There is a director at Dean Dorton that claims to be a belt and suspenders type of person.  Some may call this thorough and others may call this inefficient.  One thing we can all agree on is that this is effective.  I recently took a trip to the Dominican Republic.  Upon entering the airport, I stood in line for about 15 minutes and was then asked to pay a $10 entrance fee to get in to the country.  Then I stood in line for another 15 minutes and I was asked to provide proof (in the form of a receipt) that I had actually paid the $10 at the first checkpoint.  Only then was I allowed to get in another line to get through immigration.  Most people in line complained about this process because it took so much time and seemed redundant.  I walked through the line quite impressed with how this country has embraced internal controls over cash receipts.  They wanted to make sure no one had skipped through the lines in order to avoid this payment.  This control served another purpose to ensure that the individual collecting the $10 entrance fee was not misappropriating it in some way.  The airport could reconcile the receipts collected at the 2nd checkpoint to the actual cash collected at the first checkpoint.

This type of control is called a compensating internal control.  Another thing to call it is a double check (not to be confused with a discount double check).  Internal controls are only as good as the systems and people executing the internal controls.  You do not need compensating controls over every process.  However – companies should consider the need for compensating controls over their most important processes.  Generally I think the most important areas relate to cash.  Cash receipts and disbursements are two of the most important processes for every company.  One example of a compensating control over cash receipts is to have the person who opens the mail create a log of all incoming checks before giving the checks to the person who creates the deposit.  Then after the deposit has been made – you go back and compare the deposit slip to that log.  This control ensures that the person who is in charge of relieving accounts receivable is not somehow misappropriating checks for their own benefit.  One example of a compensating control over cash disbursements is to implement a positive payment system at your bank.  You implement all of the correct controls over paying your bills but then someone outside of the cash disbursement cycle reviews a list of checks sent to them directly from the bank before the bank approves the check for payment.  This ensures that the person writing checks isn’t writing them to a phony company or to themselves directly.

Compensating controls add that extra layer of safeguarding to your most important assets.  Take a minute to review your internal control structure and consider if there is any need to add a double check to the system.  If you would like assistance in reviewing your internal controls or have any questions on where to look, feel free to contact Lance Mann ( or Nick Lynch (

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