Pub. 3 2013-2014 Issue 1

21 Consider Payment Process Options For most charter schools, payroll makes up the majority of operating expenses. Often the payroll is handled through a management company or outsourced to a third-party processor. Payroll also can be processed in-house by submitting an ACH file — typically generated by accounting software — to the school’s bank. With regard to time cards, schools should have at least two individuals review the employee names and number of hours approved for payroll in each pay period. Of course, charter schools have mul- tiple options for paying other expenses through traditional checks, ACH, credit cards and purchasing cards, or wire transfers. Credit cards are typically viewed as safer than writing checks be- cause the school’s bank account number is not exposed to vendors. Another option that is less expensive and more secure than mailing check payments is to use ACH credits to pay vendors. If you’re not doing this already, consider exploring this option with your banker. A final option allows the school to outsource its payment file to its bank. The bank then makes payments on the school’s behalf, via ACH or check, ac- cording to the school’s guidance. Fight Back Against Fraud We strongly encourage all of our customers to take steps to prevent in- ternal and external fraud. Consider the following sobering statistics from the 2013 AFP Payments Fraud and Con- trols Survey: • 61 percent of organizations experi- enced actual or attempted pay- ments fraud • 87 percent of those affected re- ported that checks were targeted • 29 percent of affected organizations indicated that corporate/commer- cial purchasing cards were targeted • $20,300 was the typical loss due to payments fraud According to the study, “checks con- tinue to lead as the payment type most attacked even as their use dramatically declines. As payment options evolve, fraudsters’ techniques are evolving as well,” the study said. “Now more than ever the need for new security models and strict controls should be top of mind for organizations across the coun- try and around the globe.” Take the following steps to help protect your school and its resources against fraud: • Ensure computers are protected with antivirus and anti-spyware software — and potentially a firewall — before accessing bank information online. • We have arranged for our custom- ers to be able to download free security software called Rapport from Trusteer, Inc. at https://www. zionsbank.com/learning-center/rap- port.jsp. Rapport software helps provide protection for identity theft and online transactions.  (Trusteer Rapport software is a product of Trusteer, Inc., Zions Bank and Zions Bancorporation are not affiliated with Trusteer, Inc., and they do not provide, warranty, or guarantee the content, service or operation of Trusteer Rapport.) • Provide your bank with an elec- tronic file of all authorized check and ACH payments, which the bank will match to items presented for payment to ensure legitimacy. This will help protect against losses due to fraudulent checks and unau- thorized ACH transactions. • Log into online banking to scruti- nize account activity on a regular basis. • Consider using separate bank accounts with minimal balances to write checks to vendors or for payroll. Brad Taylor, CFO of Academica West, also provided insights on prac- tices in fraud prevention for charter schools. He stressed the importance of internal controls, in particular, having a process where multiple employees review and authorize outgoing pay- ments and payroll before payments are made. Even a small charter school with a limited staff should always practice dual control and have a minimum of two employees review and approve pay- ments to ensure accuracy. As a practical matter, Taylor said they have created petty cash accounts at each school — with balances from $500 to $1,000 — for immediate needs, such as purchasing supplies or materials. This allows the school to use a check or debit card to make small purchases, without the need to submit a purchase order. The information reviewed in this article provides just a small sample of the management issues charter schools face on a daily basis. Your homework assignment is to review your school’s current cash management and fraud prevention practices to identify the areas of strength and the areas where there may be some room for improve- ment. And remember, treasury man- agement services can help you earn a passing grade in financial management. Andrew Larsen is a vice president and com- mercial relationship manager for Zions Bank in Salt Lake City who works with charter schools to help streamline their financial management. Zions Bank®, Member FDIC. Now more than ever the need for new security models and strict controls should be top of mind for organizations.