What approval controls should govern bill payment and household expense administration?
Use written approval limits, separate payment preparation from approval, require two people for higher risk transactions, verify changes to vendor or employee payment details, and reconcile accounts independently. Keep receipts, invoices, approvals, and payment records together. Review exceptions monthly, remove access promptly, and document who can approve each type of household expense.
Separate preparation, approval, and review
One person may collect invoices and enter payments. Another person should approve them. A third person, when practical, should review bank activity and reconcile the account. This separation reduces the chance that one error or improper payment moves through the entire process. The Office of the Comptroller of the Currency identifies segregation of duties and dual controls as core payment system controls. OCC, Payment Systems
Create a written authority matrix. It should name approvers, spending limits, permitted payment methods, and backup approvers. Require documented approval before a payment is released. For large, unusual, urgent, or related party payments, require two independent approvals. The approver should confirm the invoice, household or business purpose, amount, recipient, and supporting receipt.
Protect payment instructions and access
Treat bank detail changes as high risk. Confirm a new account number or routing instruction through a previously known phone number or other trusted contact method. Do not rely only on an email request. Nacha recommends authenticating requests to change payment information and obtaining internal approval before transactions are sent. Nacha, ACH Operating Rules Supplement
Use individual user accounts, multi factor authentication, and the lowest access needed for each role. Disable access when a staff member leaves or changes duties. Keep check stock and bank credentials under controlled custody. Set alerts for new payees, large transfers, failed payments, and unusual activity.
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Reconcile records and household employment costs
Maintain an organized file for each payment, including the invoice or receipt, approval record, payment confirmation, and any exception explanation. Reconcile bank and card statements to the ledger on a set schedule. An independent reviewer should investigate unmatched items and duplicate payments.
For household employees, retain required employment records. The IRS says household employment tax records generally must be kept for at least four years after the later of the tax return due date or the date taxes were paid. IRS, Publication 926 Apply the same record discipline to reimbursements, cash expenses, and personal use of household accounts. Review the control matrix at least annually and after any staffing, banking, or systems change.
Related guides
- Access to Alternatives Through an MFO: A Practical Guide for Families
- Cross-Border Families and Multifamily Offices: A Practical Guide
- Family Governance With a Multifamily Office