What are the key elements of internal control over disbursements?

• A. Dual authorization for large payments, procurement policies, vendor verification, and timely documentation.
• B. Only the treasurer can approve all disbursements.
• C. Use of cash only for small purchases.
• D. Monthly statements from the bank are sufficient.

Answer: (A)

Internal control over disbursements relies on a combination of checks and documentation to prevent errors and fraud. Dual authorization for large payments adds a needed check so no single person can approve and release funds, reducing the chance of unauthorized or erroneous disbursements. Procurement policies ensure that spending follows approved processes—using authorized vendors, staying within approved spend limits, and complying with bidding or sourcing rules—so disbursements reflect legitimate commitments. Vendor verification protects the payables process by confirming that vendors are legitimate, that invoices match the vendor records, and that banking details align, helping to avoid fraudulent or duplicate payments. Timely documentation ensures that every disbursement is supported by records such as purchase orders, receiving reports, and invoices, enabling prompt review, audit, and reconciliation.

Relying on one person for all approvals bypasses necessary checks and increases risk. Limiting discussion to cash usage for small purchases doesn’t address the broader disbursement cycle. Bank statements alone do not prevent or detect improper disbursements without supporting documentation and ongoing reconciliation.