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Do you need a TCR with Self-Audit? It depends.

March 29, 2023

cash recycling (95)

Self-audit — it seems to be a must-have feature on a teller cash recycler. Manually auditing a TCR is a tedious and time-consuming process for branch staff. So it makes sense a feature that makes auditing faster and more secure is something you’d want in a TCR, right?

Before you decide a TCR must have self-auditing capability, let’s look at why you may not even need it.

In case you are not familiar with it, self-audit refers to the ability of a TCR to internally count and validate its own cash inventory, in other words, audit itself. During a self-audit, the TCR moves notes from a storage cassette to another designated cassette or bin and back to the storage cassette, passing each note by the reader to validate it during the process. All of this happens inside the TCR safe.

Contrast that to auditing a TCR that does not have self-audit capability. Depending on the TCR, the process involves removing cash from the TCR to count and verify the actual inventory of the cassettes in order to reconcile with the reported totals. During the procedure, at least two staff members are pulled away from customer-facing work and cash is physically exposed outside of the safe.

Both types of auditing take the TCR out of service so you can see why you would want the audit to be as fast as possible.

But what if self-audit just addresses a symptom of a bigger issue (problem)?

Rethinking Audits

Cash audit policies and practices were established long before cash automation—and were based on manual cash processes. Routines like multiple counts, dual custody and frequent audits were necessary to build security, accountability and control into a manual environment that exposed cash to risks like human error and theft.

Cash automation devices like TCRs were designed to automate cash handling, making transactions faster and virtually eliminating human error. These devices add security and accountability to teller cash handling by reducing cash touches and providing an electronic record of every cash transaction for each operator to create a complete audit trail of activity.

In fact, TCRs improve nearly every cash process in the branch and resolve many of the issues audits were put in place to address. Cash automation itself reduces the need for cash audits. But even after installing TCRS, banks and credit unions don’t always update their cash handling policies and procedures to align with security improvements cash automation delivers. By not taking the opportunity to re-evaluate branch cash handling policies and practices when implementing TCRs, banks and credit unions fail to maximize the ROI of cash automation.

While cash automation reduces the frequency, it doesn’t eliminate the need for audits. This is where the particular type of TCR further impacts auditing. Some recycler technology triggers more frequent auditing.

Why all TCRs don’t have self-audit

TCRs are based on one of two note storage technologies: Rolled Storage Modules (RSMs) or Cassettes (also called traditional or stacked note cassettes). Not only do these two technologies store notes differently, they also process notes differently. These differences directly impact auditing requirements.

Why Cassette TCRs Need Self-Audit

Cassette-based TCRs are the older of the two technologies and store notes in box-like cassettes, typically one for each denomination, stacked vertically inside the safe. For a deposit transaction, banknotes are fed into the recycler and pass through a reader to validate their fitness and denomination before they are deposited to the appropriate cassettes.

During a dispense transaction, a friction-picking mechanism pulls notes, one by one, from the cassettes. Sometimes the picking mechanism picks up more than one note at a time (ie, double picking). So to verify the correct number and denomination of notes are dispensed, they pass the reader again on the exit path. If the reader detects a double pick or any other error, it diverts these notes away from the exit path to a divert bin/cassette inside the safe. This second validation complicates the bill path with more opportunity for jams and extra wear on the internal parts of the TCR.

Once notes are diverted internally, they create an ‘off’ or out of balance situation since they are not part of cassette inventory nor part the dispensed cash total. The out of balance condition then requires the TCR to be audited. But before performing a self-audit or a manual audit, any diverted notes must be manually verified and put back into their respective cassettes.

The manual contact with cash inside the TCR poses a security risk by exposing cash and creating the potential to manipulate TCR totals. And it’s prime example that a hands-free self audit is more of a concept than a reality.

Finally, the design of the cassettes makes it possible to manually add or remove notes from cassettes when accessing the safe without being validated by the reader which means the inventory is not guaranteed and should be audited to verify it. With so much potential for being out of balance, you can see why a self-audit feature would be helpful as you long you keep in mind that it is not entirely hands-free and still takes the TCR out of service.

Why RSM-based TCRs Don’t Need Self-audit

RSMs are newer technology and were designed to address the problems with traditional cassettes. These devices process and store notes in a completely different way. RSM-based TCRs have a closed loop system that guarantees the inventory in the storage modules in real time and basically eliminates the balancing and security issues that make frequent auditing necessary.

In a rolled storage module, notes are rolled around a cylindrical drum with mylar tape securing notes to the drum. This design makes it much more difficult and tedious to manually remove notes from the storage module.

As notes are deposited to the TCR, they pass through the reader where they are validated for fitness and denomination. Then, only valid notes travel on a controlled path to the appropriate RSM where they are rolled onto the drum, one by one. Invalid notes, (suspect counterfeits, torn notes, etc.) exit the bill path to an external reject bin.

Because these notes never enter the safe, they are not counted in the inventory and do not create an out of balance condition. Rejected notes are managed externally so they don’t require tellers to access the safe or otherwise expose cash inventory to risk.

When a teller initiates a dispense, notes roll off the drum one by one and continue along the exit path bypassing the reader, and then dispense directly to the teller. Unlike cassette TCRs, notes do not need to be validated before dispensing for several reasons:

  • Double picking is impossible because RSMs don’t use a picking mechanism to pull notes.
  • Notes can only be added to an RSM by passing through the feeder and reader so there is no possibility of unvalidated notes being added. Humans cannot remove an RSM and load it by hand so putting the wrong denomination in a storage module isn’t possible.
  • It is very difficult and time consuming to remove notes manually from an RSM so cash is far less exposed to easy theft.
  • Notes are rejected or diverted externally so there are no excess notes that are not in an RSM to reconcile at the end of the day.

By keeping rejected notes out of the safe inventory and limiting access to the modules (and cash) in the safe, you can be confident the TCR inventory matches the reported totals which reduces the need for audits.

Theory and Practice

It’s important to recognize that cash automation technology fundamentally changes the traditional processes around branch cash processing. By keeping cash under tighter control and adding accountability, TCRs can reduce the frequency of audits by eliminating many of the issues audit policies were designed to address.

But you have to consider specific recycler technology when selecting a TCR. Self-audit is an appealing feature if your TCR will require more frequent audits but keep in mind:

  • Audit policies and procedures should be re-evaluated with TCRs
  • RSM based TCRs don’t need self-audit
  • Self-audit is not always hands-free
  • Manual audits and self-audits temporarily take a TCR out of operation

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