Volume 2 — Governance and ControlsGovernance and Controls © Copyright 2002, All rights reserved 38 • Any discrepancies identified during the monthly invoice checkout process should be documented in an issue database and assigned to an individual for resolution. This individual should contact the appropriate internal and external groups to receive information supporting a resolution of the discrepancy. From this information, the individual should determine the resolution of the discrepancy, gain agreement from the counterparty, and, if required, post a system adjustment that reflects the resolution. The issue database should then be cleared of the discrepancy. • Checkout procedures should be documented for reference. • An issue database should be used to track patterns of discrepancies, as sorted by counterparty, location, transport contract, or dealmaker, with the patterns being communicated to appropriate personnel for active management. • Settlement statements should be netted where possible, aggregating purchases and sales by counterparty. • Intercompany transactions should be confirmed and net amounts captured in financial records. Key Reports • Third-party statements. • Nomination versus actual reports. • Monthly checkout results. • Issues database reports. 1.4.2 Settlements Process Overview The settlement process performed by the back office includes verification of information between the parties in a transaction and the procedures used to account for transactions the back office also initiates billings and payments. These functions should be performed independently of the trading, trade processing, and reconciliation functions. Objectives • Ensure that cash and security movements are properly authorized and executed. Best Practices and Controls • Standard settlement and delivery instructions should be established for all counterparties. This includes setting up proper controls for establishing and authorizing instructions, for changing previously approved instructions, for structured transactions, and for non-standard deals. • Telephone conversations regarding settlement issues should be recorded.