4) The officer or employee designated to handle the petty cash fund should at all times
have sole access to and responsibility for the fund.

Manager’s/Cashier’s Checks
1) Check-issuing and check-paying operations should be separated. Any person

authorized to sign checks should not be involved in check payment or account
reconcilement.
2) Every check should be serially pre-numbered and unissued checks should be

kept under joint custody.
3) A number control system should be maintained.
4) Paper stock used for printing of checks should be of the kind that readily
discloses attempts at alteration.
5) Checks should never be signed in blank or made payable to “cash” or “bearer”.
6) All checks presented for payment should be checked for date and
endorsements and should be properly cancelled and filled.
7) A designated officer should approve outstanding checks per register.
8) A designated officer should approve payments on long-outstanding checks.
9) Specific policies should be established with regard to the cancellation or

replacement of stale and lost or destroyed checks or drafts.
10)A register for issued manager’s and cashier’s checks should be maintained
indicating the date issued, check number, amount, payee and the purpose for
which it was issued. A “remarks” column should be provided in the register to
indicate the dates the checks were paid. All open items that are outstanding
should be reconciled with the general ledger balance.
Current, Savings and Time Deposit Accounts
Current Accounts
A. New Accounts
1) A designated officer should approve all new current accounts.
2) Board resolutions, powers of attorney, letters of authority, special agreements

and lists of authorized signatories should be required for all corporate or
partnership accounts and fiduciary accounts.

3) Joint accounts should be evidenced by appropriate documents signed by all

parties to each account.
4) The corresponding certificate of registration with the proper government agency

and a copy of the approved articles of co-partnership or incorporation should
support each account under a power of attorney.
5) The corresponding certificate of registration with the proper government agency

and a copy of the approve articles of co-partnership or incorporation should
support Corporate and/or partnership accounts.
6) In case of corporations, a certificate of election of the directors and officers and

copy of the board resolutions authorizing said directors and officers to sign
checks and other instruments should be obtained annually.
7) Number controls should be established and assigned to each account.
B. Signature cards and deposit ledger sheets
1) Each current account should have at least two signature cards containing four
specimen signatures per card of the persons(s) authorize to sign on the
account.
2) Some from of validation should authenticate signatures cards and deposit ledger
sheets. Subsequent changes should also be validated. The validating device
use, if any, must be kept under joint custody. This is to prevent manipulation by
substitution of signature cards and/or deposit ledger sheets.
3) Signatures card and deposit ledger sheets should be accessible only to

authorize persons and adequately protected against tempering, loss or damage.
C. Deposits
1) Customers should prepare and sign their own deposits slips.
2) Deposits slips should be validated by the teller’s machine or by means of the

teller’s identification stamp in addition to his signatures or initials.
3) All checks received for deposit should be individually imprinted with both the
teller’s identification and “non-negotiable” stamps.
4) Deposit tickets should not be altered. In case of error, corrections should be by

debit or credit tickets with advice copies for the depositor.

5) Entries in the customers’ ledgers representing deposits should be identified by

symbols or marks as to whether they were received in cash, checks, out-of-two
checks, etc.
6) Dates appearing on deposits tickets should be occasional examined at irregular

intervals after they have been posted. This operation may detect “lapping” of
deposits.
D. Withdrawals
1) Withdrawals against uncleared checks deposits as well as temporary

overdrawing should be allowed only upon prior approval of a responsible officer
within the limits of authority set by the board of directors. Approval should be
evidenced by the officer’s signatures or initials on the checks(s) and placed
beside the related ledger entry. DAUD’s and TOD’s should be regularized into
straight loans if not liquidated after 15 days. However, rural Water Ups MPC
should not allow withdrawals against uncleared check deposits under any
circumstances.
2) Reports on drawings against uncleared check deposits and temporary

overdrafts should be submitted monthly to management or the board of
directors.
3) Reports of closed accounts and returned checks should be prepared daily.
4) Checks should be canceled as soon as they have been paid and posted.
5) Closed accounts should be listed daily and the officer or auditor should send
out confirmation letters to determine if account is fraudulently closed.
E. Segregation/Rotation of duties
1) The work assignments of bookkeepers check filers, and statement checks

should be rotated periodically.
2) Each bookkeeper should be made responsible for a definite group or section of

accounts. These sections should be shifted from one bookkeeper to another at
frequent and unannounced intervals.
3) Bookkeepers should not allow to:
a) Deal with costumers,
b) Open new accounts,

c) Prepare and/or mail statements except in cases where bookkeepers use

machines with built-in control features that produce both ledger and
statement in one posting process,
d) Act as relief tellers,
e) Access to signature cards, and
f) Access to clearing items.
4) Rotation assignments should be irregularity, unannounced and long enough to

permit disclosure of any irregularly.
5) Control keys to posting machines should be kept by the internal auditor or control
officer.
6) An schedule of mandatory vacations for officer and employees should be

prepared and implementation should be without notice. Records should be
maintained to show that such vacations were taken as scheduled. Officers and
employees on force leave should not be allowed to do his previous duties for the
duration of their leave of absence.
7) In systems where both ledger and statement are posted in one operation, an
employee other than the bookkeeper should verify daily the entries on the
statement against the corresponding ledgers.
F. Statements
1) Monthly statements should be prepared for all current accounts.
2) Officers and employees who have something to do with current accounts

transactions should be prohibited from handling the dispatching and delivery of
current account statements at the end of the month or from assisting in such
operations.
3) All statements should be mailed direct to the depositors. An organizational unit not
responsible for demand deposit account processing should retain undelivered
statements.
4) Necessary precautions should be taken to ensure that no alteration is made on any

statement of account before mailing or delivery.
5) An officer be designated to attend to customers who report differences on their

statements

G. Reconciliation
1) In either a manual or automated system, the totals of the daily transaction should
be reconciled with the general ledger entries.
2) Separate sub-controls should be maintained for each type of demand deposit and
the sum of the sub-controls should be proved to the general ledger total daily.
3) Current account subsidiary ledgers should be independently proved monthly to the

general ledger.
H. Miscellaneous
1) Effectively controls should be over unposted debit and credit (hold-over) through the
use of suspense accounts. These items should be cleared daily.
2) Internally generated entries- both and two authorized officers should approve credit-
to checking accounts.
3) Erasures on ledgers should not permitted. Errors should be by correction posting,

which should be verified an initialed by someone other than the bookkeeper.
4) Closed-out ledger sheets should be preserved and segregated from active file.
5) Dormant and inactive deposit accounts should be segregated from the active
deposit ledger accounts and held under joint custody.
6) Checkbooks should be issued only against requisition forms signed by each party
authorized to sign on the account and only after positive verification of the
signature.
7) Reserved supplies of checkbooks and requisition forms should be kept under joint
custody and issuances properly acknowledged in writing.
8) Debits to deposit accounts for transfer to other accounts should be covered by a

written authority from the depositors whose accounts are to be debited.
Savings Accounts
The internal controls for current accounts discussed in the preceding pages also apply
to Savings accounts except for operations peculiar to current accounts such as
overdrafts, Statements and checkbooks. In addition, the following controls are also
needed:
1) An employee other than the one who made the computation should check interest
credits to individual savings deposits.

2) Subsidiary ledger balances should be independently proves monthly against

control accounts balances.
3) Approval by key officer should be required for all withdrawals.
4) The Water Ups MPC should hold no savings passbook unless so held in the
safekeeping department under the control and custody of designated officer.
5) Unissued passbooks should be under the control and custody of a designated

officer and periodically accounted for.
Dormant account
1) Dormant accounts should be segregated from the active account ledgers and held
under joint custody.
2) A general ledger control account should be maintained for dormant savings

accounts.
3) Entries to dormant account ledgers should be verified and approved by a

designated officer. His initials should be placed next to the entry on the ledger
sheet.
4) All inquiries on dormant accounts should be coursed to one officer who should
obtain sufficient identification from the inquirer to assure that he is entitled to the
information.
5) Signature cards for dormant accounts should be removed from active files and
held in joint custody to avoid the possibility of substitution and forgery.
6) A trial balance of dormant account ledgers should be taken and balanced with the
control account periodically by a person other than the bookkeeper.
7) Dormant on inactive accounts should be verified directly with customers.
8) The board of directors should establish definite policies as to what constitutes a

dormant account.
Time Deposit
1) Two authorized officers should sign all certificates of time deposits issued jointly.
2) Resolutions, powers of attorney, letters of confirmation, special agreements, and

lists of authorized signatories should be required for all corporate, partnership and
fiduciary accounts.

3) Certificates of time deposits should be pre-numbered and issued in numerical

sequence. All numbers should be accounted for as either in stock, canceled or
issued.
4) Depositors should be required to acknowledge receipt of certificates.
5) Subsidiary ledgers should be maintained for each outstanding certificate. Stub or

file copies of the certificates may serve this purpose.
6) A person other than the bookkeeper should prove subsidiary ledger balances
monthly against the control account.
7) Upon withdrawal, the original certificate of deposit should be endorsed by the

depositor and surrendered to the Water Ups MPC.
8) Original copies of paid or canceled certificates should be perforated or marked

with the date of payment and attached to the corresponding stub or duplicate
copy.
9) Interest computations should be checked by another employee as to accuracy and

as to the fact that interest has not been previously paid on the same item before
payment is made to the customer.
10)Paper stock used for the printing of time certificate of deposit should be of the kind
that readily discloses of alteration.
11) All Unissued certificates should be kept under joint and control.
12)Certificate of deposits should never be signed in Water Ups MPC.
13)The function of receiving deposits, recording and signing of certificate should be

segregated. If draft is issued in duplicate, a copy should be sent to the auditor for
review as to its validity.
Bills Payable and Other Borrowings
A. Authority for Borrowings
1) The board of directors or its committee should authorize borrowings.
2) At least two authorized officers should sign for borrowings.
3) Maximum ceiling for Water Ups MPC borrowings, based on Water Ups MPC past
borrowings and on projected use or need for funds, should be set by the board of
directors.

B. Recording of Debt
1) Bills payable and other borrowings should be recorded in subsidiary ledgers

showing the amount, maturity date, interest rate, payment of principal, payment of
interest and description of collaterals, if any.
2) The subsidiary records should be reconciled monthly with the control account.
C. Miscellaneous
1) Interest payments should control and reconciled with the rates and amounts
specified in the agreement.
2) Paid instruments should be canceled and filed.
3) Release document should be obtained for fully paid obligations.
4) An adequate record should be maintained to effectively control collateral pledged to

secure borrowings.
5) Arrangement for the procedure of releasing pledge collateral of paid borrowings

should be made.
6) Repayment arrangement of bills payable and other borrowings should be strictly

followed.
7) Direct confirmation of outstanding balance should be made periodically from

creditors.
Other Liabilities (Unearned interest and discount, account payable, accrued

expenses)
1) A detailed subsidiary record for each creditor should be maintained.
2) At least once a month, subsidiary ledgers should be independently proved against

their respective control accounts in the general ledger.
3) Bookkeepers handling subsidiary records should never be allowed access to

general ledger records and vice versa.
4) The internal auditor/control officer should undertake direct verification on payables

periodically. Confirmation letters should be mailed and not delivered personally.
Subsidiary ledger bookkeepers should not be allowed to prepare confirmation
letters.

5) The internal auditor/control officer as to the status of outstanding payables should

prepare a monthly report to the Board of Directors or its committee. Long
outstanding items should be given preferential attention for their final disposition.
6) All debit and credit tickets to the general ledger should bear the signature of an
authorized officers.
Capital Accounts
A. Capital stock
1) The capital stock accounts should be supported by two subsidiary records

consisting of the stub portion of issued stock certificates and the stockholders’
ledger or stock and transfer book containing the name and address of each
stockholders with his total number of shares.
2) The printer should number stock certificates. Blank certificates should be placed
under joint custody to prevent their being abstracted while books containing the
stubs of outstanding certificates should be placed in a vault under the control of a
responsible employee.
3) At least two employees should participate in the issuance of stock certificates.

Certificates should be delivered as soon as they are ready for issue.
4) Surrendered certificates should be duly canceled or defaced and kept in a safe

place or attached to their corresponding stubs
5) Documentary stamps should be properly affixed and canceled for original issues
and transfers.
6) A person other than the one handling the records should reconcile subsidiary
records monthly with the general ledger control account.
7) Proper control should ensure that (a) a change in capitalization comply with legal
requirements; (b) dividend checks are made out in correct amounts payable to
correct parties; (c) dividend checks are mailed out by a person who did not prepare
the checks; and (d) unclaimed dividend checks are properly accounted for and set
up as a liability.
B. Surplus and undivided profits
1) Entries to surplus accounts should be originated and approved by an officer.
2) Entries passed directly, to the Undivided Profits account should require senior
officer approval.

3) The preparation of entries, the posting to ledgers and the preparation of periodic
reports should be separated.
Income and Expense Accounts
A. Income
1) Income receipt and record keeping function should be separated.
2) Adequate subsidiary records should be maintained showing the required

breakdown and distribution of income.
3) Simple accrual procedures should be established for larger income accounts,

particularly for investments and loans.
4) Comparative statement of income should be prepared monthly so that the board of

directors can determine the variations and cause thereof.
5) The investment income account should be checked to ensure that all coupons due
have been collected.
6) The interest income and sundry income accounts should be checked to see to it
that all income is properly recorded.
7) The financial intermediary should have an approved written profit plan.
8) A budget of estimated income should be prepared for each calendar year to

determine whether the actual income earned is in accordance with the financial
intermediaries’ expectations.
B. Expense
1) The purchasing and payment function should be separated.
2) All disbursements should be made in check and should be in separate series of

official checks.
3) An impress fund should be established for minor disbursements
4) Two official signatures should be required for all check disbursements.
5) Original invoices should support all disbursements and supporting documents,

which should be stamped “paid” and noted with the check number and date
payment after the issuance of the check.

6) Voided or spoiled checks should be properly mutilated and kept for inspection.
7) Reserve supply of Unissued be kept under dual control.
8) Checks should never be signed in blank or drawn to “Cash” or “Bearer”
9) Subsidiary records should be maintained showing detailed distribution of expenses.
10)Simple accrual procedures should be established for large expense accounts,

particularly interest and taxes payable.
11) Comparative statements of expenses should be prepared monthly so that the

board of directors can determine any variation with its causes.
12)The financial intermediary should have an approved budget as a means of

controlling its expenses. Expenses beyond the budget should require prior
approval of the Board or its committee.
Safe Deposit Boxes
A. Access
1) On each access, an identifying signature should be obtained from the box holder or
his duly authorized deputy. The date and time of access should be noted on a
register.
2) Access tickets or register should be dated and signed by an officer allowing

access.
3) Both the box holder and the custodian should be present when the box door is
unlocked or relocked.
4) An employee should examine booths after each access to ensure that the renter did
not leave anything behind.
5) Adequate visitation records should be maintained.
B. Controls
1) Locks and keys to all unrented boxes should be placed in sealed containers and
held under dual control.
2) The Coop not hold any safe deposit box keys in behalf of renters.
3) If both to a box have been lost, the box should be broken only in the presence of
the box holder and two employees.

4) In the event of the death of a box holder, proper notation should be made and
necessary precautions taken so that no admission is granted until all legal
requirements have been met.
5) After a sufficient period of time has elapsed without payment of rental, all
regulations of law should be followed before the box is forced open.
6) Locks be changed after the termination of each lease.
Collection Items
A. Incoming collections
1) All incoming collections should be recorded in a separate register,
2) A number control should be maintained for collection items and a number assigned
to each collection item.
3) Follow-up procedures regarding the settlement of collection items should be

established.
4) The disposition of all incoming collections should be noted on the register.
5) Incoming traces and inquiries should be handled by an officer or employee not

connected with the processing of collection items.
6) An employee other than the one handling the register should periodically prove
outstanding items per register against the general ledger account.
7) Customers should be promptly notified and the collection item promptly returned in
the event of non-payment of a collection item.
8) Credit to the customer in advance payment of all items, which require handling on a
Collection basis should not be allowed.
9) Adequate vault storage facilities should be provided for collection items carried over
to the next day’s business.
10)The files of notes/checks/drafts entered for collection should be clearly and

distinctly set apart from Water Ups MPC owned notes/checks/drafts.
11) Collections tellers should turn over all cash to all paying teller at the close of
business each day; they should start each day with the standard change fund.

B. Outgoing Collections
1) Pre-numbered receipts should be issued to customers for items received for

collection.
2) All outgoing collection items received from customers should be recorded in a

separate register.
3) A number control should be maintained and a number assigned to each collection

item.
4) Appropriate procedures should be followed to settle all outgoing collection items

immediately.
5) The disposition of all outgoing collections should be noted on the register.
6) Outstanding items per register should be periodically reconciled with the ledger
balance.
7) Customers should be notified immediately after the collection of an item is promptly

returned in the event of non-payment of a collection item.
8) Credit to the customer in advance payment of all items, which require handling on a
collection basis, should not be allowed.
9) Adequate vault storage facilities should be provided for collection items carried over
to the next day’s business.
10) The files of notes/checks/drafts entered for collection should be clearly and
distinctly set apart from Coop-owned notes/checks/drafts.
11) Collection tellers should turn over all cash to the paying teller at the close of
business each day; they should start each day with the standard change fund.
B. Outgoing collection
1) Pre-numbered receipts should be issued to customer for item received for

collection.
2) All outgoing collection items received from customers should be recorded in a

separate register.
3) A number control should be maintained and a number assigned to each

collection item.
4) Appropriate procedures should be followed to settle all outgoing collection items

immediately.
5) The disposition of all outgoing collections should be noted on the register.
6) Outstanding items per register should be periodically reconciled with the general
ledger balance.
7) Customers should be notified immediately after the collection of an item is

received.
Transportation of Cash and Securities
The following minimum requirements should be followed in the local transportation of

Valuables under the care of company employees:
1) One employee (unarmed) - up to P 1,000
2) Two employees (unarmed) - P 1,000 to P 10,000
3) Two employee (unarmed) - P 10,000 to P 100,000
4) Armored car (2 armed guards) - Over P 100,000
5) At all times, the transportation of cash and securities should be adequate

covered by insurance.
6) Each parcel transported, which has a value in excess of P1,000, should be

securely locked in a carrying case or similar container. Addition protection
should be provided if in the opinion of the manager, it is warranted.
7) Dual control should be maintained over shipment valued in excess of P 1,000

until they are delivered against appropriate receipts to the person responsible
for their transportation.
Likewise, the shipment should be received into dual control after

transportation. This precaution should apply regardless of whether the
transportation is under the care of company employees or independent
carries.
Shipment of Securities
1) The security should prepare shipment of securities and coupons. All parcels
should be very securely wrapped. Each parcel should remain in the continuous
joint custody of two person until delivered to the carrier against. At least one of
these persons should have assisted in the preparation of the parcel.

2) The person responsible for custody of the valuable should handle inward parcel,
identifiable as valuable parcel through prior receipt of advice of shipment or
similar notification from remitter, under dual control.
PART III
INTERNAL CONTROL QUESTIONNAIRES
The following questioners are designed to determine the compliance by Water Ups
MPC with prescribed internal control standards. They have to be filled up by auditors in
the course of their audit of Water Ups MPC. Answers to the question may be “Yes” or
“No”. A negative answer, unless satisfactorily explained, would mean an exception and
should be explained in the auditor’s report. The basis on how the answer was obtained
should be indicated and this could be done through interview, verification or observation.
This basis should be given under the remark’s column.
I. GENERAL SAFEGUARDS YES NO

REMARKS
1. Are the director well-informed and aware of them

responsibilities to their depositor, creditors and stockholders? ____ ____
_________
2. Are the directors aware that they are responsible for the
implementation of a fraud prevention program? ____ ____
__________
3. Does the board see and review the supervisory authorities’

report by noting any adverse comments? ____ ____
__________
4. Do they follow-up exception to see that they are

satisfactorily settled? ____ ____
__________
5. Is an auditor/control/compliance officer appointed? ____ ____

__________
6. Does the auditors/control/compliance officer report direct to the

board of director ____ ____
__________
7. Do the By-Laws outline the auditor’s/control/compliance officer’s

authority? ____ ____

__________
8. Is he/she independent of Coop Management? ____ ____

__________
9. Is the auditor/control/compliance officer not authorized to

develop and install procedures, prepare record or to review
or appraise the activities normally expected of him/her? ____ ____
__________
10. Are titles of accounts accurate and descriptive? ____ ____

__________
11. Do entries have sufficient description either on the

general ledger, tickets or journals? ____ ____
__________
12. Is plan of rotating the employee in their duties enforced? ____ ____
__________
13. Does the auditor/control/compliance officer report to the board

of directors that all officers and employees have
complied with the vacation requirements? ____ ____
__________
14. Does the board of directors maintain a close scrutiny

of the outside activities of all officers and employees? ____ ____
__________
15. Was an investigation made on the immediate or sudden

change in habits or appearance of officers and employees? ____ ____
__________
16. Are all the unusual social and financial activities

of employee thoroughly investigated? ____ ____
__________
17. Does the board or control officer periodically secure the

financial statements and credit report of officers
and employees? ____ ____
__________
18. Are employee-customer relations watched for possible

collusion or misappropriation of the institution’s funds? ____ ____

__________
19. Does the Coop follow normal rules and satisfactory

precautions when hiring new officers and employees? ____ ____
__________
20. Does the Coop conduct its own investigations and/or

does it secure adequate information before hiring them? ____ ____
__________
21. Does the Coop pay all officers and employees an

adequate, livable salary? ____ ____
__________
22. Is a comparison made of the Coop’s structure with

competing concerns? ____ ____
__________
23. Is an executive officer or some other officer designated

to handle complaints and personal problems of employees? ____ ____
__________
24. Are employees encouraged to discuss their personal

problems with their officers? ____ ____
__________
25. Are officers or employees assigned in a joint custody or

dual control not related within the third degree of
consanguinity or affinity? ____ ____
__________
26. Is dual control under the supervision of the auditor or

control/compliance officer, on one side, and a cahier or
operating personnel, on the other side? ____ ____
__________
27. Are the keys or combination used in the dual control

procedure guarded carefully by the persons concerned? ____ ____
__________
28. Is the operation of combination concealed from persons

nearby? ____ ____
__________
29. Are spare keys or combinations retained in sealed

envelops bearing the holder’s signature across the flap? ____ ____
__________
30. Has a dual control system been created by having one

person hold one part of the combination and another
person the other part? ____ ____
__________
31. If the Coop is too small to hire a qualified auditor or

control officer, is it audited at least annually by a qualified
outside CPA who has an experience in Cooping
techniques? ____ ____
__________
32. Does the outside CPA make periodic checks,

examinations or verifications during the year? ____ ____
__________
33. Are the reports from such examinations

communicate to the board of directors? ____ ____
__________
34. Is a permanent record maintain for all incoming

outgoing registered mails? ____ ____
__________
35. Are you registered mail receipts or shipments handled

jointly by two people? ___ ____
__________
36. Are insurance coverage reviewed annually or oftener

by the control/compliance officer. ____ ____
__________
II. SPECIFIC SAFEGUARDS
A. Cash in Vault
1. Is cash in vault under dual control? ____ ____
__________
2. Are sealed currency package and bagged coins place

in circulation on a first-in, first-out basis? ____ ____
__________

3. Are vault door combination and/or locks changed at

least once a year? ____ ____
__________
B. Teller’s Cash
1. Does each teller have sole access to and responsibility
for cash assigned to him? ____ ____
__________
In this regard, the following question should be answered:
a) Is entrance to the teller’s cages denied to all individuals

except the teller concerned? ____ ____
__________
b) Are tellers give strict instructions never to leave their

respective cages without locking them? ____ ____
__________
c) Where teller’s cage are not provided, are tellers furnished

a cash drawer or box which can be locked whenever they
leave their counters? ____ ____
__________
d) Are relief teller provided with their own cash supply which
they account for at end of the day? ____ ____
__________
2. Are transfers of cash between teller duly authorized

and evidenced by transfer slips or tickets? ____ ____
__________
3. Is each teller held responsible for his cash difference and

required to report any difference regardless of amount? ____ ____
__________
4. Are separate account for “cash over” and cash short”

maintained by the accounting department for each teller? ____ ____
__________

C. Operations
1. Are all tellers transaction identified through the use of a

teller stamp? ____ ____
__________
2. Are late cash deposits handled by one teller and

approved by an officer? ____ ____
__________
3. Are deposits and others cash receipts recorded by

the teller validating machine? ____ ____
__________
4. Are the keys to the machines kept in the custody of the

internal auditor or a control/compliance officer? ____ ____
__________
5. Are receipts other than deposits acknowledge through

pre-numbered official receipts? ____ ____
__________
6. Are checks payable to companies or corporations not

accepted for an individual? ____ ____
__________
7. Do tellers:
a) Ascertain that every deposit slip or receipt bear the

name of the depositor/pay or and an account number
where the latter is in use? ____ ____
__________
b) Stamp every check received for deposit “Non-negotiable”

and “Paid” in case of checks encashed? ____ ____
__________
c) Item count the checks against the corresponding deposit

slip to ensure that the item count tallies with the number
of item listed in the corresponding deposit slips? ____ ____
__________
d) Examine each check for regularity and endorsement

before encashment or receiving in payment of
an account with the Water Ups MPC? ____ ____
__________

8. Are tellers prohibited from:

a) Preparing customer’s deposit slips? ____ ____
__________
b) Preparing debit and credit memoranda? ____ ____
__________
c) Posting of savings, current or general ledger? ____ ____
__________
d) Having access to clearing and bookkeeping items? ____ ____
__________
e) Holding customer’s savings passbook? ____ ____
__________
f) Assisting in the preparation of customer’s statements? ____ ____
__________
g) Hiving access to signature cards? ____ ____
__________
h) Holding customer statement for delivery? ____ ____
__________
i) Issuing checkbooks to depositors? ____ ____
__________
9. Are teller’s cash counted and returned to the cashier

when they go on vacation leave? ____ ____
__________
10. Are teller’s cash counted in the presence of the auditor/

officer or his representative when he is absent or
another person not connected with the cash department? ____ ____
__________
11. Are unannounced cash counts of tellers’ cash and cash in

vault frequently made by an officer or an internal auditor? ____ ____
__________
12. Are differences reported to the directors in accordance

with established policy? ____ ____
__________
13. Do cashiers and tellers take their prescribed mandatory

vacation leave. ____ ____
__________
14. Are cashiers and tellers rotated at irregular periods and

without previous notice? ____ ____
__________

15. Are teller’s cages free from accumulated memoranda,

miscellaneous slips, checks and other items that could
hide shortages and irregularities? ____ ____
__________
16. Where there are separate receiving and paying tellers,

do all receiving tellers turn in all their cash at the end of
the day to a designated employee/officers against receipt? ____ ____
__________
17. Do tellers exhibit their remaining cash to a designated

officer for “night checking” before placement
inside their respective vault compartments? ____ ____
__________
D. Electronic Fund Transfer System (EFTS)

Automated Teller Machine (ATM)
New Accounts
1. Is proper identification required for all customers
opening new accounts? ____ ____
__________
2. Are customers properly educated on the secrecy of the PIN

the importance of safeguarding their ATM cards PIN? ____ ____
__________
3. Are controls adequate to ensure the secrecy of the PIN

assigned to each customer? ____ ____
__________
4. Is PIN selection done in a secured place or preferably

with the use of an electronic keypad? ____ ____
__________
5. Are customers required to personally come and secure

their ATM cards in the Water Ups MPC? ____ ____
__________
Cash Operations
1. Is cash maintained in the ATM sufficient to support normal
operation but not necessarily excessive? ____ ____
__________
2. Is the opening of ATM lockers as well access to ATM

locks/combination under dual control? ____ ____
__________

3. Is the counting of cash, replenishment and balancing of
ATM transaction conducted by two employees? ____ ____

__________
4. Are discrepancies immediately reported and

corresponding reconciliation and investigation done
by independent personnel? ____ ____
__________
5. Is the servicing of ATM by hardware maintenance

personnel strictly monitored? ____ ____
__________
6. Is daily cash control report prepared for each ATM machine? ____ ____
__________
7. Is cash proofing/reconciliation done when unusual or

unplanned machine opening occurs? ____ ____
__________
8. Are depositors immediately inform of discrepancy

noted on deposit transactions? ____ ____
__________
Other Operation
1. Are all ATM transactions authorized only by the customer’s ____ ____
__________
2. Are Unissued ATM cards under dual control? ____ ____

__________
3. Are personnel handling returned ATM cards different from

those responsible from ATM cards distribution? ____ ____
__________
4. Are the limitation on the amount and number of daily

withdrawals clearly established. ____ ____
__________
5. Are the control mechanism/procedure able to handle invalid

attempts, aborted transaction and errors? ____ ____
__________
6. Are test runs conducted once or twice every 24 hours

to ensure that machine is functioning property? ____ ____

__________
7. Are ATM transaction reports reviewed daily? ____ ____

__________
8. Is the non-printing of PIN in the reports generated as well as

the terminal/host computer message strictly implemented? ____ ____
__________
9. Does the ATM machine retain cards that are reported

lost or stolen?
On Line Tellering
1. Are tellers’ terminals safeguard by terminal locks, terminal
identification checks or authorized user-identification? ____ ____
__________
2. Are limits set on transactions tellers can initiate, files they can
access as well as time they can use the terminals? ____ ____
__________
3. Is supervisor’s override/key required for transaction initiated,

file accessed land terminal use beyond the limits set. ____ ____
__________
4. Is teller’s identification code immediately deleted from the list

of authorized user codes/passwords within the system when
they resign, transfer to a new position or go on leave for a
number of days to avoid unauthorized terminal access? ____ ____
__________
5. Is periodic change of teller’s and supervisor’s password

observed? ____ ____
__________
6. Do tellers log-off their respective terminals if not in use or

upon completion of all the processing activities? ____ ____ __________
7. Are control keys to tellers’ terminals kept by the internal

auditor or control officer? ____ ____
__________
E. Checks and Other Cash Items

1. Is a separate account in the General ledger used to

control checks and other cash items? ____ ____

__________
2. Is a run-up of all checks held under COCI attached to the

checks and are both placed in a box with lock
and key? ____ ____
__________
3. Is the box surrendered to the cashier/head teller for

safekeeping overnight and is the surrender as well
as its withdrawal the next day recorded in an appro-
priate record of the vault with the proper initials of
those concerned? ____ ____
__________
4. Does the auditor or his representative or an officer/

employee make a daily examination and proof of
the checks to ensure that previously cleared checks
are again carried under COCI? ____ ____
__________
5. Is a register maintained showing the date the item

was placed in the account, its description, amount
and disposition? ____ ____
__________
6. Does the register balance with the general ledger? ____ ____
__________
7. Are checks and other cash items held by an individual

not handling cash? ____ ____
__________
8. Are checks and other cash items promptly disposed

of for redistribution and clearing? ____ ____
__________
9. If, for one reason or another, these checks and other

cash items are not promptly disposed of, are they
placed in a vault overnight under dual control? ____ ____
__________
10. Is a record maintained for return items? ____ ____

__________

11. Are return items checked for authenticity and validity? ____ ____
__________
12. Are return items not returned to the tellers or

departments that originally handled them but
to an officer or employee not handling cash? ____ ____
__________
13. Are they charged Water Ups MPC to the proper accounts
on the day of receipts? ____ ____
__________
14. Are return items mailed/delivered/picked up by

the depositor as soon as possible? ____ ____
__________
15. Are checks held overnight kept in a vault or safe

under the control of an officer? ____ ____
__________
16. Are cash items of tellers inspected frequently? ____ ____

__________
17. Are tellers prohibited from carrying their own

personal checks or those of other employees,
advances to employees on salaries or past due
notes between paydays? ____ ____
__________
18. Are “stale” or postdated checks not received for

deposit or in payment of loans? ____ ____
__________
19. Are checks and other cash items that were

debited to the depositor’s account controlled
by the auditing department? ____ ____
__________
20. Are the same checks perforated “paid” and

retained under the custody of the auditing
department until returned to the respective drawers? ____ ____
__________
F. Due from Water Ups MPC /Cash in Water Ups MPC

1. Are reconcilements made by a person
other than the authorized signatory of

the account? Quality ____ ____

__________
2. Is a permanent reconcilement record maintained? ____ ____

__________
3. Is this record checked periodically by the auditor

or some other officer? ____ ____
__________
4. Are statements obtained daily on very active

accounts and weekly or semi-monthly on
moderately active accounts? ____ ____
__________
5. Is a person, preferably from the internal auditor’s

office, designated to see to it that statements are
received and reconciled promptly? ____ ____
__________
6. Is the reserve supply of Unissued Water Ups MPC drafts

under dual control? ____ ____
__________
7. Are entries to those accounts approved by two

authorized officers? ____ ____
__________
8. Are all exceptions in the reconcilement report

followed up properly to a satisfactory conclusion? ____ ____
__________
9. Is a review of the cancelled drafts made to determine

the use of the “Due from Water Ups MPC” account for possible
abstraction of cash or any other irregularities? ____ ____
__________
10. Are Water Ups MPC drafts/checks prenumbered and issued

in numerical sequence? ____ ____
__________
11. Are all numbers accounted for as either in stock,

issued or as cancelled? ____ ____
__________

12. Are Water Ups MPC drafts not signed in blank? ____ ____
__________
13. Are the functions of issuing, recording and signing

of Water Ups MPC drafts separated ____ ____
__________
14. Are paid drafts filled, controlled and maintained by

an officer other than an authorized signatory? ____ ____
__________
Investments
A. Purchase/Sale/Pledge of Securities
1. Are purchases, sales or pledges of securities formally
approved by the Board of Directors or its Committee? ____ ____
__________
2. Are they recorded in the Minutes of the Board

or its Committee? ____ ____
__________
3. Are two official signatures required on letters

confirming purchase, sale or pledge of securities? ____ ____
__________
4. Are registered securities owned issued in the name

of the Water Ups MPC or otherwise endorsed to it, or endorsed
in blank, or accompanied by a power of attorney? ____ ____
__________
B. Safekeeping
1. Are securitied held by the financial intermediary
under joint custody and securities held elsewhere
(in custody for the financial intermediary) properly
acknowledged in writing? ____ ____
__________
2. Are custodians prohibited from handling transactions

involving securities and other investment? ____ ____
__________
3. Are securities owned by financial intermediaries

segregated physically and in the records from other
securities that may be held by them? ____ ____
__________

4. Are authorizations for withdrawal and other documents

in support of security transactions kept on file? ____ ____
__________
5. Are movements of securities in and out of the vault

authorized by two signatories and recorded in a book
or evidenced by “in” and “out” tickets? _____ ____
__________
6. Are all withdrawals or deliveries made against receipts

duly acknowledged by the receiver or his duly authorized
representative? ____ ____ __________
7. Are all unmatured coupons attached to coupon bonds? ____ ____

__________
8. Are securities physically verified at least quarterly by

someone other than the regular custodian? ____ ____
__________
C. Recording and Verification

1. Is an adequate security register maintained? ____ ____
__________
2. Is the storekeeping function separate from the actual

execution of security transactions so that the employee posting
the detailed records cannot originate or handle securities? ____ ____
__________
3. Are detailed subsidiary records of securities balanced each month

to the general ledger control account by an officer or employee
not directly connected with the processing, recording or
safekeeping of securities? ____ ____
__________
4. Does an officer or employee, other than the person originating

and/or recording the entry, review the supporting documents to
substantiate each security transaction entry? ____ ____
__________
5. Are securities owned by financial intermediaries which

are presently worthless or of nominal value carried under
accounting control? ____ ____
__________

6. Are they reviewed by board periodically for any possible

realization? ____ ____
__________
7. Are documents (brokers, bills advices, etc.) in support of

security transactions kept on file? ____ ____
__________
Loans and Discounts

A. Lending Operations
1. Do loan officers or the loan committee have definite loan
authority limit established by the Board of Directors? ____ ____
__________
2. Are loans which were approved within the loan authority

limits of an officer or the loan committee confirmed by
the Board of Directors? ____ ____ __________
3. Are the lending policies written so as to be properly understood

and implemented by loan officers and loan committee? ____ ____
__________
4. Are all loans granted, renewed or extended covered by loan

approval memos which contain the credit basis of the loan? ____ ____
__________
5. Are definite policies and procedures prescribed for the

appraisal of collateral and for credit evaluation? ____ ____
__________
6. Are appraisals done by individuals not responsible for

approving loans? ____ ____ __________
7. Is a number control maintained and a number assigned

to every new renewed note? ____ ____
__________
8. Are officers and employees prohibited from taking notes signed by

a customer in blank and held in anticipation of future barrowings? ____ ____
__________
9. Are paid or renewed notes stamped or perforated “paid”

or “renewed”? ____ ____
__________

10. Are paid notes returned promptly to the borrower or otherwise

removed from the active file? ____ ____
__________
11. Are note proceeds always released by credit to deposit accounts

or by official checks and never in cash? ____ ____
__________
12. Are officers and employees prohibited from receiving loan

proceeds in behalf of the borrowers? ____ ____
__________
13. Are all loans granted, renewed. Extended or restructured

reported to the Board of Directors for notation/confirmation? ____ ____
__________
14. Does the institution maintain a central liability record? ____ ____
__________
15. Does it provide complete and up-to-date information on all

credit accommodations extended to each customer? ____ ____
__________
16. Are not form initialed by officers to show approval? ____ ____
__________
17. Do loan ledgers contain the fallowing basic information for

each loan accounts?
a) Name of barrower? ____ ____ __________
b) Credit line – amount and expiry date? ____ ____
__________
c) PN number? ____ ____ __________
d) Date granted and maturity date? ____ ____
__________
e) Type of loan including its status (l.e., current or past due)? ____ ____
__________
f) Collateral code? ____ ____
__________
g) Outstanding balance? ____ ____
__________
h) Accrued/ unearned interest? ____ ____
__________
18. Are loan ledger sheets/register and notes kept inside the vault

vault after office hours? ____ ____

__________
19. Are loans reviewed periodically to determine the status of

their collectibility? ____ ____
__________
20. Does the auditor confirm, on a surprise basis, the loans

(including loans to directors, officers, employees, stockholders
and their related interest) and their collaterals with the
barrower? ____ ____
__________
21. Is a payment schedule required for every loan granted,

renewed or extended? ____ ____
__________
22. Does the account/loan officer visit the big barrowers to have
a first-hand information on the development of the barrowers’
business, financial condition and future credit requirements? ____ ____
__________
23. Are credit reports obtained by an employee other than the

lending officer? ____ ____ __________
B. Collaterals
1. Is a central collateral register so maintained as to provide
complete and accurate descriptions of all collateral pledge/
deposited with the Water Ups MPC? ____ ____
__________
2. Are negotiable collaterals held under joint custody? ____ ____

__________
3. Are all collateral on hand as indicated by the collateral

notes & their records physically verified monthly against
the collaterals o file? ____ ____ __________
4. Is the verification performed by an employee other than the

collateral custodian? ____ ____
__________
5. Are collaterals received acknowledge with receipts? ____ ____

__________

6. Are collateral releases approved by authorized officers? ____ ____

__________
7. Are inward and outward movements of collaterals evidence,

respectively, by “securities-in” and securities-out” receipts? ____ ____
__________
8. Does the designated officer/employee inspect the collaterals

and all related documents to ascertain that: ____ ____
__________
a) the collateral pledge/ mortgaged deposited by the barrowers
have been properly recorded? ____ ____
__________
b) the Water Ups MPC has a realizable lien on the collaterals? ____ ____
__________
c) the income arising from such collaterals (e.g. cash
dividend on stocks) are properly accounted for? ____ ____
__________
d) the securities sent for exchange, transfer, etc. are
under the control of the Water Ups MPC? ____ ____
__________
e) the collateral is preserved intact until their release to the
barrower upon payment of loans together with the accounts
receivable arising from said loans, or until the Water Ups MPC has earned
all its due from the collateral per loan agreement? ____ ____
__________
9. Are collaterals appraised realistically or conservatively to

avoid over appraisal? ____ ____
__________
C. Separation of Duties
1. Are payments on loans made directly to the cashier/teller
and not to any employee involved in lending operations? ____ ____
__________
2. Are the functions of receiving and processing loan payment

and of bookkeeping performed by different employees? ____ ____
__________
3. Are customer statements and delinquent notices mailed

by a person other than the officer who granted the loan or the
person handling the records? ____ ____
__________
4. Are all notes run and independently balanced monthly by

the auditor or by someone not connected with the granting

of loans against the loan subsidiary ledgers? ____ ____
__________
D. Past Due Accounts

1. Are definite policies and procedures fallowed in the collection
of delinquents? ____ ____
__________
2. Do the management and the Board of Directors periodically

review the status of past due loans? ____ ____
__________
3. Are past due loans segregated and placed in a separate

general ledger account? ____ ____
__________
4. Are loans which were past due and placed in a separate

general ledger account? ____ ____
__________
5. Are past due loans given closer supervision and administration

to effect collection or to subject them to easy repayment
arrangement with the barrowers concerned? ____ ____
__________
6. If conditions or circumstances warrant, are past due

loans renewed or restructured? ____ ____
__________
E. charge-Offs
1. Are all loans charged-off approved by the Board of Directors
or its committee? ____ ____
__________
2. Are evidences of uncollectibility kept available for examination? ____ ____

__________
3. Are all charge-off items held under dual control? ____ ____
__________
4. Are adequate records for their status maintained so that

items can be reviewed and appraised periodically with a view
toward effecting recovery? ____ ____
__________

5. In compromise settlements, is there a stipulation signed

by the debtor and the officer handling the transaction? ____ ____
__________
6. Is the stipulation authorize by the Board of Directors in

its Minutes and signed by a member of the Board
other than an active officer? ____ ____
__________
7. Is the item kept in the charge-off asset file? ____ ____

__________
8. Are barrowers with charged-off accounts not accommodated

for further loans unless charged-off accounts are paid? ____ ____
__________
Properly, Plant and Equipment

A. Recording
1. Are detailed subsidiary ledger cards maintained for fixed
assets? ____ ____
__________
2. Are this card periodically reconciled with the controlling

accounts by an employee other than the bookkeeper? ____ ____
__________
3. Is physical inventory if fixed asset taken at least annually and

its result compared with the subsidiary control records? ____ ____
__________
4. Are individual fixed assets tagged or otherwise identified and

related to subsidiary records? ____ ____
__________
5. Is there a well-defined policy governing the differentiation

between capital and revenue expenditures? ____ ____
__________
6. Are fully depreciated assets still in use included in the asset

account at a nominal value of one peso (P1.00)? ____ ____
__________
7. Is adequate control maintained for scrapped and retired

items to insure the reporting of any recoveries on these items? ____ ____
__________

8. Are all charges and credits to this account evidence by

original vouchers and invoices? ____ ____
__________
9. Is reasonableness of the accounts verified and approved

by an authorize officer? ____ ____
__________
10. Are income and expenses related to Water Ups MPC premises segregated
from the other income and expenses of the Water Ups MPC? ____ ____
__________
B. Miscellaneous
1. Is a prior written approval by the Board or its committee required
for:
a) Addition to and/or major repairs on fixed assets? ____ ____
__________
b) Sale of fixed assets? ____ ____
__________
c) Scrapping or retirement of fixed assets? ____ ____
__________
d) Transfers of fixed assets from one branch or
department to another? ____ ____
__________
e) Adjustment of book record to physical inventory? ____ ____
__________
2. Are appraisals regularly undertaken for purposes of insurance

coverage? ____ ____
__________
3. Is consideration given to the limit of investment in real estate

as set by the General Cooping Act? ____ ____
__________
Other Properly Owned or Acquired

1. Is a detailed subsidiary record of acquired items maintained
and does it show the minimum information such as: ____ ____
__________
a) From whom the item was acquired? ____ ____
__________
b) Date acquired? ____ ____
__________
c) Acquisition cost? ____ ____
__________

d) Description of property? ____ ____

__________
e) Location of property? ____ ____
__________
2. Is there an officer/employee responsible for the

administration of all such assets? ____ ____
__________
3. Does this unit perform the functions off:

a) Maintaining proper accounting for all income and
expenses for each asset held? ____ ____
__________
b) Making periodic reports to the Board of Directors regarding
new acquisitions, sale and status of outstanding assets? ____ ____
__________
c) Preparing periodic appraisals of assets values to update
records for each asset held? ____ ____
__________
d) Maintaining adequate insurance coverage’s? ____ ____
__________
4. Is a physical inventory of all items held conducted

periodically by the internal auditor or control officer? ____ ____
__________
5. Does the Board of Directors or its committee review

monthly all acquisition and sale of assets? ____ ____
__________
6. Are asset disposals made with the prior authority from the
Board of Directors or its committee? ____ ____
__________
Other Assets
A. Accounts receivable and Advances
1. Is a detailed subsidiary record maintained for all accounts
receivable and for amounts due from officers and employees? ____ ____
__________
2. Are all advances to officers and employees granted with the
prior approval of an authorized officers? ____ ____
__________
3. Are all advances to officers and employees which remain

outstanding or unliquidated for an unreasonable period of time

reported to the Board of Directors? ____ ____

________
4. Does the internal auditor/ control officer prove the totals

Of all subsidiary ledgers to their respective control accounts
In the General Ledger at least once a month? ____ ____
__________
B. Petty Cash Fund

1. Is a separate account in the General ledger maintained for
petty cash fund? ____ ____
__________
2. Are disbursements from the fund allowed only upon presentation
of properly accomplished petty cash vouchers? ____ ____
__________
3. Does the petty cash voucher contain the minimum information

required such as: Natures/description of the expense account,
date and Officer/employee preparing the voucher? ____ ____
__________
4. Does the officer or employee designated to handle the petty cash

fund have also sole access to and responsibility for the fund at
all times? Prepared with advice copies for the depositors? ____ ____
__________
Manager’s Cashier’s Check
1. Are check issuing and paying operations separated? ____ ____

__________
2. Are the person’s authorized to sign checks not involved

In check payment or account reconciliation? ____ ____
__________
3. Are checks serially prenumbered and are the reserve

supply of unissued checks kept under joint custody?
4. IS a number system maintained? ____ ____

__________
5. Is the paper stock used for the printing of checks of the

kind that readily discloses attempt at alterations? ____ ____ __________
6. Are checks are never signed in blank? ____ ____ __________

7. Are checks not drawn payable to “cash” or “Bearer”? ____ ____ __________
8. Are all checks presented for payment checked for the

date of endorsement? ____ ____ __________
9. Are paid checks properly canceled and filed? ____ ____

__________
10. Are outstanding checks per register proved monthly

against the control account? ____ ____ __________
11. Are payments on long outstanding checks approved by an

officer? ____ ____ __________
12. Are specific policies established regarding cancellation or

replacements of stale, lost or destroyed checks or drafts? ____ ____ __________
13. Is a register for manager’s and cashier’s checks issued

maintained? ____ ____ __________
14. Does it contain such information as:

a) Manager’s/cashier’s check number? ____ ____ __________
b) Date issued? ____ ____ __________

c) Payee? ____ ____ __________
d) Amount? ____ ____ __________
e) Purpose? ____ ____ __________
15. Does it contain a “remarks” column to indicate the date

when checks were paid? ____ ____ __________
16. Are outstanding open items reconciled with the General Ledger? ____ ____ __________
Current Accounts
A. New Accounts
1. Are all new accounts approved by a designated officer? ____ ____
__________
2. Are resolutions, powers of attorney, letters of authority, special

arrangements and lists of authority signatories required for all
corporate or partnership accounts and for fiduciary accounts? ____ ____
__________
3. Are joint accounts evidence by appropriate documents signed by

all parties to each account? ____ ____

__________
4. Is such account under a power of attorney supported by the

original or certified true copy of the legal documents? ____ ____
__________
5. Are corporate or partnership accounts supported by them

respective certificates of registration with the proper
government agency and by approved copies of the
articles of co-partnership or incorporation? ____ ____
__________
6. In the case or corporation, is a certificate of the election of

the directors and officers and a copy of the board resolution
authorizing said directors and officers to sign checks
and other instruments obtained annually? ____ ____
__________
7. Are number controls established and a number

assigned to each account? ____ ____
__________
B. Signature Cards and Deposit Ledger Sheets

1. Does each current account have at least two signature cards
containing four specimen signatures per card of the person(s)
authorize to sign the account? ____ ____
__________
2. Are signatures card and deposit ledger sheets
authenticated by some form of validation? ____ ____
__________
3. Are subsequent changes also validated? ____ ____

__________
4. Is the validating device used kept under joint custody? ____ ____
__________
5. Are signature cards and deposit ledger sheets accessible

only to authorize persons and adequately protected
against loss or damage? ____ ____
__________

C. Deposits
1. Do customers prepare and sign their own deposit slips? ____ ____
__________
2. Are deposit slips validated by teller’s machine or by

means of teller’s identification stamp in addition to his
signatures or initials? ____ ____ __________
3. Are all checks received for deposit individually imprinted with both
the teller’s identification stamp and “; Non-Negotiable” stamp? ____ ____
__________
4. Are deposit tickets not allowed to be altered? ____ ____

__________
5. In case of error, are separate debit or credit ticket

adjustments prepared with advice copies for the
depositor? ____ ____
__________
6. Are entries in the customer’s ledgers presenting deposits

identified by symbols or marks as to whether they were
received in cash, checks, out-of-town checks etc.? ____ ____
__________
7. Are dates on deposit tickets occasionally examined at

irregular intervals after they were posted? ____ ____
__________
D. Withdrawals
1. Are withdrawals against uncleared check deposits allowed
only upon the prior approval of a responsible officer who
should do so within the limits of the authority given him by
the board of directors and in accordance with applicable
CB rules and regulations? ____ ____
__________
2. Are the approval evidence by the officer/s signatures or

initials on the check(s)? ____ ____
__________
3. Are reports on drawings against uncleared check deposits and

overdrafts arising from normal Water Ups MPC charges (booked under
“Accounts Receivable- Local Currency” submitted to manage-
ment or the board of directors monthly? ____ ____
__________

4. Are reports on closed accounts and returned checks prepared

daily? ____ ____ __________
5. Are checks cancelled a soon as paid and posted? ____ ____

__________
6. Does the auditor/officer sent out confirmation letters to

determine if accounts are fraudulently closed? ____ ____
__________
E. Segregation/Rotation of Duties
1. Are the work assignments of bookkeepers, check filers and
statements clerks rotated periodically? ____ ____ __________
2. Is each bookkeeper made responsible for a definite group

or section of accounts? ____ ____ __________
3. Are the sections shifted from one bookkeeper to another at

frequent unannounced intervals? ____ ____ __________
4. Are bookkeepers prohibited from:

a) Dealing directly with customers? ____ ____ __________
b) Opening new accounts? ____ ____ __________
c) Preparing customer’s statements? ____ ____ __________
d) Acting as relief tellers? ____ ____ __________
e) Having access to signature cards? ____ ____ __________
f) Having access to clearing items? ____ ____ __________
F. Statements
1. Are monthly statements prepared for all current accounts? ____ ____
__________
2. Are officers and employees who have something to do

With current account transactions prohibited from handling the
dispatching and delivery of current account statements at the
end of the month or from assisting in such operations? ____ ____ __________
3. Are all statements mailed? ____ ____ __________
4. Are undelivered statements retained by a unit not responsible for

demand deposit account processing? ____ ____ __________
5. Are necessary precautions taken to ensure that no alteration is

made on the statements of account before mailing or delivery? ____ ____ __________

6. Is an officer designated to attend to customers who report

differences regarding their accounts? ____ ____ __________
G. Reconciliation
1. In either a manual or automated system, are the totals of the
daily transactions reconciled with the general ledger entries? ____ ____
__________
2. Are separated sub-controls maintained for each type of demand

deposit? ____ ____
__________
3. Is the sum of the sub-controls proved to the general ledgers

totals daily? ____ ____
__________
4. Are current accounts subsidiary ledgers proved monthly to

the general ledgers? ____ ____ __________
H. Miscellaneous
1. Are effective controls established over unposted debits
& credits through the use of suspense accounts? ____ ____
__________
2. Are these items cleared daily? ____ ____

__________
3. Are internally-generated entries to checking accounts

approved by two authorize officers? ____ ____
__________
4. Are erasures on ledgers prohibited? ____ ____

__________
5. Are correction posting verified and initialed by

someone other than the bookkeeper? ____ ____
__________
6. Are closed out ledger sheets preserved and segregated

from active files? ____ ____
__________
7. Are dormant and inactive deposit accounts segregated

from the active deposit ledger accounts? ____ ____
__________

8. Are they held under joint custody? ____ ____

__________
9. Are checks books issued only against requisition forms

signed by each party authorize to sign on the account? ____ ____
__________
10. Are checkbooks issued only after positive verification

of the signatures? ____ ____
__________
11 Are the reserve supplies of checkbooks and requisition

forms kept under joint custody? ____ ____
__________
12. Are issuances properly receipted and recorded? ____ ____

__________
Savings Accounts
This questionnaire for current accounts discussed in the preceding
pages apply to savings accounts except for the operation peculiar to
current accounts such as overdrafts, statements and checkbooks.
however, the following additional questions should be answered.
1. Are interest credits to individual savings deposit ledgers checked

by an employee other than the one who made the computations?____ ____
__________
2. Are subsidiary ledger balances independently proved every

month against control account balances? ____ ____
__________
3. Is official approval required for all large withdrawals? ____ ____

__________
4. Are savings passbooks not held by the Water Ups MPC? ____ ____
__________
5. In case savings passbooks are held in the safekeeping

department, are they under the control and custody of
a designated officer? ____ ____
__________
6. Are unissued passbooks under the control and custody

of a designated officer? ____ ____ __________
7. Are they periodically accounted for? ____ ____

__________
Dormant Accounts
1. Are dormant accounts segregated from the active
accounts ledgers? ____ ____
__________

__________
3. Is a General Ledger control accounts maintain for dormant

savings accounts? ____ ____
__________
4. Are all debit and credit entries to dormant accounts ledgers

verified and approved by a designated officer? ____ ____
__________
5. Are his/her initials placed next to the entries on the ledger

sheet? ____ ____
__________
6. Are all enquiries on dormant accounts coursed through

an officer? ____ ____
__________
7. Does said officer obtain sufficient identification from the

inquirer to assure that he his entitled to the information? ____ ____
__________
8. Are signatures cards for dormant accounts removed from

active files? ____ ____
__________

__________
10. Is a trial balance of the dormant account ledgers taken and

balanced with the control account periodically? ____ ____
__________
11. Are dormant or inactive accounts verified directly with
customers? ____ ____
__________

12. Are definite policies as to what constitute a dormant account

established by the board of directors? ____ ____
__________
Time Deposits
1. Are all certificates of time deposits issued and signed jointly by
two authorized officers? ____ ____
__________
2. Are solutions, powers of attorneys, letters of confirmation,

special agreements and list of authorized signatories required for
all corporate, partnership and fiduciary accounts? ____ ____
__________
3. Are certificates of time deposits pre-numbered and issued

in numerical sequences? ____ ____
__________
4. Are all numbers accounted for as either in stock, cancelled

or issued? ____ ____
__________
5. Are depositors required to acknowledge receipt of certificates? ____ ____

__________
6. Are subsidiary ledgers or stubs or file copies maintained for

outstanding certificates? ____ ____
__________
7. Are subsidiary ledger balances proven monthly against the

control account by a person other than the bookkeeper? ____ ____
__________
8. Upon withdrawals, is the certificate of deposits endorsed by the

depositor and surrendered to the Water Ups MPC? ____ ____
__________
9. Are original copies of paid or cancelled certificates perforated
or marked with the date of payment and attached to the
corresponding stub or duplicate copy? ____ ____
__________
10. Are interest computations checked by the another employee

as to accuracy? ____ ____
__________

11. IS it also check that no payment was made previously on

the same item before payment is handed to the customer? ____ ____
__________
12. Is the paper stock use for the printing of time certificates of
deposit of a kind that readily discloses attempts at alterations? ____ ____
__________
13. Are unissued certificates kept under joint custody and control? ____ ____
__________
14. Are certificates of deposit not signed in blank? ____ ____

__________
15. Are the functions or receiving deposits, recording and signing

of certificates segregated? ____ ____
__________
Bills Payable And Other Barrowing

A. Authority for Barrowings
1. Are barrowing authorize by the Board of Directors
or its committee? ____ ____
__________
2. Are two or more authorized officers required to sign

for barrowings? ____ ____
__________
3. For the institution’s barrowings, are maximum ceiling set

by the Board of Directors based on the institution’s per
barrowings and projected use or need for funds? ____ ____
__________
B. Recording of Debts
1. Are bills payable and other barrowings recorded in the
subsidiary ledgers showing the amount, maturity date, interest
rate, payment or principal, payment of interest and description
if collaterals, if any? ____ ____
__________
2. Are the subsidiary records reconciled monthly with the

control accounts? ____ ____
__________
C. Miscellaneous
1. Are interest payments properly controlled and reconciled with

the rates and amounts specified in the agreement? ____ ____

__________
2. Are paid instruments cancelled and filed? ____ ____

__________
3. Are released documents obtained for fully paid obligations? ____ ____
__________
4. Is an adequate record maintained to effectively control

ledger to secure barrowings? ____ ____
__________
5. Is an arrangement for the procedure of releasing pledged

collateral of paid barrowings made? ____ ____
__________
6. Is the repayment arrangement of bills payable and other

barrowings strictly fallowed? ____ ____
__________
7. Is direct confirmation of outstanding balance made periodically

from creditors? ____ ____
__________
Other Liabilities
(Unearned Interest & Discount, Accounts Payable, Accrued Expenses)
1. Is a detailed subsidiary record for each creditor maintained? ____ ____

__________
2. Are the totals of the subsidiary records proven against their

respective control accounts in the General Ledger? ____ ____
__________
3. Are bookkeepers handling subsidiary records never allowed

access to the General Ledger and vice versa? ____ ____
__________
4. Do the internal auditor/control officer periodically undertake

direct verification of payables? ____ ____
__________
5. Are confirmation letters mailed and not delivered personally? ____ ____
__________

6. Are subsidiary ledger bookkeepers not allowed to prepare

confirmations letters? ____ ____
__________
7. Is a monthly report to the Board of Directors or its committee

prepared by the internal auditor/control officer on the status
of outstanding payables? ____ ____
__________
8. Are long outstanding items given preferential attention? ____ ____

__________
9. Do all debit and credit tickets to the General Ledger bear the
signature of an authorized officer? ____ ____
__________
Capital Accounts
A. Capital Stock
1. Are the capital stock accounts supported by two subsidiary records
consisting of the stub portion of the stock certificates issued and
the stockholders ledger or stock and transfer book containing the
name and address of each stockholder and his/her total number
of shares? ____ ____
__________
2. Are stock certificates numbered by the printer?
3. Are blank certificates placed under joint custody? ____ ____

__________
4. Are books containing stubs of outstanding certificates placed

in vault under the control of a responsible? ____ ____
__________
5. Are two employees instructed to participate in the issuance of

stock certificates? ____ ____
__________
6. Are certificates delivered as soon as they are ready for issue? ____ ____
__________
7. Are surrendered certificates duly cancelled or defaced and

kept in a safe place or attached to their corresponding stubs? ____ ____
__________
8. Are documents stamps properly affixed and cancelled

for original issues and transfers? ____ ____

__________
9. Are subsidiary records reconciled monthly with the General

ledger control account by a person other than the one handling
records? ____ ____
__________
10. Is there proper control which can assure that:

a) any change in capitalization complies with legal
requirements? ____ ____
__________
b) dividend checks are made out in correct amounts payable to

correct parties? ____ ____
__________
c) dividend checks are mailed out by a person who did not

prepare the checks? ____ ____
__________
d) unclaimed dividend checks are properly accounted for

and set-up as a liability? ____ ____
__________
B. Surplus and Undivided Profits

1. Are entries to surplus accounts originated and approved by
on officer? ____ ____
__________
2. Do entries direct to Undivided Profits account require

senior officer approval? ____ ____
__________
3. Are the functions of preparation of entries, posting to ledgers

and the preparation of periodic reports separated? ____ ____
__________
Income and Expenses

A. Income
1. Are the receipt of income and its record-keeping
functions separated? ____ ____
__________
2. Are adequate subsidiary records establish showing the

required breakdown and distribution of income? ____ ____

__________
3. Are simple accrual procedures establish for larger income

accounts particularly for loans and investments? ____ ____
__________
4. Are comparative statements of income prepared monthly

for the Board of Directors? ____ ____
__________
5. Is the investment income account check to insure if all

coupons have been collected? ____ ____
__________
6. Are the interest income and sundry income accounts

checked to see if all income is recorded? ____ ____
__________
7. Is there an approved profit plan in effect? ____ ____

__________
8. Is a budget of estimated income prepared for each pear? ____ ____

__________
B. Expenses
1. Are the purchasing and paying functions separated? ____ ____
__________
2. Are all disbursement made in check? ____ ____

__________
3. Is a separate series of official checks used? ____ ____

__________
4. Is a petty cash fund established for minor disbursement? ____ ____

__________
5. Are two official signatures required for all checks

disbursement? ____ ____
__________
6. Are all disbursements supported by original invoices and

supporting documents? ____ ____

__________
7. Are these invoices and documents stamped “paid” and

noted with the check number and date of payment after
the issuance of the check? ____ ____
__________
8. Are voiced or spoiled checks properly mutilated and kept for

inspection? ____ ____
__________
9. Is the reserve supply of unissued Water Ups MPC drafts under dual control? ____
____ _________
10. Are checks never signed in blank, or drawn “cash” or

“Bearer”? ____ ____
__________
11. Are subsidiary records maintained to show a detailed distribution

of expenses? ____ ____
__________
12. Is a simple accrual procedure established foreign accounts,

particularly for interest and taxes payable? ____ ____
__________
13. Are comparative statements of expenses prepared monthly

for the Board of Directors? ____ ____
__________
14. Is there an approved budget for the institution to control

its operation expenses? ____ ____
__________
15. Do expenses beyond the budget require the prior
approval of the board of directors? ____ ____
__________
Safe Deposit Box

A. Access
1. On each access, is an identifying signature obtained
from in the holder or his duly authorized deputy? ____ ____
__________
2. Is the date and time of access noted in the register? ____ ____
__________

3. Are access tickets or registers dated and signed by an officer

before allowing access? ____ ____
__________
4. Are both the box holder and the custodian present when
the box door if unlock and re-locked? ____ ____
__________
5. Are booths examined by an employee after each access

to ensure that the renter did not leave anything behind? ____ ____
__________
6. Are adequate visitation records maintained? ____ ____

__________
B. Control
1. Are spare locks and keys held under the dual control? ____ ____
__________
2. Are keys of safe deposit boxes not held in the half of renters? ____ ____
__________
3. If both keys have been lost, is the box broken only in the
presence of the box holder and two employees? ____ ____
__________
4. In the event of death of the box holder, is proper notation

made and the necessary precautions taken so that no admission
is granted until all legal requirements have been met? ____ ____
__________
5. When a sufficient period of time has elapsed without payment

or rental, are all regulations of law followed before the box is
forced open? ____ ____
__________
6. Are locks changed after the termination of each lease? ____ ____
__________
III. EMERGENCY PREPAREDNESS MEASURES
Has the Coop formulated emergency preparedness program

to provide for the protection of personnel continuity management
reconstruction of records? If so, or if partial program is in effect,

complete the questions below and/or add appropriate comments.
1. Have instructions in any form describing the procedures to be

followed in any emergency been given to employees? ____ ____ _______
2. Are personnel given training in the operation of the program? ____ ____ _______
3. Have employees been instructed on procedures to be followed

for the protection of assets in the event of an alert signal? ____ ____ _______
4. Does the Coop have a program for duplication and safe storage
for essential records? ____ ____ _______
5. Are there instructions for reconstruction of essential records? ____ ____

__________
6. Do the instruction include procedures for restructuring Coop’s

assets and liability position from these records? ____ ____
__________
7. Are employees trained on the procedure in reconstruction? ____ ____

__________
8. Do instructions include procedures to be followed in case of

strikes? ____ ____
__________
COMMENTS

PART IV
CODIFIED APPROVING/SIGNING AUTHORITY
A. WATER UPS MPC REFILLING

OPERATIONS APPROVING AUTHORITY
1. Approval of Refilling Station:

a. Purchase of Supplies
* Up to P10,000 Branch Manager
* Up to P50,000 General Manager
* Up to P100,000 Credit Committee
* Over P150,000 Board of Directors with Supporting
Resolution
2. Signing of Purchase Order Supplies Purchasing Officer/OIC/Manager

Approved
3. Signing of Cash Request Approved Budget Officer or Head Cashier

/Manager
4. Signing of Liquidation Approved Accounting Officer/Internal

Auditor/Manager
6. Signing of Fund Voucher Approved In-charge Request/Budget Officer

or Head Cashier/Accounting
Officer/Manager
8. Signing of Cash/Check Disbursement Approved Bookkeeper/Accounting Officer/

Manager
9. Signing of Payroll Approved Human Resource

Officer/Accounting
Manager

B. WATER UPS MPC SHIPPING


Resolution

Approved

/Manager

Auditor/Manager

Officer/Manager

Manager

Officer/Accounting
Manager
C. WATER UPS MPC CANTEEN/RICE TRADING


Resolution

Approved


/Manager

Auditor/Manager

Officer/Manager

Manager

Officer/Accounting
Manager
D. LENDING OPERATIONS APPROVING

AUTHORITY
1. Approval of loans:
a. New loans/Re-loans
* Over P50,000 Board of Directors
Board of Directors with
Supporting Resolution and
MAO
b. Restructuring of Loans BOD/Chairperson/Gen. Mgr.
c. Collaterals servicing the loans BOD/Chairperson/Gen. Mgr.
2. Signing of contracts and documents Chairperson/Gen. Mgr.

implementing approved loans
3. Release of approved loans Manager
4. Interest rates including charges thereof BOD/Chairperson/Gen. Mgr.
5. Other transactions in outstanding loan:

a. Advances for taxes, insurance, etc. for Manager
properties securing loans
b. Classification, reclassification of loans BOD/Chairperson/Gen. Mgr.

c. Additional credit exposure for original loan Same as loan approving

(subject to guidelines) levels/authorities
6. Release/substitution of collaterals and signing

of contracts implementing the same:
a. Partial release/substitution of collaterals Manager
b. Release of mortgages, guarantees, pledges Manager

and other document on fully paid loans.
c. Signing of contracts, transferring owner- Gen. Manager/ Chairperson

ship of collaterals in partial/settlement of
loan obligations with the Water Ups MPC
7. Signing/approval of collection letters and

other actions for collection:
a. Collection letters Loan Officer
b. Final demand letter Manager
c. Legal proceedings Manager
8. Approval of actions to be taken on Credit Committee plus Board of

Past due accounts Directors
9. Signing of documents relating to actions on Loan officer plus Manager plus

Past due accounts Board of Directors
B. DEPOSIT AND TRANSFER OF FUNDS
1. Approval of client’s deposit transaction:

a. Opening of deposit accounts Cashier/or Manager
b. Savings account withdrawals Cashier/or Manager
c. Encashment of certificate of time deposit Cashier/or Manager
2. Approval of CB deposit transaction with:

a. Opening of deposit accounts in the name Cashier/Treasurer or Manager or
of the Water Ups MPC Chairperson, Board of Directors
b. Cash withdrawals/check encashments Cashier/or Manager or

Chairperson, Board of Directors
c. Closure deposit accounts - do –

d. Transfer of funds from one depository - do –

Coop to another
3. Interest rates of all Water Ups MPC deposits:

a. Savings accounts Board of Directors
b. Time deposits Board of Directors
4. Increase in CIV limits Manager
C. PERSONNEL MATTERS
1. Appointment/promotion of rank and file personnel Manager based in guidelines

adopted by the Board of Directors
2. Appointment/promotion to officer level positions Board of Directors
3. Performance rating of probationary employees Immediate supervisor + Board of

Directors
4. Termination of services of probationary Water Ups MPC Manager plus Board

personnel for unsatisfactory conduct or want of of Directors
capacity
5. Disciplinary action against Officers and employees

of the Water Ups MPC;
a. Written reprimand Manager
b. Suspension or fire Manager plus Board of Directors
c. Transfer, demotion, termination, dismissal Manager plus Board of Directors

forced resignation including other adminis-
trative disabilities
6. Acceptance of resignation, retirement and Manager plus Board of Directors

dropping from the rolls of Officers and
Employees of the Water Ups MPC
7. Hiring and terminations of contractuals, casuals Manager plus Board of directors

for emergency employees.
8. Issuance of executive order:

a. re: administrative/procedural matters Board of Directors
and policy implementation
b. policy and regulatory matters Board of Directors

c. participation of training Manager + Chairman, Board of Directors
9. Approval of leave:
a. vacation/sick leave
* Up to 5 days Immediate supervisor plus manager
* Over 5 days Immediate supervisor plus Manager

plus Board of Directors
* Maternity/terminal Manager plus Board of Directors
10. Domestic travel orders including cash advances Manager plus Board of Directors
And liquidation of the same
11. Authority to render Overtime services Manager
12. Performance ratings:

a. Rank and File Immediate supervisor plus
Manager
b. Officer position Manager plus Board of Directors
13. Signing or report of absences Accountant plus Manager
14. Signing of appointment papers, contracts of services,

certification of employment, service record, etc.
a. Approve appointment papers of all personnel Chairperson, Board of Directors
Of the Water Ups MPC.
b. Contracts of services of all contractual Manager plus Chairperson, Board of

personnel Directors
c. Retirement, disability income benefit, Board of Directors

employee compensation circular
d. Service record Manager
e. Resignation Manager plus Board of Directors
f, Salary/personal loans Manager plus Board of Directors
g. unused earned leave credits Manager
h. W-4 (BIR form) Accountant plus Manager

15. Application for Bonding/Cancellation bond Board of Directors
D. GENERAL AND ADMINISTRATIVE FUNCTION
1. Annual Budget Plan Board of Directors/Approved by

General Assembly
2. Strategic Plan Board of Directors/Approved by
General Assembly
3. Requisition Issue vouchers/Procurement Manager
of assets/supplies
4. Approval of lease Board of Directors
5. Repairs and Maintenance Manager plus Board of

Directors
6. Procurement of security services Board of Directors
7. Disposal of obsolete and unserviceable assets Manager plus Chairperson,

Board of the Water Ups MPC of Directors
8. Signing of invitation to Bid for procurement of Manager plus Chairperson,

supplies or equipment Board of Directors
9. Approval of awards of bids:

a) Building construction, repairs, renovations Manager plus Chairperson, Board
and supply of materials or engagement of of Directors
services in connection therewith
b) Repairs of vehicles Manager
c) Repair procurement other than repairs Manager

of vehicles
d) Procurement of initial furnishing for Manager plus Chairperson, Board

(newly opened institution) of Directors
10. Purchase Orders Manager
11. Representation and entertainment expenses/ Manager

purchase orders
12. Advertising and publicity Manager
13. Cash donation and contributions Manager/Chairperson/BOD

14. Membership in Organizations -do-
15. Setting up Petty Cash Fund -do-
16. Approval of other expenses (Management & Manager plus Chairperson,

Other professional fees, litigation and asset Board of Directors
acquired, periodicals and magazines, miscellaneous
and the like)
17. Normal and recurring expenses necessary Accountant plus Manager

for operations (electricity, telephone, water
and the like)
18. Signing of contracts:

a. Lease contract Board of Directors
b. Deed of absolute sale and such other Board of Directors
contracts or document to effect
disposal of obsolete assets
c. Other contracts Board of Directors
E. ACCOUNTING, FINANCE AND

BUDGETING FUNTIONS
1. Approval of Disbursements/payments of approved

transactions:
a. Purchase or procurements Accountant plus Cashier plus Manager
b. BSP supervision and examination fees, -do-
PDIC fees
c. Dues, fees and other assessments related Accountant plus Cashier plus to
previously approved membership in Manager
clubs/organizations
d. Bond sinking fund contribution -do-
e. Payroll and manpower costs -do-
f. Remittance to BIR -do-
g. Overtime pay Accountant plus Cashier plus Manager
h. Terminal/Gratuity/Retirement Pay
i. Other employees’ claims -do-

j. Other claims -do-
2. Petty Cash/Revolving Fund Transactions:

a. Payment of Petty Cash Fund/
Revolving Fund Vouchers -do-
b. Replenishment of Petty Cash/ -do-

Revolving Fund
3. Approval of accounting entries

covering approved transaction:
a. Debit/credit tickets Accountant plus Manager
b. Debit/credit advices -do-
4. Approval of adjustment/corrections to previous

accounting entries:
a. Adjustment not affecting income
b. Adjustment affecting net income Account plus Manager plus Chairperson,

Board of Directors
c. Correction of error in amount taken up Accountant plus Manager
d. Reversal of erroneous entries -do-
5. Approval of prior years’ adjustment Accountant plus Manager plus Board

(Debit/Credit to surplus account) of Directors
6. Approval of proof sheet Accountant plus Manager
7. Issuance of cashier’s check, expense checks,

Water Ups MPC drafts, telegraphic transfers, notes, Cashiers plus Treasurer
money orders and all other negotiable instruments Manager plus Chairperson
obligating the Water Ups MPC for the payment of money
in pursuance of a duly approved transaction
(the signing of the instrument shall be in accor-
dance with the provisions of the authorized
signatories list in the Water Ups MPC)
8. Approval of Budget/Budget transaction:

a. Department/Unit Budget transactions Board of Directors
b. Annual Budget -do-
c. Supplemental Budget -do-

d. Budget revisions/amendments Board of Directors

i.e., reorganization, creation of new
positions or units and related cases
provided within approved annual budget
e. Transfer of funds/budget appropriations -do-

resulting in the increase of representation
and entertainment expense, etc.
f. Increase in the budget for representation Board of Directors

and entertainment expenses
g. Certification of funds availability Accountant plus Cashier
F. MISCELLANEOUS
1. Approval of establishment of tie-ups:

a. Correspondent Cooping relationships Board of Directors
with any other financial institutions
b. Collection tie-up with government and -do-

private entities to collect land and loan
amortizations
c. Deposit pick-up and payroll delivery -do-

tie-ups with government and private
entities
2. Signing of contracts/Memo agreements Chairperson, Board of Directors
3. Signing of BSP reports Manager
4. Signing of application for Rediscounting/ Manager

fund coverage/Special time deposits
5. Approval for setting up of evaluation reserve Board of Directors
6. Approval for cash-in-vaults limits Manager
7. Approval for filing/confirming suits, Board of Directors

petitions in the name of the Water Ups MPC
8. Approval of transaction not otherwise Board of Directors

specifically provided with CASA

9. Designation of approving/signing authorities Board of Directors

(provided that such designation shall be reported
to the Board of Directors for notation)
10. Absence of a member of the approving group Board of Directors
11. Other provisions as may be provided for Board of Directors


Water Ups MPC Internal Control Manual For 2019

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WATER UPS MULTI-PURPOSE COOPERATIVE

CDA Reg. CDA Reg. 9520-13017547

Manual of Internal Control

Risk Based Evaluation Supervision: Supervision and

This is the Internal Control Policy of Water Ups Multi-Purpose Cooperative

A GUIDE IN CREATING A SYSTEM OF INTERNAL CONTROL FOR

Overview of the Manual ________________________________ 4

PART I – ELEMENT OF INTERNAL CONTROL

Proper Accounting Record ______________________________ 6

PART II – SPECIFIC INTERNAL CONTROL STANDARDS BY ACCOUNTS AND

This is the Internal Control Policy of Water Ups Multi-Purpose Cooperative

Capital Accounts _______________________________________ 30

Transportation of Cash & Securities ________________________ 34

PART III – INTERNAL CONTROL QUESTIONNAIRES

General Safeguard _____________________________________ 35

PART IV – CODIFIED APPROVING/SIGNING AUTHORITY

Lending Operation _____________________________________ 62

This is the Internal Control Policy of Water Ups Multi-Purpose Cooperative

MANUAL OF INTERNAL CONTROL

Overview of the Manual

This manual is divided into four parts.

This is the Internal Control Policy of Water Ups Multi-Purpose Cooperative

Objectives of Internal Control

The Internal Auditor

The Internal Auditor shall be responsible for developing and implementing

Specifically, the Internal Auditor shall have following responsibilities:

This is the Internal Control Policy of Water Ups Multi-Purpose Cooperative

2. Execute the developed audit program and recommend improvements whenever

3. Apprise the branch managers, thru the President, of deficiencies in their

4. Conduct special audits as may be requested by management and regularly review

5. Regularly visit the branches to determine effectiveness of branches in the

ELEMENT OF INTERNAL CONTROL

Proper Accounting Records

This is the Internal Control Policy of Water Ups Multi-Purpose Cooperative

In branch system, independent balancing is considered a necessary procedure before

The minimum independent balancing procedures adopted are the following:

1. Monthly reconcilement of general ledgers balances against their respective

3. bookkeeper or the person handling records.

5. least twice a month by the auditor/control officer or by an officer not connected

6. the cash department.

8. Periodic verification of securities and collateral by someone other than their

9. Periodic verification of the accuracy of the interest credits to deposit liabilities

Division of Duties and Responsibilities

Duties should be segregated to allow the proper functioning of automatic checks.

This is the Internal Control Policy of Water Ups Multi-Purpose Cooperative

2) A loaning officer should never be allowed to disburse proceeds of notes, accept

3) The functions of issuing, recording and signing drafts/checks should be

6) Custodian of securities should be done by an employee/officer other than the one

8) Someone other than lending officers should obtain credit reports.

This is the Internal Control Policy of Water Ups Multi-Purpose Cooperative

10)Dispatching and delivery of current account statements should be done by an

11) Extensive background checking of persons assigned to handle cash and

Joint custody means the processing of transactions by a person in the presence of

1) Physical control is established by the use of two locks or combination of a file,

4) The following should be under joint custody:

c) Collateral and securities.

d) Documentary of title and/or ownership of properties or fixed assets.

e) Dormant or inactive deposit ledger and corresponding signature cards.

f) Import documents and trust receipts.

This is the Internal Control Policy of Water Ups Multi-Purpose Cooperative

i) Vault doors and safe combination.

j) Unused specimen signature books.

k) Test key fixed number unused.