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Purchase and Accounts Payable

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					City of ______________
Summary and Evaluation of Key Controls
Accounts Payable Disbursements Cycle


The following summarizes the key controls that typically would be relevant to a local government client.
Determine if we have addressed these controls in the activity-level controls matrix attached.




1. Persons processing accounts payable are separate from those ordering or receiving goods or
services.

2. There is an appropriate system for review and approval of vendors.

3. Invoices are properly approved for payment.

4. The accounts payable GL account and list of accounts payable are reconciled regularly.

5. In some governments (espcially larger organizations), there is a formal purchase-order process in
place.

6. There is a process to review, record, and approve retainages and encumbrances at year end.

If there are controls listed above that are not in place, evaluate if there are compensating
controls that achieve the same control objective and list here:




                                                    Summary                                                1
City of Brookfield
Internal Controls Documentation
Accounts Payable Disbursements Process




                                   Process Documentation                                    Control Procedure


        (A)                                    (B)                                                   (C)

                      Vendor Invoice Processing:
                      Invoices for goods and services are received           Each department has been issued a stamp
                      and approved by the department that ordered            for approving invoices. This stamp includes
                      them. Each department receives and signs               lines for the date, PO number, signature of
                      for the goods that they ordered. They are              the person approving, and G/L account
                      responsible for checking the quantities and            number(s) to be charged.
                      quality of the goods that are received. They
                      are also responsible for checking invoice
                      pricing and the total amount due.
                      Only authorized personnel within each                  Department Approval Authorization Lists are
                      department may approve items for payment.              kept on file in the Accounting Department.
                                                                             These lists are updated on an annual basis.
                      Checks requests are used to process non-               Check request forms are provided to the
                      invoiced items for payment such as refunds             various departments by the Accounting Dept..
                      of deposits, employee reimbursements (other            Only original (blue print) forms are accepted,
                      than travel), refunds of overpayments, etc..           no copies. All check requests must be
                                                                             approved by the Accounting Manager.
                      Contractor payment requests for public works           The Accounting Manager must approve all
                      projects are submitted on special forms                contractor payment requests. The Utility
                      generated by the Engineering Department.               Accountant approves contractor payments
                                                                             for water/sewer projects.
                      Invoices for capital projects require project          All capital project invoices must be approved
                      and sub-projects numbers in addition to the            by either the Accounting Manager or the
                      appropriate G/L account numbers.                       Utility Accountant.

                          Procurement Card Transactions:
                          Procurement cards are issued to select City        The City's Procurement Card Program is
                          employees to purchase goods and services in        administered by the Accounting Manager who
Initiation of transaction
                          instances where the issuance of a purchase         has been designated as the City's Program
                          order is not required and where the supplier       Administrator.
                          accepts credit card payments.
                          Each cardholder is assigned daily and monthly      Changes to cardholder profiles can only be
                          transaction limits. In addition, each cardholder   made by the Program Administrator.
                          is assigned to a Merchant Category Group           JP Morgan Chase requires a security
                          which restricts use by certain vendor types        identification code whenever requesting
                          (MCC codes).                                       charges to cardholder profiles.
                          Cardholders review and approve their monthly       Cardholders print an Expense Report listing
                          charges using an online system provided by         all their charges for the current billing cycle.
                          JP Morgan Chase, the card issuer. As a part        They sign and date their report and forward it
                          of this process the cardholder must enter an       to the Accounting Manager. The Accounting
                          expense description and the G/L account            Manager reviews all cardholder transactions
                          number to be charged for each transaction.         and compares them to the monthly statement
                                                                             from JP Morgan Chase.




                      5800c464-bc3b-4fc0-a576-63e0f83031a4.xls - AP Disbursements Matrix                                  2
                                 Process Documentation                                  Control Procedure


       (A)                                    (B)                                                (C)
                     ACH Transactions:
                     Certain payments such as debt service,               All ACH transactions are initiated by
                     payroll taxes, pension contributions, and            authorized Finance/Accounting personnel.
                     health insurance claims are paid via an ACH
                     automatic debit to the City's bank account.
                     Prior to withdrawal, ACH documentation is            ACH transactions are approved and coded
                     placed in a special file with the Accounts           (G/L account numbers) by the person who
                     Payable Clerk. These transactions are posted         initiated the transaction.
                     on a weekly basis in the same manner as
                     vendor invoices.

                     Vendor Payments By Check:
                     Approved vendor invoices are forwarded to            The Accounts Payable Clerk runs a tape of
                     the Accounting Department on a daily basis.          the amounts of each invoice in the batch and
                     Invoices are entered by batches into the             enters the total into the accounts payable
                     accounts payable system by the Accounts              system. The system tracks the amounts of
                     Payable Clerk.                                       each invoice being entered and compares the
                                                                          total amount entered to the batch total.
                      Once all of the invoices have been entered a        The Accounts Payable Clerk compares the
                      Vendor Invoice Edit Listing is run. Running         total amount on the Vendor Invoice Edit
                      this report also generates an Error Listing         Listing to the batch total and checks the
                      report. If errors exist, the batch will not post.   Error Listing report.
                      If correct, the batch is posted which updates
                      vendor files and creates the general ledger         The Vendor Invoice Edit Listing and Journal
                      journal entry. The journal entry is then posted     Post Listing (Summary & Detail) are retained
                      to the general ledger.                              for audit purposes.
                      A/P checks are run on a weekly basis.               Accounts payable checks are prenumbered
                      Invoices are selected for payment based upon        and kept in a locked storage room in the
                      the due date. A Selected Invoices Edit Listing      Accounting Department.
                      is run and saved to compare with the check
                      register which is generated when the checks         Check signatures are stored in a secure
                      are run. Next, the checks are generated,            computer file that can only be accessed by
                      totals are verified, and the checks are printed.    authorized IT personnel.
                      Note: Checks are automatically signed as
                      they are printed.
                      Once checks are run and the totals verified,        The Selected Invoices Edit Listing, Check
                      the Accounts Payable Clerk runs the Post            Register, and Journal Post Listing (Summary
                      Vendor Payments option that updates the             & Detail) are retained for audit purposes.
                      vendor files and creates the general ledger
                      journal entry. The journal entry is then posted
                      to the general ledger.
                      Finally, the Accounts Payable Clerk uploads         The Accounting Manager reviews the check
                      the check file to Tri City Bank for positive pay    register and approves the uploaded check
                      and gives the Accounting Manager a copy of          file on the Tridata system. The Accounting
Transaction recording the check register to review.                       Manager writes the Tridata confirmation
  and processing                                                          number on the check register and initials it.

                     Procurement Card Payments:
                     Procurement card charges are paid via ACH            The Accounting Manager receives, codes,
                     automatic debit to the City's bank account on        and approves the monthly statement from
                     the 18th of each month. This payment is              JP Morgan Chase.
                     processed along with other ACH payments.




                     5800c464-bc3b-4fc0-a576-63e0f83031a4.xls - AP Disbursements Matrix                                3
   and processing




                                  Process Documentation                                  Control Procedure


        (A)                                   (B)                                                  (C)
                     Monthly procurement card transactions are            The Accounting Manager downloads the JP
                     uploaded into the accounts payable system            Morgan Chase transaction information into an
                     from a file created through JP Morgan Chase          Excel file. A copy of this worksheet is filed
                     Smart Data On-Line.                                  with the JP Morgan Chase payment detail.
                     The Accounts Payable Clerk uploads the               The Accounts Payable Clerk compares the
                     Excel file into the accounts payable system          batch total to the JP Morgan Chase monthly
                     which creates an invoice batch. Each P-Card          statement.
                     transcation is recorded as invoice in the
                     batch.
                     The Accounts Payable Clerk edits invoice             The Accounts Payable Clerk checks the
                     information including adding vendor numbers          Error Listing report and makes corrections
                     when necessary and entering purchase order           as needed.
                     numbers if applicable. Edit reports are run
                     in the same manner as those for standard
                     vendor invoice processing.
                     If correct, the batch is posted which updates        The Vendor Invoice Edit Listing and Journal
                     vendor files and creates the general ledger          Post Listing (Summary & Detail) are retained
                     journal entry. The journal entry is then posted      for audit purposes.
                     to the general ledger.

                     ACH Payments:
                     The Accounts Payable Clerk processes ACH             ACH transactions are processed using a
                     transactions on a weekly basis. The process          special bank code and documentation is
                     is similar to the recording of vendor invoices       filed separately from A/P invoices paid by
                     that are paid via check.                             check.

                         Corrections to posted ACH and procurement        Adjusting journal entries can only be made
                         card transactions can only be made through       by the City's Accounting Manager, Utility
                         an adjusting journal entry. The Accounts         Accountant, or Accountant.
                         Payable Clerk gives documentation to the
                         general accountant who makes the adjusting
                         journal entry.
                         Corrections to posted vendor invoices paid by    Adjusting journal entries can only be made
   How the incorrect
     processing of
                         check can be made by voiding either the          by the City's Accounting Manager, Utility
transactions is resolved check or invoice through the accounts            Accountant, or Accountant.
                         payable system, or through an adjusting
                         journal entry.
                         Voids processed through the accounts             Voiding of vendor checks or invoices through
                         payable system automatically generate the        the accounts payable system must be
                         appropriate journal entry.                       approved by the Accounting Manager or other
                                                                          designated Accounting Dept. personnel.

                        Reconciliation of the various Vouchers            The Accounts Payable Clerk runs the Open
                        Payable general ledger accounts is done on        Invoice Aging Report and provides the
                        a quarterly basis. An Open Invoice Aging          information to the Accounting Manager.
                        Report is run as of a specific date. The report
Process for reconciling lists all of Vouchers Payable accounts and
 detail to the general  the balances as of the date selected. These
         ledger         balances are compared to the general ledger.
                        In addition, periodic reconcilations of the       A Selected Invoice Edit Listing is run and the
                        outstanding (unpaid) vendor invoices are          total is compared to a tape total of the actual
                        made.                                             unpaid invoices.




                      5800c464-bc3b-4fc0-a576-63e0f83031a4.xls - AP Disbursements Matrix                               4

				
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