Our internal auditors have requested a detailed procedure regarding our loans which are secured by cash collateral. They are asking questions about how we verify the owner of the collateral, early payoffs, paid off by third parties, past due, loan made on behalf of a third party, business purpose of the loan...etc.

Does anyone have a procedure they are willing to share? Or, at least a checklist?

Until we automated, we received a monthly report that identified all new cash collateral loans (based on the unique loan code for each). We also received a monthly report of any such loans that were delinquent. These reports allowed us to review source of funds; customer relationship; etc. (our automated software does this same function for us now.) We rely on our loan ops folks to notify us of unexpected payoffs, third-party involvements, etc.

Check with your data processing vendor to see if they can help you segregate and monitor these loans as a group more or less as Cape Codder describes. Treat your auditors' request as a wish list, not as a "requirement" you have to satisfy.

If your vendor can supply you with some standard reporting with this information, then make that your counteroffer. Do not invent the wheel.

Thanks for the information/suggestions!