Volume 2 — Governance and ControlsGovernance and Controls © Copyright 2002, All rights reserved 39 • When warranted, automated settlement balances should be validated through third- party verifications. • Variances in settlement statements should be investigated and resolved with counterparties in a timely manner. • Billings should be prepared and sent to customers as required by settlement agreements. • The back office should maintain a list of counterparties that are required to prepay before physical delivery, based on information provided by the credit department. • The back office should monitor receipts and payments of balances due and immediately notify appropriate credit management personnel, trading personnel, and/or originators responsible for executing the transaction of material past-due payments or underpayments. • A payment issue resolution process should be approved and documented. • Approved authorized limits for payments prior to disbursement should be defined and documented. • The settlement and disbursement functions should be independent of each other and of the trade processing function. • All payments should be made on a timely basis in accordance with contractual agreements. • Payment values should be automatically calculated based on trade data entered into a designated transaction management system. • The back office is responsible for ensuring that payment requests are properly submitted to the accounts payable department for payment. • The treasury department should transfer the funds to the proper counterparty, based on the time frame for payment and payment instructions specified on the request. • Access to the payment system should be secured and restricted. Key Reports • Settlement statements. • Delivery instructions. 1.4.3 Reconciliation Process Overview Preparing reconciliations is a key control over the completeness and accuracy of the information in the trade, payment, billing, and general accounting systems. To establish the proper segregation of duties and maintain a sound control infrastructure, a group independent of deal making must perform this process.