Let’s begin today with a brief multiple choice quiz. Internal audit allows your financial institution to do which of the following:
Increase revenue production
Cut costs
Produce reliable numbers for informed decisions
Increase efficiencies
Reduce fraud risk
All of the above
If utilized correctly, the answer, of course, is 6 – all of the above. A carefully developed audit plan is perhaps your best source for objective proof that policies and procedures are being met across the bank. And it uncovers and clarifies strategies for improving and growing the institution.
Case in point. The HORNE Banking team manages the internal audit function for a financial institution that operates 21 branches. When we began work with this institution, each branch had its own decentralized payables function. Each year, the institution was noticing possible concerns related to the issuance of expense checks. Management worked with HORNE to perform an internal audit of this decentralized process and then used the intelligence to make the decision to consolidate the payables function to corporate headquarters.
According to the CEO, “This decision eliminated 21 potential threats for fraud. While I cannot put a price on that, I know I am able to rest a little easier at night!”
In addition to reducing the risk of fraud, the internal audit process produced various other improvements within the institution, including:
Reduced expenses Giving individual branches payment authority meant the bank was paying out numerous unnecessary expenses. Approving and paying invoices at headquarters has eliminated these extra costs.
Increased loan production Relieved of administrative tasks, the sales team has more capacity to focus on revenue generation, improving loan production for the bank. Management expects that centralizing this process could generate as much as $100,000 in additional revenue per year.
Better, more reliable numbers for improved decision-making The way that expenses are coded informs budget decisions. Centralizing the payables function produces more accurate coding and reporting. This clarity has enabled management and the board to make more informed, confident decisions.
This client hadn’t instituted internal audit to comply with some regulation around paying their invoices. The bank’s management saw an opportunity to use the process to drive policy. Ultimately, the decision increased their efficiencies and grew shareholder value. The old saying, “you get out what you put in” is absolutely relevant to internal audit. If your financial institution is merely checking the audit box for the purposes of risk management, you may be missing out on tremendous opportunities to drive growth.
Is your internal audit function only focused on risk management? It’s a broad source of enormous value for your bank. Get in touch – the HORNE Banking team would love to help your bank recognize these benefits.
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