Internal Control Questionnaires and Verification Procedures

Collateral

1. Are floor plan checks, physical inventories, conducted at least monthly and on a surprise basis?

2. Are more frequent floor plan checks required if the dealer is experiencing financial difficulties?

3. Are individuals performing floor plan checks rotated?

4. Are floor plan inspector(s) required to determine or verify the following and indicate their findings on the floor plan check sheet:

   1. Serial number of item?

   2. Odometer reading of vehicles?

   3. Condition of item?

   4. Location of item, if other than normal place of business?

   5. Existence of any fire or theft hazards?

5. Does the floor plan inspector include on the check sheet:

   1. Date inspection was performed?

   2. Date any item located elsewhere was checked?

   3. His or her signature?

   4. Summary of his or her report, if appropriate?

6. Are all demonstrators checked?

7. Does an officer review floor plan reports?

8. Are follow-up inspections made of items not seen during the regular inspection?

9. Are items reported by the dealer as being sold, required to be paid off immediately?

10. Does the floor plan inspector determine the date that item(s) reported as sold were sold from that on the dealer’s copy of the sales agreement?

11. Are dealer sales patterns reviewed to determine that the number of units reported sold at the time of floor plan inspection is not excessive and does not indicate a float?

12. Are payments in process reported by the dealer during floor plan inspection verified by bank personnel?

13. When a dealer trade or “swap” occurs, does the bank:

    1. Obtain the manufacturer’s invoice from the selling dealer on the new unit acquired?

    2. Obtain the invoice from the borrowing dealer for the new unit?

    3. Have a trust receipt executed on the new unit?

14. Does the bank have a procedure to check all indirect paper received from a dealer against the trust receipts of items floored for that dealer to determine that there is no duplication of loans against the same security?

15. Does the bank have floor plan property damage insurance or require that the dealer maintain such coverage with the bank named as loss payee?

16. Is the insurance coverage periodically reviewed for adequacy?

17. Are all trust receipts required to be supported by invoices or other evidence that title to the security is vested in the bank?

18. Are trust receipts required to include:

    1. Description of each item?

    2. Serial number of each item?

    3. Loan amount for each item?

    4. Interest rate?

    5. Date?

    6. Authorized signature of dealer or person holding power-of- attorney to execute the trust receipt?

19. If the bank and dealer permit a bank employee to execute trust receipts using the dealer’s power-of-attorney:

    1. Are proper documents on file granting the power-of-attorney?

    2. Does the bank maintain a numbered register for trust receipt notes?s

    3. Are trust receipt notes under dual control?

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