Internal Control Questionnaires and Verification Procedures

Other

1. Are all floor plan loans granted under an established line?

2. Are line approvals structured to permit the bank to cancel or suspend shipments of unwanted merchandise?

3. Are dealer floor plan line limits strictly adhered to?

4. Is a trial balance of each dealer’s trust receipts/security agreements prepared at least monthly

5. Are dealer trial balances reconciled to department and general ledger controls?

6. Are floor plan interest charges systematically computed and regularly billed?

7. Are notices of past-due interest payments sent promptly?

8. Are all interest, curtailment, and unit pay-off payments from dealers posted promptly?

9. Are disbursements for floor plan loans on new units made only against the original copy of the manufacturer’s invoices?

10. Are the original invoices retained in the bank’s files?

11. Are loan proceeds on new units paid directly to the manufacturer rather than to the dealer?

12. Are accounting records established so that the bank has records of all floored items with adequate individual identification?

13. Are limits on loan advance versus invoice price (current wholesale value, if used) clearly established?

14. Are wholesale values determined independently of dealer appraisals?

15. Does someone independent of the department periodically review the wholesale values that floor plan department personnel assign.

16. Is amount of loan advance prohibited from exceeding 100 percent of the invoice price of a new item or of the wholesale value of a used item?

17. Has a curtailment policy been established?

18. Does the policy provide proper incentives to the dealer to turn over inventory on a timely basis?

19. Is the loan written so that the floored items never depreciate faster than the loan balance is reduced?

20. If the manufacturers of the floored items have entered into a repurchase agreement, are curtailments structured to keep the loan balance in line with any declining repurchase amount?

21. Are records maintained on curtailment billings so that delinquency is easily determinable?

22. Are notices of past-due curtailment payments sent promptly?

23. If assignment of rebates has been made, have procedures been established to insure that factory rebate checks payable at the end of the model year are promptly forwarded to the bank?

24. If demonstrators are floored, are they subject to separate curtailment requirements which keep the loan balance in line with their liquidating value?

25. Are floor plan agreements required for all dealers?

26. Must agreements be accompanied by borrowing resolutions?

27. Is a written agreement between the manufacturer and the bank required on any flooring line which includes drafting arrangements with the manufacturer?

28. Do such agreements with the manufacturer stipulate under what conditions the bank will accept items to be floored?

29. Are checks made periodically to determine that only those individuals granted power-of-attorney are signing the trust receipts?

30. Are dealers required to submit financial and operating statements on a continuing basis?

31. Are all dealers who prepare internal financial and operating statements more frequently than annually required to submit copies of those statements to the bank?

32. Are all financial statements received from dealers reviewed promptly?

33. Do financial statement reviews include a determination that floor plan loans, deposit accounts, and other information agrees to the bank’s records?

34. Are periodic reviews made of deposit accounts, to detect any possible out of trust sales?

35. Are periodic reviews made of the retail paper being generated to determine if the bank is receiving an adequate portion?

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