TREASURY REVIEW AUDIT REPORT

TABLE OF CONTENTS (1/2)

04 Treasury Review Audit Report: 32 Treasury Review Audit Report:

Sample 1 Sample 2
05 Executive Summary 33 Executive Summary
06 Objectives and Scope 34 Objectives and Scope
07 Work Performed 35 Summary of Procedures Performed
08 Acknowledgments 36 Acknowledgements
09 Action Matrices 37 General Background
18 Appendix A: Leading Practices 44 Action Matrix
Scorecard 45 Best Practices
22 Appendix B: Leading Control 46 Appendix: FX Strategy/Background
Practices Scorecard
48 Treasury Review Audit Report:
27 Appendix C: Domestic Cash Sample 3
Management Process Flow
49 Executive Summary
29 Appendix D: Corporate Finance
51 Objectives, Scope and Procedures
Process Flow
Performed
31 Appendix E: Summary of Treasury
52 General Background
Testing
53 Detailed Issues and Observations
This report provides management with information about the condition of risks and internal controls at one point in time. Future changes in environmental factors and actions by
2 63
personnel may significantly and adversely impact these risks and controls in ways that this report did not and cannot anticipate. Appendix I: Internal Control
Assessment
TABLE OF CONTENTS (1/2)

65 Treasury Review Audit Report: 82 Treasury Review Audit Report:

Sample 4 Sample 5
66 Executive Summary 83 Payment Authorization and
67 Objective and Scope Release Process Proposed
68 Summary of Procedures Implementation Procedures
Performed 91 Cash Flow Forecasting Process
70 Acknowledgments Proposed Implementation
71 General Background Procedures
72 Background: Cash Management
and Wire Transfers
75 Background: Investments
77 Background: FX
78 Action Matrix
79 Best Practices
80 Appendix: FX
Background/Strategy

This report provides management with information about the condition of risks and internal controls at one point in time. Future changes in environmental factors and actions by
3 personnel may significantly and adversely impact these risks and controls in ways that this report did not and cannot anticipate.
TREASURY REVIEW AUDIT REPORT: SAMPLE
1
EXECUTIVE SUMMARY

We have completed our operational review of Company XYZ’s treasury-corporate finance (corporate finance) group and have found that the internal control environment is
effective. The corporate finance group performs or facilitates the following functions: cash management and forecasting, short-term investing, short- and long-term debt
funding, equity funding, monitoring hedging activities, project and subsidiary finance support, and oversight of the pension trust and other funds. These functions are
supported by System ABC, the controlled disbursement system (CDS), Hyperion and MS Excel. In addition to these systems, manual processes exist to produce
management reports, cash management, and forecasting data. Wire transfers are manually posted to the general ledger by corporate accounting.
Since the Company Y acquisition, corporate finance has utilized two systems for domestic cash management. Treasury management is researching and identifying a lead
cash management bank for an integrated domestic cash management and forecasting solution.
While we determined that appropriate controls exist over the corporate finance functions through interviews, observations of key processes and transactional testing, we
identified some opportunities for improvement.

The following summarizes the issues noted as a result of our review of the
controls and processes surrounding the systems supporting the treasury
department:
• Anti-virus software is not installed on the Windows NT terminal server housing
the System ABC platforms.
• Two parallel systems are used to gather daily cash information. The process is
manually intensive and inefficient.
• Sensitive DESMAC diskettes were not stored in a secure location while not in
use.
• CDS Connection has been installed locally at each site location; however,
system configuration parameter reviews do not occur periodically.
• Reviews of user access privileges do not appear to be occurring periodically.
The following summarizes the issues noted as a result of our review of the
controls and processes surrounding the Company XYZ treasury organization:
• Domestic cash management and forecasting should be fully integrated.
• Domestic cash forecasting variances significantly fluctuate daily.
• Policies and/or procedures for some key corporate finance functions are not
formally documented.
• Signatory authorizations and limits for wire transfers are outdated.
• The corporate secretary’s office received safeguarded assets from
Company Y, but not all these assets have been delivered to the treasury for
deposit in the treasury safe.
• Personnel goals have been established and formally communicated;
however, job descriptions do not exist.

5
OBJECTIVES AND SCOPE

Objective Scope

The objective of our review was to perform an operational The scope of this review included the corporate finance functions,
assessment of the key business processes for the corporate finance which we defined as the following processes:
group. This included performing the following tasks: • Cash management and forecasting
• Obtain an understanding of the relevant processes.
• Short-term debt funding
• Evaluate processes’ effectiveness and efficiency.
• Trust and fund management
• Evaluate the internal control environment by testing selected
control objectives. Internal control evaluations were based on interviews with
management and personnel, observation of key processes, and
• Assess compliance with corporate policies and procedures. transactional testing.
• Identify opportunities for process and internal control
improvements.
• Provide best practices where opportunities for improvement exist.

6
WORK PERFORMED

Key treasury and A high-level The corporate

information review of the finance internal
systems information control
management systems environment was
and personnel environment evaluated to best The effectiveness
Related corporate Detailed transaction The corporate
were related to the control practices. and efficiency of
policies and testing of finance processes
interviewed. corporate finance business processes
procedures were commercial paper, were compared to
group was were assessed,
reviewed. letters of credit, wire established best
conducted. noting opportunities
transfers and trust practices.
fee calculations for improvement.
(see Appendix E)
were performed.

7
ACKNOWLEDGEMENTS

We are pleased to take this opportunity to thank various management and personnel of the treasury department for the
courtesies extended to our representatives and their considerable cooperation.

Treasurer (Insert Name)

Assistant Treasurer (Insert Name)

Corporate Accounting Manager (Insert Name)

Senior Counsel (Insert Name)

Director of Corporate Business Systems (Insert Name)

Information Services (Insert Name)

Senior International Treasury Analyst (Insert Name)

Senior Treasury Analyst (Insert Name)

Treasury Coordinator (Insert Name)

Accounting Analyst (Insert Name)

Associate Accounting Analyst (Insert Name)

Financial Systems Support (Insert Name)

Legal Entities Coordinator (Insert Name)

8
ACTION MATRIX (1/9)
The following matrix contains important issues and observations related to treasury functions. Management’s action plan is described along with the
responsible party. Also, observations have been given a high, medium or low priority ranking, representing a degree of control risk or opportunity for
process improvement. Each issue will be addressed according to the implementation date agreed to by management and internal audit. A follow-up
review will be performed based on this information.
Responsible Priority Completion
Observation Recommendation Action Plan
Party (Low, Med, High) Date
Cash Management and Forecasting A best-practice approach to (Insert Name) Treasury is now looking for a High (Insert Date)
Domestic and international cash management and cash management and lead cash management bank
(Insert Name)
forecasting are performed separately. More systems forecasting is a fully integrated and integrated domestic
infrastructure must be needed to support the linkage global solution combining (Insert Name) treasury workstations. A
of global corporate strategies and cash management domestic and international (Insert Name) request for proposal (RFP) is
and forecasting. Treasury is now addressing domestic cash activity and projections. being prepared for vendor
cash management. Internationally, Company XYZ (Insert Name) distribution.
uses its Z Treasury Center (ZTC), which acts as a Retain an independent
banking facility, to manage cash efficiently. Foreign consultant to assist with
subsidiaries loan excess funds to other foreign selecting domestic cash
subsidiaries at improved yields on the lending side management solutions.
and reduced interest rates to those entities needing
funding. The ZTC earns fees on both ends of the
transactions and enjoys low Country Z tax rates.
Business Impact/Risk:
• Global needs may not be known quickly.
• Processes may be inefficient and inaccurate.

9
ACTION MATRIX (2/9)
Responsible Priority Completion
Observation Recommendation Action Plan
Party (Low, Med, High) Date
Bank Relationships Identify and implement one (Insert Name) Identify, assess and select a High (Insert Date)
Currently, two parallel systems are utilized to query fully integrated cash lead cash management bank
(Insert Name)
daily domestic banking activity and to gather cash management system for for domestic cash
management data one for Company XYZ and one for querying, gathering, (Insert Name) management and forecasting.
Company Y. The process of gathering this data is transacting and reporting cash (Insert Name) Minimally, replace the
manually intensive and inefficient. management information. domestic cash management
(Insert Name) system with an integrated
Business Impact/Risk:
cash management system
• Processes are inefficient. having electronic linkage to
• Time spent addressing separate processes results the general ledger.
in lost opportunities.

Since the Company Y acquisition, two primary bank Select a lead cash (Insert Name) Select a lead cash High (Insert Date)
accounts have been utilized for Company XYZ’s management bank and management bank and
(Insert Name)
domestic transactions. This increases processing consolidate bank accounts. consolidate bank accounts.
time, as the senior treasury analyst must query the (Insert Name)
banks through two system modules and corporate (Insert Name)
accounting must reconcile two accounts.
Business Impact/Risk: (Insert Name)
• Use of funds may be costly or inefficient.
• Processes may be inefficient.
• Time spent addressing separate processes may
result in lost opportunities.
• Fees may be higher.

10
ACTION MATRIX (3/9)
Responsible Priority Completion
Observation Recommendation Action Plan
Party (Low, Med, High) Date
Cash Forecast Accuracy and Timeliness Evaluate the effectiveness of (Insert Name) Develop and disseminate a Medium (Insert Date)
Domestic cash forecasts are submitted monthly to the the current cash forecasting standard format for daily,
(Insert Name)
corporate treasury. Consolidated cash forecasts need methodology. weekly and/or monthly as-
to be prepared. (Insert Name) appropriate cash forecasting
Consider creating and
Additionally, domestic cash forecasts are prepared, (Insert Name) for use by the domestic units.
implementing a standard form
and daily, the senior treasury analyst verifies the on which sites submit cash (Insert Name)
accuracy and reasonableness of the cash forecasts forecasts.
submitted. Based on the data received, variances
Monitor the effectiveness of
between forecasts and bank activity range from
the new form and continue to
approximately $XXX to $XXX. Some reasons for
measure cash forecast
variances relate to the Company Y acquisition and
accuracy.
personnel changes.
Additionally, some sites need to meet the first of the
month submission deadline.
According to an assistant treasurer, prior to the
Company Y acquisition, the treasury’s domestic cash
forecasting generally was accurate and Company Y
management did not produce monthly forecasts.
Business Impact/Risk:
• Forecasting measures may be inaccurate.
• Future cash needs may not be identified.
• Funding risk may arise.

11
ACTION MATRIX (4/9)
Responsible Priority Completion
Observation Recommendation Action Plan
Party (Low, Med, High) Date
Manual Processes Ensure that the new system (Insert Name) • Retain an independent High (Insert Date)
has the following functionality: consultant to assist with
The treasury department utilizes several systems. (Insert Name) selecting a domestic cash
These systems include System ABC, CDS • Automated bank polling
(Insert Name) management solution.
Connection and Hyperion. • General ledger interface
• Define system
In addition to these disparate systems, MS Excel is • Foreign currency purchases (Insert Name) requirements.
extensively used to produce meaningful cash with real-time exchange
(Insert Name) • Establish selection criteria.
management and forecasting reports. MS Excel rates
• Evaluate canned treasury
requires many manual processes to generate reports. • A payments module able to
workstation applications.
initiate electronic payments
Treasury personnel have retained an independent from one input screen • Select and implement
consultant to assist with selecting a domestic cash appropriate treasury
management solution. • An adequate security
workstation applications.
administration module
Business Impact/Risk: • Train end users on the
• Value-added system
system’s functionality and
• Processes are manual and inefficient. generated reports
security requirements.
• Data capture and reporting may be inaccurate.
• Disaster recovery procedures may be worse.

12
ACTION MATRIX (5/9)
Responsible Priority Completion
Observation Recommendation Action Plan
Party (Low, Med, High) Date
Policies and Procedures Ensure consistent practices, (Insert Name) Formalize and communicate Medium (Insert Date)
While policies and procedures have been established policies and procedures are policies, as delineated in the
established and reviewed for (Insert Name) Recommendation section
for some treasury functions, they are generally dated.
all functions and updated (Insert Name)
Additionally, policies and/or procedures for elements
annually to reflect current
of the following treasury functions have not been
practices. (Insert Name)
formally documented:
Formally establish the
• Cash forecasting (Insert Name)
following policies and/or
• Commercial paper issuance procedures:
• Trust and fund management Cash Forecasting
Business Impact/Risk: Detailed procedures exist for
• Policies and procedures may be inconsistently preparing cash forecasts;
applied. however, a higher-level
• Processing may be inaccurate. explanation defining the
• Process knowledge may be lost. purpose of cash forecasts
should be established,
documented and
communicated. Minimally
require the reporting of key
cash forecasting data
elements for large dollar
transactions.
Commercial Paper Issuance
Formally establish guidelines
for the issuance of commercial
paper.

13
ACTION MATRIX (6/9)

Responsible Priority Completion

Observation
Policies and Procedures (Continued)
Recommendation Action Plan
Party (Low, Med, High) Date
Include a statement regarding (Insert Name) Formalize and communicate Medium (Insert Date)
which staff members are policies, as delineated in the
authorized to issue (Insert Name) Recommendation section
commercial paper on behalf of (Insert Name)
Company XYZ and formally
communicate it to commercial (Insert Name)
paper dealers. Additionally,
procedures should be (Insert Name)
established officially regarding
the management review
required for commercial paper
efficiency, cost and execution.
Trust and Fund Management
Establish policies/procedures
for reviewing and monitoring
trust and funds, including
trust/fund manager selections
and changes, fund
management performance
(including corrective action),
and management fee structure
and payment.

14
ACTION MATRIX (7/9)
Responsible Priority Completion
Observation Recommendation Action Plan
Party (Low, Med, High) Date
Signatory Authorizations Update the signatory (Insert Name) The senior treasury analyst High (Insert Date)
Signatory authorizations for wire transfers for both authorizations and limits for (Insert Name) will obtain updated wire
international and domestic wire activity have been wire transfers. transfer signatures and limits.
established; however, based on conversations, the
authorized signers do not represent the current
Company XYZ management structure. For example,
Company Y management signatures have not been
received. Similarly, authorization limits do not
accurately represent current wire transfer
requirements.
Business Impact/Risk:
• Payments may be unauthorized.
• Payment authorization may not be verified.

Safe Ensure that Company Y-held (Insert Name) Deliver all Company Y-held High (Insert Date)
Company Y-held stock certificates have been stock certificates are properly (Insert Name) stock certificates to the
received by the corporate secretary’s office, but not recorded and deposited in the treasury safe.
all certificates have been delivered to the treasury for treasury safe.
placement in the treasury’s fireproof safe.
Business Impact/Risk:
• Transactions or activity may be unauthorized.

15
ACTION MATRIX (8/9)
Responsible Priority Completion
Observation Recommendation Action Plan
Party (Low, Med, High) Date
Job Descriptions Establish formal job (Insert Name) Establish formal job Medium (Insert Date)
Personnel goals have been established and descriptions. (Insert Name) descriptions.
communicated; however, formal job descriptions are
not in place.

Employee Training Establish targets for formal (Insert Name) Calendarize formal technical Medium (Insert Date)
Corporate sponsored, formal technical training is technical training by position. (Insert Name) training by position annually.
limited; however, a training budget is in place to cover
training costs.
Business Impact/Risk:
• Financial risk may be managed inaccurately.

Information Systems Perform detailed reviews of (Insert Name) Utilize a standardized work High (Insert Date)
CDS Connection the CDS Connection system (Insert Name) program to evaluate system
configuration parameters at configuration parameters at
CDS Connection has been installed locally at each of
the site locations. the site locations.
the site locations. Given limited training and the on-
site installations, site location personnel may need Follow up on system Advise site personnel of
clarification regarding appropriate CDS Connection deficiencies. deficiencies and follow up to
system configuration and usage. ensure compliance.
Business Impact/Risk:
• Access to system resources may be unauthorized.
• Approval of unauthorized transactions may result in
financial loss.

16
ACTION MATRIX (9/9)
Responsible Priority Completion
Observation Recommendation Action Plan
Party (Low, Med, High) Date
User Access Review user-access privileges (Insert Name) Utilize system-generated Medium (Insert Date)
Reviews of user access privileges do not periodically to system resources and the (Insert Name) reports to review user access
occur. Windows NT terminal server privileges quarterly (e.g.,
Business Impact/Risk: quarterly. June, September, December).
• Access to system resources may be unauthorized.
• Sensitive data may be lost.

Information Systems Install anti-virus software on (Insert Name) Install anti-virus software on High (Insert Date)
Anti-Virus Software the Windows NT server that (Insert Name) the Windows NT server that
Anti-virus software has not been installed on the houses the System ABC houses the System ABC
Windows NT terminal server that houses the System platforms. platforms.
ABC platforms. Refer to CERT’s website for
Business Impact/Risk: virus updates.
• Access to system resources may be unauthorized. Install the necessary patches
as-needed.
• Sensitive data may be lost.

DESMAC Diskettes The primary DESMAC
The sensitive DESMAC (Data Encryption Standard diskettes should be stored
Message Authentication Code) diskettes were not in a under lock and key while not
secure location while in use. in use.
Business Impact/Risk: The backup DESMAC
• Access to system resources may be unauthorized. diskettes should be stored in
the safe located within the
• Sensitive data may be lost. treasury department.
(Insert Name) The primary DESMAC High Completed
(Insert Name) diskettes have been placed in
a locked credenza while not in
use.
The backup DESMAC
diskettes have been placed
within the treasury safe.

17
APPENDIX A: LEADING PRACTICES SCORECARD:
MANAGE CASH FLOW (1/2)
Leading Practices: Manage Financial Risk
Select core cash management banking partners.
Benefits include:
• More leverage is used during negotiations with banks,
decreasing dependency on any single institution.
• Access to new cash management products and
services is greater.
• Bank charges and reconciliation costs are lower.
Develop accurate cash forecasting models.
Benefits include:
• Treasury organization effectiveness is increased.
• Risks of overfunding payables and excess balances are
lessened.
• Access to funds, when needed to sustain operations or
to expand business, is greater.
Improve investment yields at the lowest cost.
Benefits include:
• Cash flow is improved.
• Focus on investment opportunities is clearer.
• More cash is available for investment in the business.
Good/World Class: “Best practice” currently in use.
18
Company XYZ: Treasury Rating Action Matrix Ref
Company XYZ is currently the lead cash management 1, 2 and 3
bank; however, with the need to have one fully integrated
cash management system, treasury is now looking for a
new lead cash management bank through which all
necessary cash management functions can be integrated.
A request for proposal (RFP) is being prepared for vendor
distribution.
Two cash management systems are utilized, and 2, 3 and 4
gathering cash management information could be more
efficient and manually intensive. Inaccurate information
provided by sites further hinders this cumbersome data
compilation. Together, these factors are the driving forces
behind variances in the forecast.
Clear written policies outlining investment philosophy, N/A
roles and responsibilities exist. The finance committee
directs and approves investment practices. Investments
and hedging activity are used to cover currency and
interest rate risk. A matched book is maintained with no
open positions. Idle funds are generally swept daily into
conservative interest-bearing accounts.
Moderate Use: Improvement possible in Limited Use: “Best practice” recommended to
order to achieve “best practice” status. improve process efficiency/effectiveness.
APPENDIX A: LEADING PRACTICES SCORECARD:
MANAGE CASH FLOW (2/2)
Leading Practices: Manage Financial Risk
Review the cash management system regularly.
Benefits include:
• Operating effectiveness once inefficiencies are
identified and improved is greater.
• More opportunities to improve liquidity are identified.
• Fraud opportunities are minimized.
Create a centralized cash management infrastructure
that serves global needs.
Benefits include:
• Foreign exchange exposure is minimized.
• Transaction costs are reduced.
• Transaction-related information flow is improved.
Good/World Class: “Best practice” currently in use.
19
Company XYZ: Treasury Rating Action Matrix Ref
Treasury personnel utilize system-generated reports and 12
audit logs to facilitate their review of the System ABC
platforms; however, periodic reviews of user access
privileges do not occur regularly.
Treasury is now addressing an integrated solution to 1
domestic cash management. Internationally, Company
XYZ uses its Z Treasury Center (ZTC), which acts as a
banking facility, to manage cash efficiently. Through the
ZTC, foreign subsidiaries loan excess funds to other
Company XYZ foreign subsidiaries at improved lending
yields and reduced interest rates to those entities needing
funding. The ZTC earns fees on both ends of the
transactions and enjoys low Country Z tax rates.
Moderate Use: Improvement possible in Limited Use: “Best practice” recommended to
order to achieve “best practice” status. improve process efficiency/effectiveness.
APPENDIX A: LEADING PRACTICES SCORECARD:
MANAGE FINANCIAL RISK (1/2)
Leading Practices: Manage Financial Risk Company XYZ: Treasury Rating Action Matrix Ref

Evaluate financial risks in the context of business Financial risk is conservatively managed through the N/A
objectives. finance committee, which directs and approves investment
Benefits include: practices. Investments and hedging activity are used to
• Risk management resources are directed to areas of cover currency and interest rate risk. A matched book is
greatest value. maintained with no open positions. Idle funds are
generally swept daily into conservative interest-bearing
• Financial risk managers are better partners in the accounts.
overall business.
• Significant risks are evaluated.
Involve senior management in financial risk The CFO, finance committee and senior management N/A
management. team (SMT) are regularly informed of major financing
Benefits include: issues and/or risk.
• Accountability is placed where it belongs in the
organization.
• Vision and direction to the financial risk management
function are identified.
Establish written risk management policies that define According to one of the assistant treasurers, formal written N/A
the goals and limits for hedging and trading activities. policies and procedures are in place.
Benefits include:
• The strategy set forth by senior management is
implemented.
• The likelihood of unexpected, massive impacts from
trading activities is reduced.

Good/World Class: “Best practice” currently in use. Moderate Use: Improvement possible in Limited Use: “Best practice” recommended to
order to achieve “best practice” status. improve process efficiency/effectiveness.

20
APPENDIX A: BEST PRACTICES SCORECARD: MANAGE
FINANCIAL RISK (2/2)
Leading Practices: Manage Financial Risk Company XYZ: Treasury Rating Action Matrix Ref

Educate treasury personnel and make them an integral A training budget has been created for the year (Insert 10
part of the financial risk management process. Year); however, training plans have yet to be created for
Benefits include: and communicated to treasury personnel.
• Managers are introduced to the risk impacts of
everyday decisions.
• Managers are allowed a degree of control over factors
that affect their bottom line.
Monitor financial risk exposure and the effectiveness Corporate treasury personnel have established limits for N/A
of financial risk management strategies. the site locations and utilize trend analyses to assist with
Benefits include: the monitoring of financial risk exposure to Company XYZ.
• Executive management is provided with an independent
view of risk management activities.
• Rapid changes in strategy are allowed when needed.

Adopt clear and consistent accounting and disclosing
practices for risk management activities.
Benefits include:
• Transactions are properly tracked.
• Investors are provided with necessary information.
• A basis for analyzing losses is provided.
Practices are in place to work with corporate accounting to N/A
produce accurate SEC and financial statement reporting
disclosures. Clear accounting policies and procedures are
in place.

Good/World Class: “Best practice” currently in use. Moderate Use: Improvement possible in Limited Use: “Best practice” recommended to
order to achieve “best practice” status. improve process efficiency/effectiveness.

21
APPENDIX B: LEADING CONTROL PRACTICES SCORECARD:
MANAGE CASH FLOW (1/5)
Leading Practices: Manage Financial Risk
Establish a reporting policy, ensuring that relevant
information is adequately communicated to key
personnel promptly.
Benefits include:
• Performance of the treasury function is improved.
• Cash management decisions are based on relevant and
accurate information.
Implement a “self-control” approach to assessing
business risk. Design, implement and improve risk
controls, measure performance, and monitor the
process.
Benefits include:
• Business risk identification is more effective.
• Employees are empowered.
• Performance with business strategies is enhanced.
Maintain compliance with loan restrictions.
Benefits include:
• Fines, penalties, litigation and/or loss of reputation are
prevented.
• Noncompliance with loan covenants, which could result
in decreased liquidity, is prevented.
Good/World Class: “Best practice” currently in use.
22
Company XYZ: Treasury Rating Action Matrix Ref
Domestically, changes and relevant information are N/A
communicated to corporate accounting and site locations.
Internationally, regulatory reporting is performed by the
sites.
Current manual and bank systems limit the degree of N/A
improvement. Treasury is working toward identifying and
implementing a domestic integrated cash management
system.
Domestically, corporate accounting monitors compliance N/A
with loan terms and conditions for the revolving line of
credit. Internationally, subsidiaries monitor compliance
with loan terms and conditions. Copies of compliance
reports are received and reviewed by the treasurer and
assistant treasurer. Issues are elevated to the finance
committee.
Moderate Use: Improvement possible in Limited Use: “Best practice” recommended to
order to achieve “best practice” status. improve process efficiency/effectiveness.
APPENDIX B: LEADING CONTROL PRACTICES SCORECARD:
MANAGE CASH FLOW (2/5)
Leading Practices: Manage Financial Risk Company XYZ: Treasury Rating Action Matrix Ref

Monitor the effectiveness and efficiency of the Treasury is part of the established internal audit plan. N/A
process using internal audit.
Benefits include:
• Weaknesses in the design and operation of the internal
controls are identified.
• Errors and/or unauthorized transactions are identified.
• Accuracy and reliability of outputs are improved.
Align process strategies with overall corporate • Domestically: Seek an integrated cash management 1
strategy. solution.
Benefits include: • Internationally: Use the Z treasury center to manage
• Process management is well-informed. cash tax-efficiently, primarily in (Insert Location).
• Assurance that the process is contributing to the overall Process strategies are weak in (Insert Location) and
corporate goals and objectives exists. (Insert Location).
• Greater movement toward realizing the process’s
maximum benefits occurs.
Continuously improve the process and performance. The cash management process is currently being N/A
Benefits include: assessed. While treasury is “always aware of the next
• Quality of work is increased. level,” changes are made if cost/benefit analyses support
the improvements.
• Cycle time is decreased.
• Employee satisfaction is increased.

Good/World Class: “Best practice” currently in use. Moderate Use: Improvement possible in Limited Use: “Best practice” recommended to
order to achieve “best practice” status. improve process efficiency/effectiveness.

23
APPENDIX B: LEADING CONTROL PRACTICES SCORECARD:
MANAGE CASH FLOW (3/5)
Leading Practices: Manage Financial Risk Company XYZ: Treasury Rating Action Matrix Ref

Establish, document and communicate policies and Most policies and procedures are in place but are 6 and 9
procedures to ensure all personnel understand generally dated. Recommendations for improvement are
objectives and responsibilities. noted in the action matrix.
Benefits include: Treasury personnel goals have been established and
• Standards, which allow the company to monitor and communicated; however, formal job descriptions and desk
enforce the policies, are defined. procedures still need to be implemented.
• Higher quality and consistent work is done.
• Mistakes, confusion and complaints are minimized.
Protect the integrity of systems, databases and Anti-virus software is not installed on the Windows NT 12 and13
records. terminal server that houses the System ABC platforms.
Benefits include: Reviews of user access privileges to sensitive directories,
• Errors and processing inconsistencies are lessened. databases and systems do not occur periodically. The
sensitive DESMAC (Data Encryption Standard Message
• Cycle time is reduced. Authentication Code) diskettes were not in a secure
• User satisfaction is improved. location while in use; however, they have since been
• Output quality is increased. stored in specific areas.

Good/World Class: “Best practice” currently in use. Moderate Use: Improvement possible in Limited Use: “Best practice” recommended to
order to achieve “best practice” status. improve process efficiency/effectiveness.

24
APPENDIX B: LEADING CONTROL PRACTICES SCORECARD:
MANAGE CASH FLOW (4/5)
Leading Practices: Manage Financial Risk
Ensure that all debt transactions are processed and
recorded on time.
Benefits include:
• Recorded balances will reflect realistic valuations.
• Unauthorized debt transactions are detected.
• Account balances are accurately recorded.
Ensure that investment, borrowing, disbursement and
other financial transactions are appropriately
authorized.
Benefits include:
• Records of investment transactions are accurate.
• Recorded balances reflect realistic valuations.
• Investment income is recorded accurately.
Maintain lines of credit that are adequate to meet
recurring and unexpected funding requirements.
Benefits include:
• Financing to support strategic growth and operating
activities is adequate.
• Risk of business interruption due to cash shortages is
minimized.
Good/World Class: “Best practice” currently in use.
25
Company XYZ: Treasury Rating Action Matrix Ref
Debt transactions are processed and recorded timely. A N/A
tickler file ensures that all debt transactions are processed
and recorded on time. MS Excel is used to track these
transactions.
Processes are manually intensive but do not appear to
warrant automated data transmission and capture.
Generally, investments, borrowings and disbursements 6
are properly authorized and well-documented. Weekly
management review or approval is required for
commercial paper issuance and cash balances.
The new $XXX line of credit meets current and projected N/A
funding requirements. Company XYZ’s objective is to
maintain $XXX in liquidity, accomplished through the
revolving line of credit and requires a debt-to-capital ratio
of 0.6.
Moderate Use: Improvement possible in Limited Use: “Best practice” recommended to
order to achieve “best practice” status. improve process efficiency/effectiveness.
APPENDIX B: LEADING CONTROL PRACTICES SCORECARD:
MANAGE CASH FLOW (5/5)
Leading Practices: Manage Financial Risk Company XYZ: Treasury Rating Action Matrix Ref

Maximize returns from investments of excess cash Most entities have sweep accounts. Those who do not N/A
funds. invest excess funds in money market accounts.
Benefits include:
• Return on investment is improved.

Good/World Class: “Best practice” currently in use. Moderate Use: Improvement possible in Limited Use: “Best practice” recommended to
order to achieve “best practice” status. improve process efficiency/effectiveness.

26
APPENDIX C: DOMESTIC CASH MANAGEMENT
PROCESS FLOW (1/2)
01
Receive Cash Forecasts and
Bank Balance Information
• The site locations submit
monthly cash forecasts to
corporate treasury.
 The senior treasury analyst
maintains a list of all site
locations and ensures that
forecasts are properly
submitted.
• The senior analyst
consolidates the data provided
by the site locations into a
standard template.
• The total cash forecast amount
per site location is distributed
throughout the week based on
historical operations activity.
• Process Point
27
02
Set Cash Position and Offset
Net Cash
• The daily bank balances and
all planned cash transactions
are netted to determine the
day’s cash position. As of
(Month, Year), Company XYZ
is a net borrower.
• The senior treasury analyst
determines how much
commercial paper should be
issued and what maturities
should be selected.
 Internal Control Point (Manual)
03
Process Wire Transfer
Requests
• Wire transfer requests are
received daily from site
locations.
• The senior treasury analyst
verifies the signature
authorization based on
familiarity.
› Signature authorizations and
limits are outdated. Similarly,
the established authorization
limits are not reflective of
current wire limits.
o Internal Control Point (System-
Based)
04
Collect and File Supporting
Documentation
 Reports are generated daily,
which show all cash
transactions on concentration
accounts.
 Control data sheets are
prepared to monitor the
company’s daily cash activity,
net cash position, commercial
paper activity and cash
forecasts.
 The senior treasury analyst
balances the bank activity to
the control spreadsheets.
• A MS Excel spreadsheet is
created, which identifies all
disbursements and receipts.
The spreadsheet is forwarded
to corporate accounting.
› Internal Control
Weakness
APPENDIX C: DOMESTIC CASH MANAGEMENT
PROCESS FLOW (2/2)
01
Receive Cash Forecasts and
Bank Balance Information
 Daily, the forecasts are
compared to actual bank
activity in an MS Excel
spreadsheet.
› Typically, the forecasts are
completed and consolidated by
the third of each month.
Recently this deadline has not
been met.
› The senior treasury analyst
manually queries two bank
accounts (one each for
Company XYZ and Company
Y) for the day’s activity,
receipts and disbursements. A
lead cash management bank
will be selected, and accounts
will be consolidated.
• Process Point
28
02
Set Cash Position and Offset
Net Cash
• The senior treasury analyst
contacts the authorized
dealers to obtain current
commercial paper interest
maturities and rates. The rates
are selected and recorded.
• The senior treasury analyst
primarily handles the
commercial paper activity. A
review of the decision is
periodically performed.
 A strict, short-term investment
policy approved by both the
CFO and treasurer has been
written, limiting such
transactions to no more than
90 days.
 Internal Control Point (Manual) o Internal Control Point (System-
Based)
03
Process Wire Transfer
Requests
 Pre-format wire transfers
identify customer information
such as bank and account
numbers. An assistant
treasurer must approve the
pre-format template.
 The treasury credit analyst,
senior international treasury
analyst or assistant treasurer
reviews all pre-formatted
transfers daily. An assistant
treasurer must approve any
non-pre-formatted transfers.
› Internal Control
Weakness
04
Collect and File Supporting
Documentation
• Corporate accounting manually
codes and posts the activity to
the general ledger based on
the data submitted by the
senior treasury analyst.
 Corporate accounting
reconciles the cash activity per
the bank statements to the
general ledger. The
reconciliation is performed
daily.
APPENDIX D: CORPORATE FINANCE PROCESS FLOW (1/2)
01
Establish Debt Instruments
 The Company XYZ
Corporation X/X Bylaws
indicate that the vice chairmen
and treasurer have the
authority to sign notes and
guarantees and consummate
debt and equity transactions
along with the corporate
secretary.
• The treasurer and assistant
treasurer are actively involved
in maintaining and/or obtaining
debt and equity funding for the
corporation.
• A new $XXX line of credit was
recently obtained.
• Bonds are periodically issued.
• Process Point
29
02
Perform Project Financing
• On an ad-hoc basis, treasury
assists subsidiaries with
project financing by identifying,
sourcing and negotiating
project funding.
• Company XYZ uses its Z
Treasury Center (ZTC),
primarily in (Location), as a
banking facility to efficiently
manage cash flow.
• Foreign subsidiaries loan
excess funds to other
foreign subsidiaries at
improved lending yields and
reduced interest rates to the
entities needing funding.
 Internal Control Point (Manual) o Internal Control Point (System-
Based)
03 04
Monitor Cash Balances and Report to the Finance
Hedge Financial Risk Committee
• A strict foreign exchange  Presentations to the finance
exposure management policy committee are performed on
was published in (Month, an ad hoc basis.
Year).
• The ZTC, as needed, performs
hedging to cover interest rate,
foreign exchange and
commodity risk.
• All positions are covered, and
a matched book is maintained.
• A monthly cash flow statement
is prepared in MS Excel based
on the subsidiary financial
statement information
provided.
› Internal Control
Weakness
APPENDIX D: CORPORATE FINANCE PROCESS FLOW (2/2)
01
Establish Debt Instruments
› Guidelines do not exist for
executing commercial paper
issuance. Additionally, the
names of staff members
currently authorized to issue
commercial paper on behalf of
Company XYZ are not
specified internally or with
dealers.
› Formal procedures do not exist
regarding the type of
management review required
for commercial paper
efficiency, cost and execution.
• Process Point
30
02
Perform Project Financing
• The ZTC earns fees on both
ends of the transactions and
enjoys low Country Z tax
rates.
 Each month, the ZTC sends
copies of its income
statement and balance
sheet to the treasury for
review.
 Internal Control Point (Manual) o Internal Control Point (System-
Based)
03 04
Monitor Cash Balances and Report to the Finance
Hedge Financial Risk Committee
• The cash flow statement NA
identifies international
subsidiary cash positions,
flows, and hedging gains and
losses.
• The statement is reviewed and
monitored by the treasury. Any
significant issues are reported
to the CFO.
› Internal Control
Weakness
APPENDIX E: SUMMARY OF TREASURY TESTING
We judgmentally selected a sample of wire transfer payments to determine if:
• Appropriate reviews were performed at the corporate office.
• Documentation was sufficient to support transactions.
• Wire transfers were processed timely.
• Duties were properly segregated.
• Bank confirmations were obtained and agreed to the transfer amount requested.
Exceptions should have been noted.

We judgmentally selected a sample of issued commercial paper to determine if:

• Commercial paper issuance complied with corporate policies and procedures.
• Decisions were appropriately supported by data.
• Adequate reviews of the issuances were performed.
Exceptions were noted. See Action Matrix No. 6.

We judgmentally selected a sample of standby letters of credit (letter of credit) to determine if:
• The letter of credit was properly authorized by corporate personnel.
• The purpose was documented and appropriate.
• Documentation was sufficient to support the transaction.
Exceptions were not noted.

We judgmentally selected a sample of trust asset money management fees to determine if:
• Fees were accurately calculated.
• Fees were properly approved.
Exceptions were not noted.

31
TREASURY REVIEW AUDIT REPORT: SAMPLE
2
EXECUTIVE SUMMARY

In general, treasury department controls surrounding cash management, wire transfers, investments and foreign exchange hedging functions
are less than adequate. The following primary opportunities for improvement have been identified through interviews and process observations
with treasury personnel and limited transaction testing.

• Treasury department policies and procedures are outdated in all areas (cash management, wire transfers, foreign exchange, treasury accounting, subsidiary
procedure-related policies). Formal, written cash management or treasury accounting policies do not exist.
• Cash management operations at subsidiary corporation could be combined with Company XYZ Inc. treasury.
− Excess cash balances at subsidiary (occasionally as high as $X million) are not automatically transferred to Company XYZ Inc. for investment.
− General ledger investment accounts are not adequately reconciled. Until recently, general ledger investment accounts were not reconciled to broker
statements or treasury records.
− General ledger investment transactions are not accurately recorded. During our review, we noted two booking errors where investments were recorded into
the wrong general ledger account (no adverse financial effect). In each case, the daily transaction report prepared by treasury was incorrect. Adjusted journal
entries were made to reverse each error prior to identifying the error.
− Authorization letters sent to counterparties identifying those approved to make foreign exchange transactions are outdated and include former Company
XYZ Inc. employees. These employees are, technically, still allowed to initiate transactions on behalf of Company XYZ Inc.
• Foreign exchange exposure hedges are not formally approved. Policy requires written documentation from the chief financial officer of all hedge contracts.
• Confirmations sent by counterparties are received directly by the people who execute foreign exchange hedging transactions.
• Management reporting could be improved in all areas (specifically, investments and foreign exchange hedging). Treasury currently submits single page
documents to executive management with little detail of key treasury measures (e.g., yield, portfolio composition, foreign exchange exposures, etc.).
• Reconciliations of the yen bank account should be reviewed by the treasury manager to ensure that they have been properly prepared. This review should be
documented.

Please see the Action Matrix section for further details.

33
OBJECTIVES AND SCOPE

Objectives
• Assess and evaluate the adequacy of the overall financial control environment.
• Assess and evaluate the adequacy of significant financial and accounting controls.
• Identify opportunities for process and control improvement.

Steps
• This review was limited to the corporate treasury operations at headquarters.
• The period of review was for (Insert Month) XXXX.
• This project did not include a review of the strategic alliance/partnership investments managed outside the corporate treasury.
• The following processes and functions were reviewed:

Cash Management Wire Transfers* Investments* Foreign Exchange

Exposure
Management*

*Limited detailed testing was performed

34
SUMMARY OF PROCEDURES PERFORMED

We performed the following during our review:

Obtain and review available

Company XYZ Inc. corporate
treasury policies and procedures Interview key treasury and Observe performance of
related to cash management, accounting personnel. key treasury processes.
investing and foreign exchange
exposure management.

Review domestic and

Perform detailed testing of
international cash and Review investment
outgoing wire transfers and
investment account manager statements.
investments.
reconciliations.

Analyze foreign exchange Evaluate the overall

Analyze the calculation of yen
hedging forwards and internal control
exposures for Q2-YY.
options for Q2-YY. environment.

Compare Company XYZ Inc.’s

Report on observation and
practices with best practices for
management action plans.
selected treasury operations.

35
ACKNOWLEDGMENTS

We want to thank all Company XYZ Inc. employees who assisted us during this project. We
received input and assistance from the following personnel:

Corporate Treasury
Accounting
Name A Treasury Manager
Name C Accounting Clerk
Name B Cash Analyst

Your help is key to the success of this project!

36
GENERAL BACKGROUND

During the fiscal XXXX/YYYY internal audit planning process, executive management identified treasury operations for review in the fiscal
XXXX/YYYY audit plan. Treasury operations were last reviewed in August XXXX by audit services.
Corporate treasury is responsible for the following functions for both Company XYZ Inc. and Company XYZ Inc. International:
• Cash management and short-term investing:
− Bank account management, including bank lines of credit and other types of financing as required by Company XYZ Inc.
− Foreign exchange exposure management.
− Risk management, including coordinating insurance coverage.
− Credit and collections.
• Treasury personnel, including one full-time treasury manager and one part-time treasury analyst.

37
BACKGROUND: CASH MANAGEMENT AND WIRE TRANSFERS
(1/3)

• As of (Insert Month) (Insert Year), Company XYZ Inc. had worldwide cash and investments of approximately $XXX million (see graph on next page).
− Treasury personnel perform cash management functions for Company XYZ Incorporated and international entities. Company XYZ Inc. subsidiaries
perform cash management operations independent from the corporate treasury. Subsidiaries’ excess cash is transferred to the corporate treasury (at
the corporate’s request) for investment.
− Treasury maintains a yen account with Bank A for yen accounts receivable and accounts payable activity. Yen account balances are not invested due
to low Japanese interest rates. Foreign exchange exposure in the yen account is hedged (see FX background).
− Cash management activity is monitored daily.
• The Company XYZ Inc. treasury department utilizes System A for all incoming and outgoing wire transactions.
• Treasury personnel hold releasing and approval capabilities within System A. Individuals may perform only one of these functions for each transaction.
• In the case of a system failure, alternate wire transfer procedures have been established. Wire transfer information may be directly called into the
appropriate bank. The releasing party utilizes A safe wire card to ensure that only authorized personnel are transferring company funds. Once released,
the wire information is confirmed by another authorized individual with system approval capabilities.

38
BACKGROUND: CASH MANAGEMENT AND WIRE TRANSFERS
(2/3)
Company XYZ INC. Consolidated Cash Balance
as of (Insert Month)
(as of millions of dollars)

Company A
15%
Company B
28% Company C
3%
Company XYZ
Others
Short-Term Cash
25% 20%

Total Consolidated Cash

= $ XXX million
15%

39
BACKGROUND: CASH MANAGEMENT AND WIRE TRANSFERS
(3/3)

• Wire templates have been established within the System A system. Dual authorization is required for the creation of such templates. In addition, dual
authorization is required for all template changes.
• To process a wire, a wire transfer sheet must be signed and approved by certain Company XYZ Inc. employees, based upon the current company
signature authority policy. Exceptions to this rule exist for overnight investments and payroll payments, which do not require such approvals.
• Wire information is reconciled to the general ledger monthly by Company XYZ Inc.’s general accounting department.
• The matrix below details the people authorized to initiate and approve wire transfers with their respective processing limits.

Wire Transfer (System A) Authorization Matrix

Users and Approval Limits

Dollar Limits Per User Per

User
Name A: Treasury Analyst
Name B: Treasury Manager
Name C: Finance Manager
Total Limits Per Company
XYZ
Dollar Limits Per Transaction Other Access Limitations
Day
Release equals $X million
Up to $X million None
Approve equals $X million
Release equals $X million
Up to $X million None
Approve equals $X million
Release equals $X million
Up to $X million None
Approve equals $X million
Release equals $XX million
Up to $X million NA
Approve equals $XX million

40
BACKGROUND: INVESTMENTS (1/2)

• Excess cash for incorporated and international accounts is invested daily in overnight money market accounts held with Bank A. Excess
cash from money market accounts is invested short-term with external money managers (Company A, Company B and Company C).
• Company XYZ Inc.’s current investment policy (last updated [Insert Month] YYYY) is conservative; however, a more aggressive
approach has been developed and submitted to the board for approval. All money managers are required to adhere to this policy in all
investments. All short-term investments are made through money managers.
• All current short-term investments have a maturity of less than four months.
− Of the $XXX million in cash, approximately XX% is held in short-term investments. The remaining X% is short-term cash, consisting
primarily of the Bank A yen cash and overnight money market accounts.
− The following page displays the short-term investment portfolio by instrument type.
• Maturing investments are automatically transferred into a money market account the managing institution holds. The money is rolled into
another short-term investment or wired back to Company XYZ Inc.
• Investments are recorded at cost. Cost-to-market value adjustments are minimal due to the short duration of investments.
• Company XYZ Inc. participates in approximately ten strategic alliances/partnerships. In some cases, dollar investments have been
made. These alliances/partnerships are managed at the executive level (CEO/CFO) and are independent of corporate treasury.

41
BACKGROUND: INVESTMENTS (2/2)

Short-Term Investment Portfolio

by Instrument Type
as of (Insert Date), XXXX
(in millions of dollars)

Commercial Paper
2%
and other
3%
Gov’t Agencies

Gov’t Treasuries

Gov’t Treasuries Short-term portfolio includes

20% all Company A, Company B
and Company C
investments.

20%
Average combined taxable
equivalent yield as of (Insert
Date), XXXX.

42
BACKGROUND: FX

FX Hedging Results
Q1-XX thru Q3-YY Average Net FX
• Company XYZ Inc.’s foreign Gains/(Losses) =
currency exposure management $XXX,XXX

program primarily focuses on

managing its transaction
exposures. $5,000 FX Translation Gain/(Loss)
Impact of Hedge Gain/(Loss)
• Transaction exposure results $4,000 NET FX GAIN/(LOSS)
Occur mainly from nonfunctional
currency, yen denominated $3,000
receivables and payables.

(In Thousands $)
$2,000
• Yen foreign exchange forward
contracts and yen put and call $1,000
options are the primary hedging
instruments. $0
• Treasury has concluded that no Series1
($1,000)
significant foreign currency
exposures exist at Company XYZ ($2,000)
Inc. that require hedging.
($3,000) Q1-XX Q2-XX Q3-XX Q4-XX Q1-YY Q2-YY* Q3-YY*

*Based on forecasts

43
ACTION MATRIX

(Insert Action Matrix Pages Here)

44
BEST PRACTICES

(Insert Leading Practice Pages Here)

45
APPENDIX: FX BACKGROUND/STRATEGY
FX Strategy and Process Overview
• The treasury manager receives biweekly information regarding forecasted intercompany yen activity from Company XYZ Inc., its Japanese
subsidiary. The treasury manager utilizes this information to determine Company XYZ Inc.’s expected monthly yen cash position and net
yen balance sheet exposures for each month through the end of the fiscal year. If the yen cash forecast indicates months when excess yen
will be available, the treasury manager will sell yen forward to reduce this foreign currency exposure.
• The treasury manager decides whether to sell any excess yen forward based on his analysis of the current foreign exchange market
conditions, particularly the current trend in the yen exchange rate about the most recent accounting yen exchange rate and his confidence
level in the yen forecast.
• Company XYZ Inc. is typically long yen.
− If the yen has been weakened against the dollar, and the treasury manager expects this trend to continue, he will consider selling any
excess yen forward (thus reducing yen exposure and minimizing expected translation losses).
− Additionally, the biweekly yen exposure update performed by the treasury manager might change the forecasted yen cash position. Such
changes in the forecast, depending on their significance, can result in additional forward yen sales to keep the hedges in line with the
adjusted exposures.
− Yen foreign exchange options are utilized to hedge any remaining net unhedged yen exposures. The strategy used by the treasury
manager in this area involves the purchase of a yen put option (maturity date of quarter end, strike price equal to current yen exchange
rate and option amount equal to remaining unhedged quarter end yen exposure). While the treasury manager purchases this yen put
option, he will also sell a yen call option with the same maturity date and strike price. The amount of yen covered by this written call
option is set at the amount necessary so that the option premium received by Company XYZ Inc. from the sale of this call option exactly
offsets the option premium paid by Company XYZ Inc. on the purchase of the yen put option. According to the treasury manager,
Company XYZ Inc.’s unhedged yen exposure will always remain in excess of the yen covered by the written call option (i.e., the written
option is “covered” in that Company XYZ Inc. maintains sufficient yen positions).

46
BACKGROUND: INVESTMENTS
• Yen Fluctuation
− The purchased yen put option protects Company XYZ Inc. in the event of a weakening yen. In this scenario, translating the yen balance
sheet exposure will result in a loss of remeasurement. The purchased yen put option will increase in value, resulting in a gain that will
offset the remeasurement loss. The written yen call option will expire worthless.
− In the event of a strengthening yen, remeasurement of the yen balance sheet exposure will result in a gain. The purchased yen put option
will expire worthless. However, the counterparty will exercise the written yen call option, resulting in a loss for Company XYZ Inc. on the
option exercise. This loss incurred from the exercise of the written call option will be offset by the remeasurement gain on the yen
exposure (the yen exposure remeasured should exceed the yen covered by the written call option, as described above, resulting in a net
gain).

47
TREASURY REVIEW AUDIT REPORT: SAMPLE
3
EXECUTIVE SUMMARY (1/2)

The internal audit reviewed the treasury function at corporate headquarters that provides service to the entire firm as a centralized management function under the direction
of the CFO and corporate treasurer. An estimated $X,XXX of funds are transferred, managed and distributed, including monthly cash positions, foreign exchange and daily
cash needs. Banking relationships, primarily Bank A and Commercial Bank B, service cash management accounts and related foreign exchange activity.
This review aimed to understand key processes in the treasury function (cash management, electronic fund transfers, investments and foreign exchange hedging), evaluate
the adequacy and effectiveness of the associated internal controls, and identify opportunities for process improvements.

The following summarizes the issues and observations noted during this review. Each issue/observation has been prioritized based on its business impact on
the company. A page reference and agreed-upon area management implementation plan to address each issue for corrective action have been noted for each
issue.

Issues/Observations Priority See Page No.

Investment activity authorizations and approval limits are not established in the cash investment policy and foreign exchange
1. 52
hedging and electronic funds transfer policies are not documented.
2. Cash forecasting is rarely done, typically not extending further than one day ahead. 53
Effective use of control disbursement accounts and positive pay services should be continuously reviewed for potential cost
3. 54
savings and increased efficiencies.
4. Low volumes of payables are executed using electronic payments, specifically ACH, in place of checks and wires. 55
5. The use of nonstandard electronic funds transfer forms should be limited for exceptions. 56
6. The wire transfer/ACH repetitive template setup and change approval process should be segregated. 56
A list of specimen signatures and approval limits is not maintained in treasury to verify proper wire transfer, ACH and special
7. check request authorizations. Overall, disbursement procedures are not documented. Checks held overnight for pickup are not 57
adequately safeguarded.

49
EXECUTIVE SUMMARY (2/2)

See Page
Issues/Observations Priority
No.
A contingency plan is not in place to generate signed checks if the main printer goes out of service for an extended time
8. 58
period.
Foreign exchange policies and procedures and companywide training are needed to communicate roles, responsibilities,
9. dependencies and impacts. Currently, the company experiences significant foreign exchange losses, resulting from 59
inconsistent intercompany activities.
The activities of initiation, matching, confirming and recording FX hedging transactions are not documented and performed by
10. 60
a single individual.

11. Subsidiary FX hedging best practices have not been assimilated and implemented companywide as applicable. 61

12. Bank account structure and services should be documented and reviewed for improved process and cost savings. 61

Priority Low Medium High

50
OBJECTIVES, SCOPE AND PROCEDURES PERFORMED

Summary of Procedures
1 Objectives 2 Scope 3
Performed

• Assess and evaluate the adequacy of
applicable treasury and operational internal
controls.
• Assess and evaluate the efficiency of
applicable business processes.
• Evaluate compliance with applicable policies
and procedures.
• Identify opportunities for process and internal
control improvement.
• Cash management • Key management and personnel were
• Disbursements (focus on electronic fund interviewed regarding strategies, policies and
procedures.
transfers)
• Documentation to support interviews was
• Investments
reviewed.
• Foreign exchange hedging
• Limited transaction testing was performed to
• Bank relationship management validate existing policies and procedures
utilized.

51
GENERAL BACKGROUND

Treasury Functions Cash Management Backgrounds

• Cash management • The treasury staff performs cash management, investment and foreign
• Bank account management exchange functions with direction from the treasurer and CFO.
• The company utilizes cash management services with Bank A.
• Electronic payments
• The treasury function consists of the treasurer and four FTEs. Additionally, six
• Investments
credit and collections and two risk management FTEs report to the treasurer.
• Foreign exchange exposure management
• Risk management (insurance)*
• Stock buyback program*
• Stock option administration*

* Not in the scope of this review

52
DETAILED ISSUES AND OBSERVATIONS (1/10)
General Controls
Issues/Observations
Polices and Procedures: The cash investment policy does not address
authorizations and approval limits for investments. In addition, the
foreign exchange hedging and electronic funds transfer policies have
not been documented.
The cash investment policy has been updated and approved by the board;
however, the policy does not establish authorizations and approval limits for
investment activities and is not supported by documented procedures defining
processes, authorities, limits and monitoring controls.
A written foreign exchange hedging policy has not been developed. An FX
hedging policy is needed, which clearly articulates management’s objectives
and sets the tone for the treasury’s evolving processes and procedures in this
area. (See additional FX issues and recommendations on Pages 59 – 61.)
A written electronic funds transfer policy (and supporting procedures) must be
documented. Employees authorized to initiate, approve, and release wire
transfers and ACH transactions, and the dollar amounts related to their
authorization levels are not registered and periodically compared to users’
system functionality. Protocols for handling deviations from the company’s
standard EFT request form are also needed.
Business Impact:
• Policies and procedures are inconsistently understood and applied.
• Process knowledge is lost due to employee absence or turnover.
53
Responsible Party
Management Implementation Plan
and Resolution Date
• Develop a current and comprehensive set of • List responsible parties.
treasury department policies and procedures and
• Identify the estimated completion
obtain appropriate approval from the board of
date or month/quarter.
directors or committee of the board.
• Include a need for immediate
Written policies for key treasury functions are
action or list it as “completed” if
extremely beneficial and critical to optimizing
corrected before report issuance.
controls and risk awareness. Policies
communicate the objectives and importance of
key functions, provide a framework for actions
consistent with the stated goals, and establish
controls to minimize risks. To be most effective,
they should be supported by written procedures
containing sufficient detail to efficiently transfer
knowledge of applicable processes, control
activities, forms, systems, reports and
communication. Once established and approved,
appropriate policy and procedure maintenance,
recertification, and distribution processes should
be implemented to ensure that they remain
current and are accessible to and understood by
the appropriate personnel.
Further, the authorization and coordination of
personnel between the company and banking
vendor partners, including transaction execution
and other critical controls, is paramount to
preventing unauthorized transactions.
DETAILED ISSUES AND OBSERVATIONS (2/10)
Cash Management
Responsible Party
Issues/Observations Management Implementation Plan
and Resolution Date
Cash Forecasting: Cash forecasting is not performed because cash • Evaluate the potential yield, decision-making • List responsible parties.
requirements are only calculated one day in advance. benefits, and improved cash needs/uses
• Identify the estimated completion
matching.
The treasury staff prepares a same-day cash position and forecasts following date or month/quarter.
day wire transfer settlements. In addition, accounting prepares a quarterly • Develop a process and report to compile short,
• Include a need for immediate
balance sheet and income statement forecast, which the treasury uses to medium- and long-term forecasts.
action or list it as “completed” if
anticipate future cash positions.
• Coordinate analysis with the treasurer, CFO and corrected before report issuance.
Currently, the treasury and the CFO do not view the development of a formal CEO on strategic investing/borrowing initiatives.
cash forecasting model as urgent. Nevertheless, short, medium- and long-term Discuss additional opportunities with bank
cash forecasts could enable the treasury to invest more strategically. relationship personnel to determine ongoing
strategic analysis.
Business Impact:
• Strategic investment/borrowing decisions to maximize return and limit costs
can’t be made. (See Item No. 3.)

54
DETAILED ISSUES AND OBSERVATIONS (3/10)
Cash Management
Responsible Party
Issues/Observations Management Implementation Plan
and Resolution Date
Bank Accounts and Services: Effective use of control disbursement • Review the benefit of implementing CDA and • List responsible parties.
accounts (CDA) and positive pay services should be continuously confirmation payments on all disbursement
• Identify the estimated completion
reviewed for potential cost savings and increased efficiencies. accounts versus the service cost.
date or month/quarter.
CDA services are used for the company’s AP account but not for the company • If cost-justified, eliminate the ZBA cushion when
• Include a need for immediate
payroll and several other zero-balance accounts. To compensate, a significant determining the daily cash position following the
action or list it as “completed” if
“cushion” ($XX,XXXX-XX,XXX) is left in the Bank A concentration account to implementation of CDA. (See Issue No. 2).
corrected before report issuance.
cover unforeseen check clearings. The cushion funds are set up to sweep into
an overnight money market fund. Although the foregone interest income
currently does not justify the cost of CDA services, this situation could change
and should be monitored.
Confirmation payment is used exclusively on the main AP account.
Confirmation payment should be considered for all check disbursement
accounts as it protects the company from unauthorized payment clearings,
including fraudulent items and altered amounts on valid checks and is
generally low cost.
Business Impact:
• Fraud exposure increases.
• The ability to fund disbursements strictly decreases.
• Cash is used inefficiently.

55
DETAILED ISSUES AND OBSERVATIONS (4/10)
Disbursements
Responsible Party
Issues/Observations Management Implementation Plan
and Resolution Date
Electronic Payments: Low volumes of payables are executed using • Establish ACH as the preferred method of • List responsible parties.
electronic payments, specifically ACH, in place of checks and wires. payment.
• Identify the estimated completion
Organizations are strategically migrating toward electronic payments, date or month/quarter.
specifically ACH, from checks and wires to reduce processing and bank costs. • Include a need for immediate
On average, the company processes approximately X,XXX checks, XXX wire action or list as “completed” if
transfers and XX – XX ACH monthly transactions. There is roughly a $XX corrected before report issuance.
savings for utilizing ACH instead of a wire transfer and nearly $XX savings
when using ACH instead of traditional checks. Assuming half of the wire
transfers and reviews could be converted to ACH transactions, the cost
savings in service fees per year could be around $XX,XXX.
In addition to the cost savings, ACH payments simplify the payment and
reconciliation processes and minimize exposure to fraud.
Routine, repetitive transactions are primary targets for conversion to ACH pre-
approved transaction processing.
Business Impact:
• Unnecessary substantial bank fees occur.
• Time and labor cost is associated with check processing (authorizations
and reconciliation).
• Fraud exposure increases.

56
DETAILED ISSUES AND OBSERVATIONS (5/10)
Disbursements
Responsible Party
Issues/Observations Management Implementation Plan
and Resolution Date
Standard Form Templates: The use of nonstandard electronic funds • Develop formal procedures to sometimes pre- • List responsible parties.
transfer forms should be limited for exceptions. screen and approve nonstandard templates.
• Identify the estimated completion
(Company) has a standard wire request form, but treasury also processes wire • Enforce using approved templates and ensure date or month/quarter.
transfer requests documented on nonstandard forms. The use of nonstandard that all business unit requesting parties are • Include a need for immediate
forms increases the chance for detail oversight or manual error in approving notified, trained and managed for policy and
action or list as “completed” if
and executing requests and should be limited to approved exceptions. procedure compliance.
corrected before report issuance.
Business Impact: • Verify that OFAC compliance procedures are
• Time is used inefficiently due to researching proper requestors and operating effectively and determine if
modifications to treasury processes impact
approvals or seeking missing information.
compliance efforts.
• Fraud or OFAC compliance issues may increase.

Repetitive Wires: The wire transfer/ACH repetitive template setup and • Segregate the authority to approve payment • List responsible parties.
change approval process should be segregated. instructions, including instructions to set up and • Identify the estimated completion
change repetitive wire/ACH templates, from the
The senior treasurer initiates instructions to set up or change repetitive wire date or month/quarter.
authority to approve and send wires or ACH
transfer/ACH templates (e.g., hedging settlements, investment settlements) • Include a need for immediate
transactions.
and is typically the person who approves transactions using the repetitive
action or list as “completed” if
templates. Repetitive wire/ACH templates should be approved independently • Develop and maintain a segregation of duties
corrected before report issuance.
of the person who approves and releases outgoing wires using the templates. matrix that details authority, initiation, approval,
execution, recording and release duties, including
Business Impact:
manual and system processing
• Duties are segregated improperly, which could lead to inappropriate (access/application functions).
activities.
• Fraudulent exposure increases.

57
DETAILED ISSUES AND OBSERVATIONS (6/10)
Disbursements
Responsible Party
Issues/Observations Management Implementation Plan
and Resolution Date
Disbursement Procedures and Signature Lists: A list of specimen • Develop and maintain written procedures and a • List responsible parties.
signatures and approval limits is not maintained in the treasury to verify specimen signature list of authorized approvals
• Identify the estimated completion
the proper authorization of wire transfers, ACH and special check for use in the disbursement request verification
date or month/quarter.
requests. Overall, disbursement procedures need to be documented. process.
Checks held overnight for pickup need to be adequately safeguarded. • Include a need for immediate
• Develop training and communication of updated
action or list as “completed” if
Disbursement procedures are established, but they are not documented. procedures to ensure that personnel understand
corrected before report issuance.
Documented procedures outlining acceptable payment request practices (e.g., and comply with procedures.
forms, information and approvals) should be developed. The procedures • Store “held-for-pickup” checks in a restricted and
should include verification standards and require the usage of current approval
secure area.
authority lists containing printed names, limits and specimen signatures of
people from whom treasury can accept wire transfers, ACH and special check • Verify that authority and related segregation of
requests. duties controls are in place to minimize fraud
opportunities.
Check issuance and related procedures should address balancing (e.g.,
issued checks to source files or documents), mailing, special handling,
safeguarding check stock and signed statements held overnight, voids, stop
pay, and positive pay exception items. For example, signed checks designated
“held for pickup” are kept in a locked drawer in the corporate receptionist area.
These checks should be stored overnight in a locked facility that is in a secure
place.
Business Impact:
• Policies and procedures are inconsistently applied and understood.
• Process knowledge is lost due to employee turnover.
• Fraud exposure increases, and transactions are unauthorized.

58
DETAILED ISSUES AND OBSERVATIONS (7/10)
Disbursements
Responsible Party
Issues/Observations Management Implementation Plan
and Resolution Date
Contingency Planning: A contingency plan is not in place to generate • Develop a contingency plan to efficiently produce • List responsible parties.
signed checks if the main printer goes out of service for an extended and sign checks in the event the main printer is
• Identify the estimated completion
time period. out of service.
date or month/quarter.
(Company) has one specially configured printer connected to Oracle, which • Establish adequate chain-of-command signing
• Include a need for immediate
the treasury uses to create around 1200 signed weekly checks from blank authorities and dual signature release procedures
action or list as “completed” if
paper stock? A backup printer or contingency plan is not in place to avoid to ensure contingency plans prepare for check-
corrected before report issuance.
vendor check payment disruptions if the existing printer malfunctions for an signer absence.
extended period.
Business Impact:
• Payments are delayed, and vendor relationships are strained.
• Costs to use alternate payment methods (e.g., wires) increase.
• Some state laws require terminated employee payment requirements that
may include penalties for noncompliance in the event of automated check
processing problems.

59
DETAILED ISSUES AND OBSERVATIONS (8/10)
Foreign Exchange
Responsible Party
Issues/Observations Management Implementation Plan
and Resolution Date
Foreign Exchange (FX) Policies and Procedures: FX policies and • Develop FX policies and procedures, which • List responsible parties.
procedures and companywide training are needed to communicate roles, outline the company’s hedging strategy and
• Identify the estimated completion
responsibilities, dependencies and impacts. The company experiences objectives and offer sufficient guidance for users
date or month/quarter.
significant foreign exchange losses resulting from inconsistent to understand and comply with the policies.
intercompany activities. • Include a need for immediate
• Conduct companywide FX hedging and
action or list as “completed” if
A companywide foreign exchange policy has yet to be developed and accounting training to ensure that all affected
corrected before report issuance.
distributed to appropriate corporate and subsidiary personnel. A written FX personnel understand their roles, responsibilities,
policy is needed, which clearly states the rationale and implications of activities and interdependencies.
noncompliance with the policy and includes examples of accepted and
• Monitor compliance and conduct additional
prohibited foreign exchange activities at all levels (e.g., subsidiary, corporate).
targeted training, as situations dictate.
Minimally, these examples should include intercompany, transaction and
translation activities. The intercompany section should stipulate that • Evaluate incorporating a program of foreign cash
intercompany transactions must be denominated in the same currency forecasting (see No. 2) and delayed
between entities and provide guidance on steps to perform. This ensures that repatriation/pooling of foreign currency or foreign
intercompany transactions are always net to zero by cash. The company bank pooling to offset FX currency requirements.
experiences significant foreign exchange losses resulting from inconsistent
intercompany activities.
A companywide FX policy and training are imperative because inconsistent
processes result in unpredictable gains and losses for the company.
Business Impact:
• FX gains and losses are unpredictable.
• Financial plans can’t be achieved.

60
DETAILED ISSUES AND OBSERVATIONS (9/10)
Foreign Exchange
Responsible Party
Issues/Observations Management Implementation Plan
and Resolution Date
FX Process Segregation of Duties: The activities of initiation, matching, • Document specific duties of each employee • List responsible parties.
confirming and recording FX hedging transactions are not documented involved in hedging activities.
• Identify the estimated completion
and are performed by a single individual.
• Ensure that the initiation, matching and date or month/quarter.
One treasury analyst performs the entire process of executing FX hedging confirmation/settlement activities are performed • Include a need for immediate
transactions, matching trades and settling hedged positions. This same by different personnel.
action or list as “completed” if
employee proposes journal entries to record hedging gains and losses and
• Assign key backup personnel to assist in the corrected before report issuance.
prepares FX hedging analysis reports for management. Overly concentrating
hedging process and create a plan of action
on duties reduces control effectiveness and could lead to performance issues
without key personnel.
if the person leaves or is absent for an extended time period. FX hedging
process backup personnel should be identified to help alleviate some
segregation of duties issues. These duties should be documented per a formal
company policy.
Business Impact:
• Duties are segregated improperly, which could lead to inappropriate
activities.
• Fraudulent exposure may increase.
• Hedging opportunities can’t be obtained if key personnel are absent.

61
DETAILED ISSUES AND OBSERVATIONS (10/10)
Foreign Exchange
Responsible Party
Issues/Observations Management Implementation Plan
and Resolution Date
FX Hedging Best Practices: Subsidiary FX hedging best practices should • Analyze current subsidiary performance to • List responsible parties.
be assimilated and implemented companywide, as applicable. identify best practices.
• Identify the estimated completion
Certain company subsidiaries consistently manage foreign exchange hedging • Develop a benchmark or diagnostic tool. date or month/quarter.
gains and losses. A process should be developed to routinely collect
information regarding what well-performing subsidiaries, such as Japan, are • Implement best practices for applicable • Include a need for immediate
doing. The “best practices” should be incorporated into a benchmark or subsidiaries. action or list it as “completed” if
diagnostic tool and used to improve all company subsidiaries' foreign corrected before report issuance.
exchange hedging performance.
Business Impact:
• Losses resulting from improved subsidiary foreign exchange performance
decrease.
Bank Account Structure: Bank account structure and services should be • Establish a formal procedure for regularly • List responsible parties.
documented and reviewed for improved processes and cost savings. evaluating bank accounts and service fees to
• Identify the estimated completion
Although the company enforces centralized control over bank accounts, the determine whether the accounts are still
date or month/quarter.
treasury does not document and periodically review the bank structure and necessary or can be negotiated lower. Inactive
services. The number of bank accounts should be evaluated regularly to accounts should be closed to reduce banking • Include a need for immediate
improve the control and management of cash continuously. Additionally, each fees and internal costs. action or list it as “completed” if
account requires overhead in the form of bank costs, funding costs, and costs corrected before report issuance.
to reconcile and monitor.
Business Impact:
• Fraudulent activity may increase.
• Bank costs may increase.
• Bank services may be duplicated.
• Control may be lost.
• Cash may be managed inefficiently.

62
APPENDIX I: INTERNAL CONTROL ASSESSMENT (1/2)

The matrix below and on the following pages lists process controls that should be present within a well-controlled business environment. An
evaluation of the company’s process is noted in each instance. Controls were evaluated as follows:
Good Controls: Controls are present to mitigate process/business risk and are operating effectively and efficiently.

Moderate Controls: Controls are present to mitigate most process/business risk, but management should evaluate opportunities to enhance existing
 controls.
Limited Controls: Existing controls may not mitigate process/business risk, and management should consider implementing a stronger control
structure.

Where possible improvement can be made in the control structure, a reference has been made to the Issues and Observations sections where management’s change
implementation plan is described along with the responsible party and estimated implementation timing.

Manage Cash Flow Evaluation Issue Reference No.

1. Ensure that all debt and investment transactions are accurately processed and recorded timely. 8

2. Ensure that investing, borrowing, disbursement and other financial transactions are properly authorized.  5, 7 and 10

3. Maintain lines of credit that are adequate to meet recurring and unexpected funding requirements.

4. Protect the integrity of systems, databases and records. 

5. Safeguard cash, investments and other financial assets and segregate duties.  10

63
APPENDIX I: INTERNAL CONTROL ASSESSMENT (2/2)

Issue Reference
Manage Financial Risk Evaluation
No.

Management segregates incompatible duties and protects integrity of application systems, key records
1. 10
and documents used to process transactions.

2. Risk management activity and derivatives transactions are properly authorized.  11

3. All foreign exposure transactions are accurately processed and reported.

4. Exposures are frequently measured and evaluated. 

5. A process for financial risk monitoring and control exists. 

Good Controls
 Moderate Controls Limited Controls

64
TREASURY REVIEW AUDIT REPORT: SAMPLE
4
EXECUTIVE SUMMARY
In general, treasury department controls surrounding cash management, wire transfers, investments and foreign exchange
hedging functions are less than adequate. The following primary opportunities for improvement have been identified through
interviews and process observations with treasury personnel and limited transaction testing.

• Treasury department policies and procedures are outdated in all areas (cash management, wire transfers, foreign exchange, treasury accounting, subsidiary procedure-
related policies). Formal, written cash management or treasury accounting policies do not exist.
• Cash management operations at the subsidiary corporation could be combined with Company ABC corporate treasury.
− Excess cash balances at the subsidiary (occasionally as high as $XXX million) are not automatically transferred to Company ABC for investment.
− General ledger investment accounts are not adequately reconciled. Until recently, general ledger investment accounts were not reconciled to broker statements or
treasury records.
− General ledger investment transactions are not accurately recorded. During our review, we noted two booking errors where investments were recorded into the wrong
general ledger account (no adverse financial effect). In each case, the daily transaction report prepared by the treasury was incorrect. Adjustments were made to
journal entries to reverse each error before we identified the error.
− Authorization letters sent to counterparties identifying those approved to make foreign exchange transactions are outdated and include former Company ABC
employees. These employees are, technically, still allowed to initiate transactions on behalf of Company ABC.
• Foreign exchange exposure hedges are not formally approved. The policy requires written documentation from the chief financial officer (CFO) of all hedge contracts.
• Confirmations sent by counterparties are received directly by those who execute foreign exchange hedging transactions.
• Management reporting in all areas could be improved (specifically, investments and foreign exchange hedging). Treasury submits single-page documents to executive
management with little detail of key treasury measures (e.g., yield, portfolio composition, foreign exchange exposures, etc.).
• The treasury manager should review AA bank account reconciliations to ensure they have been adequately prepared. This review should be documented.

Please see the Action Matrix section for further details.

66
OBJECTIVE AND SCOPE
Objectives:
• Assess and evaluate the adequacy of the
overall financial control environment.
• Assess and evaluate the adequacy of
significant financial and accounting controls.
• Identify opportunities for process and control
improvement.
67
Scope:
• This review was limited to the corporate
treasury operations at headquarters.
• The period of review was for (Insert Date).
• This project did not include a review of the
strategic alliance/partnership investments
managed outside the corporate treasury.
• The following processes and functions
were reviewed:
− Cash Management
− Wire Transfers*
− Investments*
− Foreign Exchange Exposure Management*
* Limited detailed testing was performed.
SUMMARY OF PROCEDURES PERFORMED (1/2)

We performed the following during our review:

Available Company ABC corporate treasury policies and procedures related to

cash management, investing and foreign exchange exposure management were
obtained and reviewed.

Key treasury and accounting personnel were interviewed.

Performance of key treasury processes was observed.

Detailed testing of outgoing wire transfers and investments was performed.

Domestic and international cash and investment account reconciliations were

reviewed.

Investment manager statements were reviewed.

68
SUMMARY OF PROCEDURES PERFORMED (2/2)

We performed the following during our review:

Internal management reports were reviewed.

The calculation of AA exposures was analyzed for Q2-YY.

Foreign exchange hedging forwards and options were analyzed for Q2-YY.

The overall internal control environment was evaluated.

Company ABC’s practices were compared with best practices for selected treasury
operations.

Observations and management action plans were reported on.

69
ACKNOWLEDGMENTS

We would like to thank all Company ABC employees that assisted us in our work during this project. We received input and assistance from the following personnel:

Corporate Treasury

(Insert Names and Titles)

Accounting
(Insert Names and Titles)

Your help is key to the success of this project!

70
GENERAL BACKGROUND

During the fiscal XXXX/XXXY internal audit planning process, executive management identified treasury operations for
review in the fiscal XXXX/XXXY audit plan. Treasury operations were last reviewed in XXXY by audit services.

Corporate treasury is responsible for the following functions for Company ABC and Company ABC International.

Cash management and short-term investing include:

• Bank account management, including bank lines of credit and other types of financing as required by Company ABC
• Foreign exchange exposure management
• Risk management, including coordinating insurance coverage
• Credit and collections

Treasury personnel include one full-time treasury manager and one part-time treasury analyst.

71
BACKGROUND: CASH MANAGEMENT AND WIRE TRANSFERS
(1/3)

As of XXXX, Company ABC had worldwide cash and investments of approximately $XYZ million (see graph on next page).
• Treasury personnel perform cash management functions for Company ABC incorporated and international entities. Company ABC subsidiaries perform
cash management operations independent from the corporate treasury. Subsidiaries’ excess cash is transferred to the corporate treasury (at the
corporate’s request) for investment.
• Treasury maintains an AA account with Bank X for AA accounts receivable and accounts payable activity. AA account balances are not invested due to
low Country X interest rates. Foreign exchange exposure in the AA account is hedged (see FX background).
• Cash management activity is monitored daily.

The Company ABC treasury department utilizes XX for all incoming and outgoing wire transactions.

Treasury personnel hold releasing and approval capabilities within the XX system. Each individual may perform only one of these functions for each
transaction.

In the case of a system failure, alternate wire transfer procedures have been established. Wire transfer information may be directly called into
the appropriate bank. The releasing party utilizes A safe wire card to ensure that only authorized personnel are transferring company funds.
Once released, the wire information is confirmed by another authorized individual with system approval capabilities.

72
BACKGROUND: CASH MANAGEMENT AND WIRE TRANSFERS
(2/3)

Total Consolidated Cash equals $ XXX million

2% XX Company
YY Company
15%
22%
ZZ Company
AA Company
Others
Short Term Cash
Gov’t Treasuries
28% 16% 20%

17%

73
BACKGROUND: CASH MANAGEMENT AND WIRE TRANSFERS
(3/3)

Wire templates have been established within the XX system. Dual

Wire information is reconciled monthly to the general ledger by
authorization is required for the creation of such templates. In
Company ABC’s general accounting department.
addition, dual authorization is required for all template changes.

To process a wire, a wire transfer sheet must be signed and

approved by certain Company ABC employees based on the current
The matrix below details the people authorized to initiate and approve
company signature authority policy. Exceptions to this rule exist for
wire transfers with their respective processing limits.
overnight investments and payroll payments, which do not require
such approvals.

Dollar Limits Per Dollar Limits Per User Other Access

User
Transaction Per Day Limitations

ABC Treasury Release equals $XXX

Up to $ X million None
Analyst Approve equals $XXX
Wire Transfer Release equals $XXX
ABC Treasury
(Company Y) Up to $ X million None
Manager Approve equals $XXX
Authorization Matrix
Users and Approval
Limits AAA Finance Release equals $XXX
Up to $ X million None
Manager Approve equals $XXX

Total Limits Per Release equals $XXX

Up to $ X million None
XYZ Inc. Approve equals $XXX

74
BACKGROUND: INVESTMENTS (1/2)

All current short-term investments have a

maturity of less than four months.
Company ABC’s current investment
Excess cash for both Incorporated and • Of the $XXX million in cash,
policy is conservative; however, a more
international accounts is invested daily in approximately XX% is held in short-
aggressive policy has been developed
overnight money market accounts held term investments. The remaining XX%
and submitted to the board for approval.
with Bank X. Excess cash from money is short-term cash, consisting primarily
All money managers are required to
market accounts is invested short-term of the Bank X AA cash and overnight
adhere to this policy in all investments. All
with external money managers (BB, CC money market accounts.
short-term investments are made through
and DD). • The following page displays the short-
money managers.
term investment portfolio by
01 02 Instrument type. 03

Company ABC participates in

Maturing investments are automatically
approximately ten strategic
transferred into a money market account
Investments are recorded at cost. Cost- alliances/partnerships. In some cases,
the managing institution holds. From
to-market value adjustments are minimal dollar investments have been made.
there, the money is rolled into another
due to the short duration of investments. These alliances/partnerships are
short-term investment or wired back to
managed at the executive level and are
Company ABC.
independent of corporate treasury.

04 05 06

75
BACKGROUND: INVESTMENTS (2/2)

Short-Term Investment Portfolio

by Instrument Type
as of XXXX
(in millions of dollars)

Commercial Papers
10% and Others X%
Government Agencies
Y%
20% Government
Treasuries XY%
Gov’t Treasuries
20%
Average combined taxable
equivalent yield as of XXXX is
70% approximately X.X%

Short-term portfolio includes

(Insert Financial Institutions)

76
BACKGROUND: FX

Company ABC’s foreign currency exposure management

program primarily focuses on managing its transaction
exposures.

Transaction exposure results occur mainly from nonfunctional

currency AA-denominated receivables and payables.

Insert Graph

AA foreign exchange forward contracts and AA put and call

options are the primary hedging instruments.

Treasury has concluded that no significant foreign currency

exposures exist at Company ABC that require hedging.

77
ACTION MATRIX

(Insert Action Matrix Pages Here)

78
BEST PRACTICES

(Insert Leading Practice Pages Here)

79
APPENDIX: FX BACKGROUND/STRATEGY (1/2)
FX Strategy and Process Overview
01
The treasury manager receives biweekly
information regarding forecasted
intercompany AA activity from Company
ABC and its xx subsidiaries. The treasury
manager utilizes this information to
determine Company ABC’s expected
monthly AA cash position and net AA
balance sheet exposures for each month
through the end of the fiscal year. If the
AA cash forecast indicates months in
which excess AA will be available, the
treasury manager will sell AA forward to
reduce this foreign currency exposure.
80
02
The treasury manager makes the
decision on whether to sell any excess
AA forward based on his analysis of the
current foreign exchange market
conditions, particularly the current trend
in the AA exchange rate about the most
recent accounting AA exchange rate and
his level of confidence in the AA forecast.
03
Company ABC is typically long AA.
• If the AA has been weakening against
the dollar and the treasury manager
expects this trend to continue, he will
consider selling any excess AA forward
(thus reducing AA exposure and
minimizing expected translation
losses).
• Additionally, the biweekly AA exposure
update performed by the treasury
manager might change the forecasted
AA cash position. Such changes in the
forecast, depending on their
significance, can result in additional
forward AA sales to keep the hedges in
line with the adjusted exposures.
APPENDIX: FX BACKGROUND/STRATEGY (2/2)

01 AA foreign exchange options are utilized to hedge any remaining net unhedged AA exposures. The strategy used by the treasury
manager in this area involves the purchase of an AA put option (maturity date of quarter-end, strike price equal to current AA
exchange rate and option amount equal to remaining unhedged quarter end AA exposure). While the treasury manager purchases
this AA put option, he will also sell an AA call option with the same maturity date and strike price. The amount of AA covered by this
written call option is set at the necessary amount so that the option premium received by Company ABC from the sale of this call
option exactly offsets the premium paid by Company ABC on the purchase of the AA put option. According to the treasury
manager, Company ABC’s unhedged AA exposure will always remain in excess of the AA covered by the written call option (i.e.,
the written option is “covered” in that Company ABC maintains sufficient AA positions).

AA Fluctuation 02
• The purchased AA put option protects Company ABC in case of a weakening AA. In this scenario, translation of the AA balance
sheet exposure will result in a remeasurement loss. The purchased AA put option will increase in value, resulting in a gain that
will offset the remeasurement loss. The written AA call option will expire worthless.
• In the event of a strengthening AA, remeasurement of the AA balance sheet exposure will result in a gain. The purchased AA put
option will expire worthless. However, the counterparty will exercise the written AA call option, resulting in a loss for Company
ABC on the option exercise. This loss incurred from the exercise of the written call option will be offset by the remeasurement
gain on the AA exposure (the AA exposure remeasured should exceed the AA covered by the written call option, as described
above, resulting in a net gain).

81
TREASURY REVIEW AUDIT REPORT: SAMPLE
5
PAYMENT AUTHORIZATION AND RELEASE
PROCESS PROPOSED IMPLEMENTATION
PROCEDURES
PAYMENT PROCESSING AND AUTHORIZATION: OVERVIEW OF
CURRENT AND FUTURE-STATE KEY RESPONSIBILITIES

Responsible Party: Current Responsible Party: Proposed

Transaction Type Activity
State Future State
Payment Proposal Run Accounts Payable Treasury Payments
Check Payment Approval Treasury Cash Operations Treasury Operations
Payment Execution Accounts Payable Treasury Payments
Payment Proposal Run Accounts Payable Treasury Payments
Automated ACH Payment Approval Treasury Cash Operations Treasury Operations
Payment Execution Accounts Payable Treasury Payments
Payment Proposal Run Accounts Payable Treasury Payments
Automated Wires Payment Approval Treasury Cash Operations Treasury Operations
Payment Execution Accounts Payable Treasury Payments
Payment Processing in JPMA Accounts Payable Treasury Payments
Payment Approval Treasury Cash Operations Treasury Operations
Manual ACH
Payment Execution Accounts Payable Treasury Cash Operations
Payment Processing in SAP Accounts Payable Accounts Payable
Payment Processing in CRP Accounts Payable Treasury Payments
Payment Approval Treasury Cash Operations Treasury Operations
Manual Wire
Payment Execution Accounts Payable Treasury Cash Operations
Payment Processing in SAP Accounts Payable Accounts Payable
Payment Proposal Run Credit TBD
EFT Payment Approval N/A TBD
Payment Execution Credit TBD

Note: Final EFT results pending EFT process documentation

84
INITIATION OF PAYMENT RELEASE FUNCTION
Risk
Initiating the payment release
function by the accounts payable
department prevents the treasury
function from performing an
independent daily review and
analysis of funds disbursement
activities, including providing
authorization for all funds disbursed
by the company (causing
inappropriate segregation of duties).
85
Proposed
Implementation
Procedure
The treasury payments group will
assume responsibility for the
business activities related to initiating
the invoice payment run and
authorizing disbursements for all
payment types. This activity is
performed through transaction F110
in SAP for check, ACH, and wire
funds. For manual ACH and manual
wire funds, payments are initiated
through separate, third-party-
provided banking applications.
Action Plan
A new treasury payments group will be created within the treasury department and
will include the positions of a payment and debt analyst and a payment process
supervisor. The stated group will report functionally to the treasurer and will perform
the proposed implementation procedures stated above. This new function will
provide the treasury with the assurance that all significant payments have been
forecasted by the business units and approved prior to disbursement. In turn, the
treasury will be able to determine whether funds are readily available for expected
future payments.
Treasury payments will run the F110 proposal transaction in SAP for all check, ACH
and wire transactions being disbursed on the current day. For any unresolved
payment issues, the payment process supervisor will manually block the payment
from the proposal list prior to the execution and release of funds. After the treasury
payment authorization analyst has authorized manual ACH and manual wire
transactions, treasury payments will log in, initiate, and enter manual ACH and
manual wire payments through the designated banking system. A custom report will
be created by treasury payments for all manual ACH and manual wire payments to
be sent to treasury cash operations for approval and release. The payment and debt
analyst will assist the treasury payment authorization analyst to resolve any payment
issues listed on the proposal.
Treasury will implement a procedure representing this change in ownership to initiate
payment release.
AUTHORIZATION OF PAYMENTS
Risk
The treasury department could
release funds for payments that have
not been appropriately forecasted by
the business units and/or are not
authorized by the appropriate
personnel. Forecasted payments
emailed sporadically to the treasury
with no commonality in information
prevent it from appropriately
managing and approving its daily
cash flow forecast.
86
Proposed
Implementation
Procedure
The treasury payment authorization
analyst (TPAA) will analyze and
authorize payments to be executed
by treasury payments. This will
ensure that payments have been
forecasted and approved by the
appropriate personnel according to
threshold limits and the system’s
authority.
Action Plan
The TPAA position will be created under the manager of treasury operati. It willill be
responsible for aggregating data from the cash flow forecasting analyst and data
from the treasury payments analyst to determine whether payments are accurate
and complete.
The TPAA will receive the payment proposal from the treasury payments group and
analyze the information against the cash flow forecast. Information from the proposal
will be filtered for designated criteria (including a stated threshold limit, prepayments
and potential multiple payments) to create a payment approval report. The report will
be analyzed against the cash flow forecast to authorize the release of payments. The
TPAA will ensure that payments listed on the payment approval report are forecasted
at least five days prior to the release of payment. Business units can only update
forecasted information for Days 6-10 within an X% deviation of the original
forecasted amount.
The manager of treasury operations will review and approve the analysis of
payments. For check, ACH and wire payments, treasury payments will be notified of
the approval. For manual ACH and wire payments, treasury cash operations will be
notified of the approval. For any discrepancies, the TPAA will research and resolve
issues and contact BUs for follow-up when necessary.
Treasury will implement a procedure representing this change in the payment
authorization process.
RELEASE OF PAYMENTS
Risk
The payment release function by the
accounts payable department
prevents the treasury from having
complete control and authorization of
all funds disbursed by the company
daily.
87
Proposed
Implementation
Procedure
The treasury payments group will
assume responsibility for the
business activities related to initiating
the invoice payment run and
authorizing disbursements for all
payment types. This activity is
performed through transaction F110
in SAP for check, ACH, and wire
funds. For manual ACH and manual
wire funds, payments are initiated
through separate, third-party-
provided banking applications.
Action Plan
The new treasury payments group will be responsible for releasing all check, ACH
and wire payments through the system transaction F110. After payments have been
analyzed and authorized by the TPAA, the treasury payments group will execute the
payment run, which automatically releases transactions set to be paid in F110. For
all check payments greater than $X, Treasury payments will obtain a counter-
signature and disburse all checks to the mailroom and receivers. SAP will
automatically notify the current bank used for processing ACH payments. The
payment process supervisor obtains this report to ensure that funding to the bank
reflects payments disbursed from the F110 report.
The treasury cash operations group will acquire the function to release manual ACH
and manual wire payments through separate banking systems. Manual ACH and
manual wire payments are only released after the TPAA has determined that
payments are complete, accurate and ready for disbursement.
Treasury will implement a procedure representing this change in ownership of the
payment release process.
SPECIFIC PROFILES OF SELECTED PAYMENTS (1/2)
Risk
Specific profiles to the payment
process, including rush payments,
prepayments and multiple payments,
are all potential issues that digress
from treasury forecasts and planned
investment strategies. Releasing
funds for these payment anomalies
could cause a deviation in cash flow
forecasting and disbursements.
88
Proposed
Implementation
Procedure
The treasurer will have the ultimate
approval for releasing funds required
for rush payments. Treasury
payments will ensure that all
prepayments have appropriate BU
approval with final approval from the
treasurer and have been forecasted
at least five days before the payment
due date. The TPAA will also run a
multiple payment report from SAP to
identify any potential multiple
payments and follow up as
necessary before cash is released
for price.
Action Plan
Rush Payments: Policies will be documented to establish that a payment is
considered a rush payment if it has yet to be forecasted at least five days prior to the
expected payment date. For Days 6-10, the policy will state that business units can
only update expected transactions within an X% variance of the original forecast.
The TPAA will notify the treasury forecasting analyst if any rush payments have been
identified. The treasury forecasting analyst will contact the BU processor and
determine why the payment was not forecasted initially. If the BU manager and the
treasury forecasting analyst agree that the payment is considered a rush payment, it
will require final approval from the treasurer before being processed for payment.
If the treasurer approves the rush payment and funds are available to make the
payment, the payment will be processed as soon as possible (the same day if the
payment run has not been performed or the next possible day if the payment run has
been performed). If the treasurer approves the rush payment but funds are
unavailable, the treasury cash operations group will obtain the necessary funds to
process the payment. If the treasurer does not approve the rush payment, the BU will
be notified to schedule the price on the forecast according to the treasury’s
procedure.
SPECIFIC PROFILES OF SELECTED PAYMENTS (2/2)

Action Plan

Prepayments: The TPAA will filter the cash flow forecast for all forecasted prepayments and escalate information and issues to management if necessary. The BUs will
determine the requirements of the prepayment and notify the BU manager, treasury payments and cash operations, and AP of the required prepayment. If the prepayment is
not forecasted, the treasury forecasting analyst will contact the BU processor to determine if the prepayment is a rush payment and why the payment was not forecasted
according to the treasury’s policy. If the BU considers the prepayment a rush payment, it will go through the rush payment process and require the appropriate approvals
before processing. If not considered a rush payment, the prepayment will be forecasted according to the treasury’s policy.
Multiple Payments: The TPAA will run a daily multiple payment report to ensure that payments are accurate and that approvals are obtained for aggregated payments to a
vendor above a stated threshold according to the treasury’s policy. Potential multiple payments will be followed up with BUs and put on “suspect” status before making
payments. The BU must provide the TPAA with the rationale for the multiple payments. If multiple payments are misused, the TPAA will follow up with management for
corrective action and log all instances of multiple payments. The TPAA and the BU will resolve the payment as necessary when multiple payments are identified before funds
are released for payments.
Treasury will implement a procedure representing this control of the payment process.

89
ACCOUNTS PAYABLE: PERFORMANCE OF BANK
RECONCILIATION PROCESS
Proposed
Risk Implementation Action Plan
Procedure

Inappropriate segregation of duties
exists.
The bank reconciliation process will
transfer to the control of the
accounts payable department to
keep the segregation of duties in
balance.
The accounts payable department will acquire the task of performing bank
reconciliations. Personnel that should perform the specific functions within this
process is determined by accounts payable.

90
CASH FLOW FORECASTING PROCESS
PROPOSED IMPLEMENTATION PROCEDURES
COMPILATION OF TREND AND BUDGET DATA
Scope
The compilation of all relative data will be used to create the most accurate master
cash flow forecast database for treasury investment-strategy purposes. The data
compiled includes the annual capital and operational expenditure budget (per BU
by month set by management), treasury’s trending data derived from one year’s
historical actual, budget and forecasted amounts (per BU by day), and a two-
month trend determined by each BU.
92
Proposed Implementation Procedure
The treasury department is required to know the expected business unit cash flow
promptly and to make investment decisions based on all relevant information. A
new treasury forecasting analyst position will be created under the treasury cash
operations supervisor. The position will be responsible for compiling all forecasting
data to create management reports that will allow management to make informed
investment and borrowing decisions.
The treasury forecasting analyst will populate the master cash flow database per
BU daily with the previous year’s trended data based on actual, budget and
forecasted information. Each BU will determine the annual capital and operational
expenditures budget by month and send this information to the treasury forecasting
analyst. Each BU will send the treasury forecasting analyst two months of trended
information every other (Insert Day). All trended, historical and budget information
will be uploaded into one database to be analyzed against daily current
transactions received and disbursed.
DETERMINATION OF DAILY CASH POSITION
1 Risk
The daily aggregated cash position may need to
accurately reflect the current position of Company
ABC, causing erroneous investment and
borrowing decisions and/or unnecessary use of
working capital.
93
Proposed Implementation
2 3
Procedure
The treasury analyst will determine the daily cash
position based on daily payments and receipts to
make investment and borrowing decisions. The
treasury analyst under the cash operations
supervisor will populate the daily cash worksheet
with check, ACH, wire and payroll amounts to
include all relevant information to reflect the
current cash position.
Action Plan
The treasury analyst under the cash operations
supervisor will populate the daily cash worksheet
with check, ACH, wire and payroll amounts to
include all relevant information to reflect the
current cash position. Including all of these
amounts will increase the reliability of the data for
the treasurer and the treasury department to
make informed decisions. This will ensure that
investment and borrowing decisions will be based
on a daily cash position that will accurately reflect
approved transactions. The daily cash worksheet
will be provided to the cash operations supervisor
to follow up on discrepancies with the bank and
finalize the daily cash worksheet to be ready to
upload into the master cash flow database.
INITIATION AND UPDATE OF DAILY CASH FLOW FORECAST
1 Risk
The cash flow forecast may not accurately
represent the daily activity of disbursements and
receipts for all BUs, which would affect daily or
future investment strategies and planning.
Proposed Implementation
2 3
Procedure
Each BU will be required to enter the cash flow
forecast every (Insert Day). The forecast should
include the expected cash disbursement and
receipt amounts for the next ten business days.
Days 1-5 will be a definitive forecast while Days
6-10 will be an approximate forecast. Days 6-10
can only be updated within an X% variance of the
original forecasted amount.
Action Plan
Each BU will dedicate a BU analyst to enter and
update expected cash flow information daily for
the next ten business days. Every (Insert Day),
the BU analyst will receive an automatic reminder
to initiate a forecast reflecting expected cash flow
disbursements and receipts. The first five
business days (Days 1-5) will be a definitive
forecast that cannot be changed. The next five
business days (Days 6-10) will represent an
approximate forecast that can be changed within
an X% variance of the original forecasted amount.
If approvals are necessary for Days 6-10, the BU
analyst must obtain the required approvals before
the update is recorded on the forecast. Treasury
will implement a policy representing this
procedure and communicate the change in
forecasting procedures to all BUs.
The BU manager will review and approve the
forecast before noon every (Insert Day) and send
the approved forecast to the treasury. If
discrepancies exist in the forecast, the BU
manager will follow up with the BU analyst to
resolve any issues before the data is sent to the
treasury for forecasting.
COMPILATION OF MASTER CASH FLOW DATABASE (1/2)
1 Risk
The cash flow forecast may include only some
current and relevant information to ensure that
complete and accurate data is available to
provide information for making investment and
borrowing decisions. It will also aid in determining
that accurate and timely payments are disbursed
and funds are received. Management reports
could potentially not accurately reflect Company
ABC’s current cash position.
Proposed Implementation
2 3
Procedure
Treasury cash operations will compile all cash
flow information to create an up-to-date and
accurate forecast. The master cash flow database
will include the treasury’s trended data, the BU’s
trended data, the BU budget and the most recent
forecast submitted by each BU. From the master
cash flow database, management reports will be
created for review, approval and decision-making.
Treasury cash operations will run and review a
change report to identify updates made to the
initial forecast.
Action Plan
The treasury forecasting analyst position will be
created under the cash operations supervisor and
required to compile and analyze all data from the
master cash flow database. The treasury
forecasting analyst will analyze forecasted
information to ensure that all expected payments
are authorized and valid.
A batch report with the upcoming 10-day forecast
will be automatically sent to the treasury at noon
every (Insert Day). All information will be
aggregated in the database to create a master
cash flow database (including treasury’s trended
data, each BU’s trended data, the BU budget and
the most recent forecast submitted by each BU).
The treasury forecasting analyst will update actual
data that has been received or paid throughout
the day.
The master cash flow database will create
management reports, including the daily variance
report, investment/borrowing position report,
weekly variance report, BU cash flow forecast
report – (Insert Day) noon, and cash flow
management summary report.
COMPILATION OF MASTER CASH FLOW DATABASE (2/2)

Action Plan

The BU makes updates throughout the week for

forecasted information. If the amount to be
disbursed changes within the first five business
days, it is considered a rush payment and must
follow the rush payment process. For any
changes made to the forecast outside of the next
five business days and greater than an X%
variance of the original forecasted amount, the
payment must be approved by the BU manager
and the treasurer. If the cash flow change is not
approved, the change must be forecasted for
payment by the treasury’s policy.
A change report will be run three times throughout
the day to identify any updates made to the
forecast. This information will be updated in the
master cash flow database to depict the most up-
to-date and approved information.
In the interim, a database will compile and report
all master cash flow forecast information. The
database will be utilized until the proper
implementation and testing can be performed on
the new treasury system.

96
TREASURY CASH FLOW FORECASTING
PHASE II: IMPLEMENTATION AND CONTROL
Coordinate IT-Related
Changes
• Determine and request required IT
improvements/updates (custom
SAP reports, database design).
• Prioritize the list of required IT
improvements (i.e., the value of the
change vs. the effort to make the
change).
• Identify which tasks could be
performed manually (while waiting
for IT changes and support).
• Develop a project plan and
timelines to modify/implement the
infrastructure.
• Coordinate the database design
and creation process with IT.
• Develop a critical path and timeline
for IT support activities.
97
Perform Testing, Finalize
Design and Implement
• Review the master cash flow
forecast database and custom SAP
reports with IT. Implement
suggested changes as necessary.
• Perform required testing on the
master cash flow database and
custom SAP reports. Implement
suggested changes as necessary.
• Finalize the design and functionality
for the database and custom report.
• Implement the final version of the
custom database and SAP reports.
Develop and Execute
Training
• Identify key business unit
stakeholders associated with the
weekly forecasting process.
• Develop and document training
programs to assist business units
with implementing new forecasting
procedures.
• Hold a training session/presentation
to introduce revised forecasting
procedures to each business unit
separately.
• Determine the level of need (by
business unit/position) for more
detailed desktop procedures.
• Introduce performance metrics with
the training materials.
Monitor Control
Environment
• Assess potential monitoring reports
and techniques available from the
SAP/database.
• Define and monitor the forecast
reporting protocol (frequency,
recipients, content, action required,
etc.).
• Report BU forecasting performance
results to management weekly.
FRAMEWORKS: TREASURY RISK MANAGEMENT
Internal Auditor Risk ModelSM
Environment Information For
Process Risk
Risk Decision-Making Risk

Competitor Financial Strategic

Customer Wants Price Empowerment Governance Environmental Scan
Technological Innovation Interest Rate Leadership Organizational Culture Business Model
Sensitivity Currency Authority/Limit Ethical Behavior Business Portfolio
Stakeholder Expectations Equity Performance Incentives Board Effectiveness Investment Valuation/Evaluation
Rating Agency Commodity Change Readiness Succession Planning Organizational Structure
Capital Availability Financial Instrument Communications Measurement (Strategy)
Sovereign/Political Resource Allocation
Legal Liquidity Planning
Regulatory Reputation Lifecycle
Cash Flow
Industry Image and Branding
Opportunity Cost Information
Financial Markets Stakeholder Relations
Concentration Technology
Catastrophic Loss Volatility Integrity
Integrity Public Reporting
Access
Credit Availability Management Fraud Financial Reporting Evaluation
Default Infrastructure Employee Fraud Internal Control Evaluation
Concentration Security Third-Party Fraud Executive Certification
Settlement Adaptability Illegal Acts Taxation
Collateral Unauthorized Use Pension Fund
Regulatory Reporting

Operations
Customer Satisfaction Performance Gap Business Interruption Operational
Human Resources Cycle Time Service Failure Budget and Planning
Knowledge Capital Channel Effectiveness Environmental Contract Commitment
Product Development Partnering Health and Safety Measurement
Efficiency Outsourcing/ Privacy/Information Security Alignment
Capacity Off-Shoring Trademark/Brand Erosion Accounting Information
Scalability Compliance

98
FRAMEWORKS: SIX ELEMENTS OF TREASURY RISK
MANAGEMENT
Business Strategies Organization and Management
Management Models and Systems
Business Processes
and Policies People Reports
Reports Assumptions and Data
• Global Cash and • Global Treasury • Skills and • Cash Position vs. • Revenue and Cash • Global Bank and Cash
Treasury Risk Operations Competencies Forecast Forecasting Information Reporting
Management Vision, • Global Cash • Training and • FX Liabilities- Hedged • FX Exposure and Risk • Treasury Workstation
Goals and Objectives Management Development and Un Hedged Limitation • ERP
• Comprehensive • Global Cash • Roles and Position • Investment Yield and • Capital Spending
Policies and Forecasting Responsibilities • Investments- Liquidity, Total Return
• Liquidity Management • Investment Custodian
Procedures • Organization Design Yield, Duration, Etc. • Interest Rate Risk
• FX Risk Mitigation and Valuation and Maturity
• Process Goals and • Corporate Culture • Liability and Debt Model
Hedging Data
Strategies Schedules • Pro-Forma Financial
• Investment • Data Integrity
• Effective Information • Banking Services and Models
Management • Authorization and
Reporting • Business Interruption Fees • Capital Spending Limits System
• Organization Structure and Disaster Recovery • Treasury Activity and Commitments and
• Effective Authorization • Vendor Approval and Performance Metrics Assumptions
Validation Validation • Global Authorizations: • Alternative Yield
• Disbursement Commitment and Calculation
Approval and Limits Disbursements
Matrix • Vouchered, Approved
• EFT and Check
and Prior Payments
Approval Process
Report

There is a risk if infrastructure component is deficient:

Current reports do not provide Management’s methodologies do Business system information is

Business processes do not People are unable to perform
information for effective not adequately analyze relevant not available for analysis and
achieve strategy. necessary processes adequately.
management. information. reporting.
Note: Activities in orange represent areas that have been noted for process redesign and improvement through the Payment Authorization and Release and Cash Flow Forecast Infrastructure project.

99
TREASURY RISK MANAGEMENT CAPABILITY MATURITY MODEL

Organization and Systems

Realization Business Strategies Processes and Management Models and
Management and Data
of Value and Policies Procedures Reports Assumptions
Structure
Proposition

Aligned, strategic
objectives are in place.
Risk issues are identified
Optimized with appropriate integrated
policies and
responsibilities.
Treasury processes are
integrated and effective.
Best practices are
continuously
benchmarked.
Critical business issues
are addressed.
Organization/process/
individual performance
measures are aligned.
Follow-up and planning Aligned, strategic Fully integrated systems
are fully developed, methodologies exist that are used for treasury risk
automated and consistent. emphasize continuous and financial analysis.
improvement.

The initial execution of Treasury risk management Requisite treasury Treasury information is Models and tools are Some nonintegrated
Treasury objective and processes and techniques expertise and knowledge high-quality, and self- sophisticated and robust. systems and data are
treasury resources aligned are effectively utilized. are in place. Teamwork assessment is available to support
Managed
Process against plans and communication are commonplace. treasury risk management.
Maturity strong.

Annual treasury plans are Processes are defined. Treasury functions are Key risks are tracked and Models available for Policies support some
developed, initiating Strategic treasury and centralized. Backup defined by standard decision-making are well- systems and information.
Defined strategic positioning finance alliances are in capability and training are benchmarks and internal developed.
actions. place. offered. audits.

Strategic objectives and Processes are established Functions are defined, Key internal treasury Simple models are used Limited systems require
informal polices are and repeating. Reliance on staff support is in place information is available inconsistently. manual input and support,
Repeatable occasionally focused on. people continues. and training/exposure is with audits occurring. and procedures are
limited. manual.

Treasury is not Formal processes are Leadership does not exist, Critical information is not Models do not exist, and The Treasury
categorized as a strategic limited or nonexistent. The and qualified staff is available, and internal reliance on people system/information is
Risk of
Initial/Ad hoc opportunity, resulting in no environment is unstable lacking. auditing does not occur. continues. disparate and inefficient.
Failure direction or policies. and people are dependent.

This represents the current state of the treasury department for each infrastructure element. This represents the future state of the treasury department for each infrastructure element.

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