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X-340 1. Internal Auditings "While allowance is irade for the trerrendous increase in the volume of work due to the Liberty Loan and to the scarcity of senior bank men capable of assuming responsibility, still the fact that the Reserve Bank officials permitted the Auditing work to be neglected and in sorne instances almost entirely dropped, can not be justified. Auditors and their assistants were assigned to other duties. At the time when there was greater need for ef fective checks and safeguards than ever before the necessary care and vigilance were relaxed. "Few Reserve Bank officials realize the importance of an internal auditing system. As a ruld the present Auditors are capable, but they have not a sufficient number of competent assist ants to enable them to keep at all times an effective check upon every department of the bank. There is a disposition to make the Auditor subject to the directions of the junior officers of the institution, whereas he should conduct his work independently, reporting only to the Board of Directors, the Governor and the Chairman of the Board* "'In some institutions a tendency is shown to assign admin istrative duties to the Auditor. While in the past, in the interest of economy, such a course was excusable, at the present time the organizations are so very large that the administrative and auditing departments should be separate. In each bank the auditing department should have at- thorough organization. The V - 2 - X-340 tank should have as Assistant Auditor an experienced can capable of supervising the work of the department, in the event of the absence or disability of the Auditor. In addition the depart ment should have as many audit clerks as are necessary to main tain at all times the proper control over dll departments. Care should be exercised in the selection of men for this work. In the past the weakness has been due to the failure to employ the right class of men. "For the proper protection of the bank the auditing work must be kept up to date and the Auditor should be held to a strict accountability for the work of his department. In case branches are established, the internal auditing system should be installed by him and the audits cade under his direction. It is the duty of the Chairman, as a representative of the Directors, and the Governor, as the Executive ifomager of the bank, to see that the work is properly done* 2. Staff: "The tremendous increase in the work of the various departments of the Reserve Banks, due partly to the Liberty Loan, has shown the need for strengthening the staffs of Reserve Banks by addition of experienced bank men. Senior employes capable of assuming responsibility are needed in practically every bank. In some institutions there is room and need for additional officers. Reserve Banks should guard against the tendency apparent in some quarters, of centalizing duties and responsibilities in such i a manner that the absence, disability or resignation of one or two officers would seriously hamper the business of the institution* n,In each bank and branch office there should be a good work ing organization. For every important position, whether official or clerical, there should be at least one competent assistant available to perform the duties in the event of the absence or disability of his immediate superior. There is a tendency on the part of nany junior officers to handle work which should be delegated to their subordinates. "It would be well for each Reserve Bank to have an organiza tion chart prepared, the work of the different departments out lined, and the duties of officers and senior employes defined. Competent utility xren should be available to assist in depart ments where their serviceB are needed. "It will be noted from the individual reports that a large percentage of the employes are women clerks* At first women were employed as stenographers, later in the transit department. At present, in some banks, they are employed in practically every department. It is apparent that it is to this source that the Reserve Banks mustlook to fill the positions made vacant by employes entering the military and naval service. "The demand for bank clerks is so great that practically all banks are in competition for experienced men. The scale of salaries has risen at least fifteen to twenty-five per cent during the past year. The Reserve Banks must be prepared to pay higher X-340 - 4 salaries in the future. 3. Liberty Loan Department. "Considering the volume of work handled,, the difficuly in getting competent clerks, the lack of time in which to perfect a working organization, the inadequacy of the accounting forms suggested for use, the work of this department was handled fairly well* "Some banks were fortunate in securing temporarily, the services of officers and senior employes of some of the largest institutions in the respective districts. Other banks hired public accountants to supervise the accounting details. In a few in stances, the department was operated by bond seen. The best re sults were obtained where an officer or officers of the Reserve Bank were in immediate charge of the banking and technical details. Through failure to understand instructions considerable confusion arose, in connection with reports and information furnished to the Treasury Department. future. The experience gained will be useful in the There is need for a better general understanding as to the duties of Reserve Banks in acting as fiscal agents, the informa tion which the Treasury Department requires in connection with the Liberty Loan operations and a detailed explanation of the proper use of the forms now used. "It is expected that at the conference in Chicago, August 34th and 25th, which will be attended by technical representatives of the Treasury Department and Federal Reserve Board, and the Auditor X-340 - 5 - and representative of the Litery Loan Department of each Federal Reserve Bank, a tetter understanding will he established* It is quite apparent that the work of the Reserve Banks would be greatly simplified if there were issued by the Treasury Depart ment, for the information and use of the staff of the Reserve Banks, a pamphlet giving detailed instructions covering the rela tions of the fiscal agent with every division of the Treasury Department. "In the opinion of your examiner the handling of the bank ing and technical details of the Liberty Loan is essentially a. banking matter and the work of this department should be super— vised by an offleet* of the Reserve Bank^ not by a bond can. Selling and publicity campaign The should be directed by the Liberty Loan Committees but as the Reserve Bank is actually responsible for subscriptions, receipts and securities, the work should be super vised by properly designated officers of the bank, directly respon sible to the Executive officers of the institution. The officers should have competent men in charge of the principal subdivisions of the work. "Some Reserve Banks fail to realise that it is necessary to give to the securities in their possession as fiscal agents, the same care as to their own securities. Interim receipts are bearer instruments and should be treated similar to currency. As a general rule when the interim receipts and definitive bonds are received from Washington they should be placed under dual control. The amount necessary for each day’s business should be released to X-340 - the delivery clerk. 6 - It will be necessary for each bank to account for all securities received from the Treasury Depart ment. "The acknowledgment of delivery signed by the subscriber should be returned to the Auditor or his representative in the Liberty Loan Department and Checked against the delivery record. After the final payment has been made on August 30th, a complete audit should be made under the direction of the Auditor of the bank. A periodical check should be trade of the securities held in the Government Deposit Department."
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