Our organization is considering using electronic signatures. Would anyone tell us how this works and what procedures of internal control you use? Marlene

HI - This is Rob from the Portland Oregon Rescue Mission. I want to use electronic signatures, but have been unable to due to a major problem within the FE software. I have not been able to get an acceptable signature. Blackbuad has been no support to this problem. My Blackbaud Case number 5073089, filing in early April 2005, has been without resolve. Once this is corrected, the proceedures on how to control the use will need to be written. Good Luck ROB SEDERSTROM

To begin with, I would never even consider using an e-signature that was not driven by a high volume of checks. If you have this situation, the internal control aspects are critical because you are removing that final, important review that would ordinarily be performed by the signer. That obviously means that when this step is gone, the rest of your system must be so tight that you can eliminate this last review. That said, the use of the e-signature has one major flaw - it is not accompanied with some sort of count feature that will allow you to reconcile the use of the e-signature with the number of checks in the check run. If such a counter was incorporated into the process - it would allow you to find unauthorized use of the e-signature and perhaps help avoid fraud. We do not allow anyone in the finance department to sign checks - the e-signature requires a high FE security clearance which would need to be an existing signer. If not an existing signer, you have effectively circumvented your board approved authorization to sign checks. In our little shop, our signers are not given access to the accounting software - this is a control feature. If the signer had the access to the software, there is too much opportunity for control breakdown. So there is the conundrum for us. Signers cannot have access to all the software for control purposes - security clearance to authorize the check use would give that access. And vice-versa - top finance and accounting personnel are not signers because of all the access.

Why not put the e-signature on a floppy disk instead of in the software system. The disk can be put under lock & key until needed.When checks are run, the disc can be retrieved from its secure location to be used. This way you shouldn't have to worry about a breach of security in the software system. A signer can then go through the checks and initial those that are ok to pay and flag those that are not.

In our shop, we have high volume of checks, so we use e-signatures. As noted below, we put the signatures on a disk, not on the software. Internal controls are that the check stock and the signature disk are kept in the safe between check runs. Checks are only given to the accountants after the pre-check run has been verified against the requests by a check signer. Then the exact checks needed are given to the accountants with the signature disk. The check signer then initials all checks that are prepared. In this way, even though the preparers have the signature disk for a time, they don't have extra checks to use them with. After the check run, the disk is returned to the safe.

Rather that put the electronic signature on a disk that must be secured, or secure and count out checks to be written, we use Positive Pay. It is a banking feature by which I transmit a file to the bank of the checks that are OK to pay. If a check is written that was not transmitted to the bank, I receive and email from the bank and have the option to approve or return the check. Management and our auditors are happy with these controls.

Our accounting office uses electronic signatures, but a hand signature by one of the signers is required for all checks $5,000 or more. Our internal controls for the electronic signature is very tight. While our office does keep the check stock locked up in our safe, we do not have access to the electronic signature. It is kept on a disk, and our manager (who does not have access to our system or safe) comes with the disk whenever we have a check run. We keep a Cash Disbursement Control Log with the date, beginning and ending check numbers, # of checks used, the total $ amount dispersed, and the initials of the Accountant and the Manager who brings the electronic signature disk and reviews the check run. A pre-check report is also reviewed and initialed by both and filed with the Post Report. The separation of duties is crucial; accounting staff who have access to the system should not have sole responsibilty for check runs.