Agribusiness Lending Internal Control Questionnaire

Transcription

1 Agribusiness Lending Internal Control Questionnaire Completed by: Date Completed: 1. Has the institution established policies that are appropriate for the complexity and scope of the agricultural lending activities of the institution? 2. Have the policies been reduced to writing? 3. Have the policies been approved by the institution s board of directors? 4. Are the policies reviewed and approved by the Board on an annual basis? Indicate last approval date: 5. During the annual review of the policies does the Board: a. Evaluate the existing policies to determine if they are compatible with market conditions? b. Ensure policies are consistent with the institution s strategic direction and within its risk tolerance? 6. Does the institution s agricultural lending policy address agricultural loan structuring? 7. Does the policy require loan maturities to reflect the purpose and source of repayment? 8. Does the policy require that carryover debt be amortized? 9. Are specified requirements outlined in the policy for: a. Annual operating lines? b. Capital purchase loans? 10. Are procedures for the use of credit enhancements to support credit underwriting identified? (i.e., Farm Service Agency programs, SBA programs, state-level programs, or personal guarantees) 11. Have collateral margins been established and outlined in the policies for specific types of agricultural lending, such as: a. Crops? b. Livestock (cattle, poultry, hogs, etc.)? c. Machinery and equipment? d. Real estate? Lending D8-1

2 12. Does the policy outline the manner in which agricultural exceptions are defined, identified, monitored, and controlled? 13. Are concentration guidelines established for the agricultural portfolio stated in the policy? 14. Does the policy outline the action to be taken if the policy limits are exceeded? 15. Does the policy require that all credit risk exposures (off-sheet balance activity, related personal debt, etc.) be captured and included in the borrower s relationship for credit risk management purposes? 16. Does the policy outline procedures for: a. Monitoring hedging strategies? b. Forward contracting? c. Third-party contracts? d. Timing of cash market sales? 17. Does the policy address and identify potential environmental concerns? 18. Have the objectives and risk limits for the agricultural portfolio been clearly communicated to and approved by the board of directors? 19. Are changes in policy and procedure communicated to key personnel in the agricultural department made in a clear and timely manner? 20. Do the management information systems used provide timely, useful information to evaluate risk levels and trends in the agricultural portfolio? 21. Regarding policy limit exceptions: a. Is approval required for all exceptions? b. Are exceptions monitored? 22. Regarding loan files: a. Is an accurate description of the collateral held documented on the collateral register? b. Is the following documented: Assignments? Stock powers? Hypothecation agreements? Statements of purpose? c. Is negotiable collateral accurately priced and documented? D8-2 Lending

3 d. Is documentation supporting guarantees and subordination agreements, where appropriate, included in each file? e. Are collateral discrepancies documented and investigated? 23. If previously charged-off agricultural loans have been rebooked: a. Do they comply with the institution s policy and terms for granting new loans? b. Do they comply with regulatory policy (OCC, FDIC, etc.) on rebooked charge-offs? 24. Is the recording of interest income stopped on loans placed in non-accrual status? 25. Is the proper classification assigned to individual credits? 26. For livestock held as collateral: a. Is an inspection conducted on a regular basis (no less than annually)? b. Is a breakdown by sex, breed and number in each category documented? c. Is the animal s condition noted? d. Are cash flow projections prepared by use of published livestock prices? 27. For crop loans: a. As loans are advanced, are inspections of growing crops performed? b. Are local/regional crop yields monitored by the institution? c. Does the institution document support for their prices if published commodity prices aren t used? 28. Are adequate processes in place to monitor farm land values and commodity prices? 29. Does documentation indicate that periodic inspections are conducted for capital assets, machinery and equipment? 30. Are people who handle cash or issue official checks or drafts singularly prohibited from preparing and posting or reviewing interest records? 31. Are delinquent account collection requests and past due notices verified against the trial balances used to reconcile agricultural loan subsidiary records with general ledger accounts, and are these entries handled by people who do not also handle cash? Lending D8-3

4 32. Are the functions of receiving and releasing collateral and making entries in the collateral register performed by different employees? 33. Does someone not connected with loan processing handle collection notices? 34. Is negotiable collateral held under dual control? 35. Do agricultural lending personnel possess and display acceptable knowledge and technical skills to manage and perform their duties? 36. Do senior management and the board of directors periodically evaluate the lenders conformance with the institution s stated credit culture and loan policy? 37. Based on the complexity and condition of the lending officer s portfolio, is the average account load per lending officer reasonable? 38. Are comprehensive procedures in place to ensure compliance with all laws and regulations? 39. Do compensation and reward programs reward behaviors that support strategic and risk tolerance objectives for the portfolio? 40. Using the management information systems for the agricultural portfolio, are reports available that: a. Identify and provide sufficient data about the performance of loans with underwriting and policy exceptions? b. Provide sufficient details of portfolio segments and concentrations, including carryover debt? c. Ensures collateral inspections are conducted in a timely manner? d. Provide adequate information to comply with the reporting requirements for any state and federal agriculture programs? 41. Is the institution providing adequate reserves to the allowance for loan and lease losses for the agricultural portfolio? 42. Are losses on agricultural loans recognized in a timely manner and recorded against the allowance for loan and lease losses? 43. Are adequate controls in place to ensure the accuracy and integrity of the agricultural loan data? 44. Are internal controls audited on a regular basis by an independent party? D8-4 Lending

5 45. Is a report of exceptions noted during audits forwarded to senior management? 46. Are exceptions noted during audits, and regulatory examinations cleared in a timely manner? Lending D8-5

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