Accounts Payable and Procurement (1)

8/10/2019 Accounts Payable and Procurement (1)

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5/14/20

B R A N D O N C L I N E F E L T E R

C C C S I N T E R N A L A U D I T M A N A G E R

Internal Controls: Accounts

Payable and PurchasingA Practical Approach

Importance of Internal Controls

- Make sure we stay on track

- Safeguards against dishonesty and honest mistakes

- Keeps our assets safe and our accounting accurate

- Accounts Payable and Procurement are areassubject to asset misappropriation.- Disbursements/misappropriation of assets

- Inappropriate purchases

- No control is 100% effective all the time

- Controls should be linked with others to maximizeeffectiveness


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5/14/20

Segregation of Duties Accounts Payable

Authorization Vendor Maintenance Invoice/Pay Request Approval Check Signing

Recording Recording Invoices Recording Credit Memos

Custody/Review Vendor Change report review Check Disbursement Analytical Review

Aging review Budget to Actual

Vendor Maintenance Key Controls

Should not also Record/approve vendor invoices

Authorize/print checks

Authorize/execute wire transfers

Vendor File review Duplicate addresses for multiple vendors

Employee addresses for a vendor

Multiple vendors with similar names

Vendors compared against the Suspension and Debarment list

Purge of non-active vendors


4/12

5/14/20

Invoice / Pay Request Approval Key Controls

Should not also Record vendor invoices Authorize/print checks

Signature log Hierarchy for who has approval authority

Spending limit delegation

Updated regularly

Signature considerations Signed and dated for evidence of approval If stamp used physical security

Is delegation appropriate Approval obtained prior to P-Card purchase

Check Signing Key Controls

Should not also Prepare bank reconciliations

Review and approve the bank reconciliations

Create the positive pay file for the bank

Responsibility for discrepancies with positive pay file

Vendor considerations Familiar vendor

Appropriate/original support for payment

Review thresholds

Multiple payments on same invoice


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Recording Invoices Key Controls

Should not also Distribute vendor checks

Prepare AP sub-ledger reconciliation

Authorize/print checks

Authorize/execute wire transfers

Supporting Documentation Original support retained

No disbursements on statements

Three way match (PO/Invoice/Receipt)

Invoice charges compared with PO for accuracy Receipt at entity determined, not shipped elsewhere

Sequential invoices

Recording Credit Memos Key Controls

Should not also Process shipping/receiving

Authorize/record invoices

Disbursement of checks

Perform/review reconciliations

Supporting documentation

Should include comparison to original purchase order Compare to return documentation

Receiving information


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Vendor Change Review Key Controls

Should not also Have access to add, delete or modify vendor information

Authorize/record invoices

Change Log

Review by someone outside the AP/Disbursements process

Clear documentation for changes

New vendor validation process

Vendor Check Disbursements Key Controls

Should not also Authorize/record invoices

Authorize/ print checks

Prepare the bank reconciliation

Check Disbursement to Vendors

Severely restrict manual checks Compare against check register, or positive pay file


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Procurement

Segregation of Duties Procurement

Authorization Approval of Purchase Requisition

Bid Process

Recording Initiation of Purchase Order

Custody / Review Receipt and Evaluation of Goods and Services


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5/14/20

Approval of Purchase Requisition Key Controls

Should not also Initiate Purchase Requests Initiate Purchase Orders

Total Purchases review Budget to Actual Report of all purchases Purchases above a threshold for new vendors

Delegation of Authority Approval from purchasing delegate only Limit set at an appropriate amount (Supervisor review)

Authority Matrix Resource for Purchasing department for approvals

Bid Process Key Controls

Red Flags to Consider Repeated awards to same entity

Competitive bidder complaints / protests

Complaints about quality/quantity

Multiple contracts awarded below threshold

Established thresholds invite split purchases

Abnormal bid patterns

Agent fees

Documentation


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5/14/20

Bid Process Key Controls

Red Flags to Consider Questionable bidder

Awards to non-lowest bidder

Contract scope changes

Post-award contract change orders

Urgent need / sole source

Documentation

Initiation of Purchase Order Key Controls

Should not also Initiate Purchase Requests Approve Purchase Requests Vendor Master file maintenance Record Vendor invoices

Total Purchase Order review Review by supervisor level of total Purchase Orders by vendor Are sole source transactions clearly documented?

Original Documentation Copies should not be used to prevent duplication Purchase Orders should be cancelled upon fulfillment


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5/14/20

Receipt and Evaluation Key Controls

Should not also Initiate Purchase Requests Approve Purchase Requests Record Vendor invoices

Receipt of Goods / Services Receiving should be done at one centralized location Should have sufficient knowledge to understand items being received Fixed Asset tracking requirements (grant specific) Physical Security Access by appropriate staff

Evaluation of Corrections / Adjustments Rejection of Goods/Services that do not conform to agreed standards

Miscellaneous Procurement Controls

Written Policies and Procedures / FunctioningProcess

A scattered process can lead to pressure for quick procurementactions which will require shortcuts

Emergency procurement actions should be considered anddocumented in advance for all forms of procurement

Periodic rotation of Procurement employees


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5/14/20

Questions?

Contact Information

Brandon Clinefelter

Internal Audit Manager, CCCS

720-858-2885

[email protected]

Documents

Accounts Payable and Procurement (1)