Financial Management Program BEST PRACTICES IN …

1 Financial Management ProgramGASBO 2015 Tracy Arner, PRACTICES IN ACCOUNTS PAYABLEAt the end of this session, the participant will be able to - Discuss the definition of accounts payable Recall components of internal control Recite best PRACTICES for accounts payable within a strong internal control frameworkObjectives2 Accounts PayableDefined3 What is Accounts payable ?The principle purpose of any accounts payable department is to paythe government s on next slide4 What is Accounts payable Unpaidbills are listed under Accounts payable on the General Ledger. Any money owed as an account payable is a current liability. Money owed must be paidin a timelymanner to avoid late penalties or fees. Some vendors offer discountsfor payingwithin a certain number of days of the invoice payable DepartmentAn accounting department dedicated to verifying, tracking, and payingall accounts on next slide6 Accounts payable Department Handles all accounts payable in timely manner Follows a system of checksand balances.

2 Uses many tools to assist with tracking accounts payable functions. Modern technology = paperless system; affordable scannersand computers; accounts payable software makes tracking and paying accounts a seamless process with little margin for error or payable The Liability The accounts payable account on the general ledger is classified as a liability something that is owed forExample: office supplies are bought on creditContinued on next slide8 Accounts payable The LiabilityExample: check issued for the office supplies 9 Accounts Payableand Internal Control10 COSOC ommittee of Sponsoring Organizations 11 COSO s Internal Control DefinitionInternal control is a process, effectedby an entity s boardof directors, managementand other personnel, designed to provide reasonable assurance regarding the achievementof objectivesin the following categories.

3 Continued on next slide12 COSO s Internal Control Definition Effectivenessand efficiencyof operations Reliabilityof Reporting Compliancewith applicable lawsand regulations13 Objectives for Accounts PayablePreapproved A/P transactionsA/P transactions recorded in proper period (cutoff)Transactions accurate and recorded in timely mannerRecorded A/P transactions represent events that occurred and are in accordance with Management s authorizationA/P and vendor records are controlled and restricted to authorized personnelDuties are assigned so that no one individual can control recording and processing transactions14 Internal Control Components15 Control Environment and A/P Control environment affects accounts payable by establishing protocols: Published code of ethics communicated with employees. Personnel hired that possess the knowledge and skillsto accomplish A/P tasks.

4 Job descriptions that provide for proper segregation of duties for responsibility and Environment and A/P Control environment affects accounts payable by establishing protocols: Written procedures that cover all phases of accounts payable . Adequate training policies that communicate roles and responsibilities in the A/P area. Managementshould exhibit commitmentfor ongoing trainingof employees in the A/P Assessment and A/PObjective No. 1: All accounts payable transactions are process for the establishment of a payable account , starting with a preapproved listing of vendors and the use of purchase on next slide18 Risk Assessment and A/PObjective No. 2: All validaccounts payable transactionsare included in the accounting records in the proper the endof each accounting cycle, any vendor invoicesshould be recorded into the general ledger in the period in which the goods and/or services were on next slide19 Risk Assessment and A/PObjective No.

5 3: All valid transactions are accurate, consistent with the originatingtransaction data, and information is recorded in a a schedule daily, weekly or monthly recording of accounts payable transactions to ensure all information is recorded in a timely on next slide20 Risk Assessment and A/PObjective No. 4: All recorded accounts payable transactions fairly represent the economic events that actually occurred, are lawfulin nature, and have been executed in accordance with Management s general written policiesconcerning the purchase of goods and on next slide21 Risk Assessment and A/PObjective No. 5: Accessto accounts payable and vendor records are controlled and properly restrictedto authorized accounts payable on next slide22 Risk Assessment and A/PObjective No. 6: Duties are assigned to individuals in a manner that ensures that no one individual can control both the recording function and the procedures relative to processing a of to be Segregated Approval of POs and invoices Approval of access to vendor master files Signing of checksAuthorization Access to accounts payable checks/bank accounts (EFT) Mailing accounts payable checksCustody (Access to Asset) Preparing source documents Maintaining journals, ledgers, or other filesRecord Keeping Preparing reconciliationsReconciliations (Accountability)24 Control Activities Match invoice, receivingand purchase order information and follow up on missing or inconsistent information.

6 Follow up on unmatched open purchase orders, receiving reports and invoicesand resolve missing, duplicate or unmatched items, by individuals independent of purchasing and receiving functions. Use of control totals or one-for-one checking. Restrict access to accounts payable and files used in processing on next slide25 Control Activities Reconcile vendor statements to accounts payable items. Resolve differences between the accounts payable subsidiary ledger and the accounts payable control account . Pay vendors only from original invoices supported by purchase and receiving on next slide26 Control Activities Take discountsif appropriately approved. Purchases are authorized and in accordance with the school's approval levels. Record transaction accuratelyin the general ledger. Promptly perform Accounts payable reconciliations for aging and clearing accounts and review reconciliations in a timely fashion.

7 Continued on next slide27 Control Activities Processinvoices according to invoice payment terms. Route check requests to the appropriate personnel for reviewprior to input into accounts payable . Accurately record expenses in the accounting recordsduring the period in which the liability was incurred. Continued on next slide28 Control Activities Make payments made to preapproved vendors. That approval process should include identifying 1099 vendors in compliance with IRS regulations. Obtain affidavits for contractors providing services Research and resolve, if possible, old outstanding accounts payable checks including compliance with State laws and regulations regarding escheatproperty29 Information and Communication and A/P Examples: Governing board/ Management : Agingof accounts payable . Internal customers: Discrepanciesin vendor invoices.

8 External customers: Discrepanciesin vendor invoices. External auditors: Types of payablesand amounts for Financial and A/P Supervisory activities: Initial and dateface of reconciliation Reviewall changesto vendor information Supervisory approval for changesto invoice once entered into A/P system31 Other best Practices32P-Card Use Supporting documentation Policy Set limits Authorized users 33 Purchasing card for elected officials New law effective 1/1/16 OCGA 36-80-24 Governing authority must vote on issuance of card and create policy for use of the cardNEW 1/1/201634 Set up vendors before any payments are made If not, vendor file incomplete 1099 s could be impossible to prepare and government could be assessed fines and penaltiesW-935 All public employers in Georgia are required to collect a signed.

9 Notarized affidavit from any contractor who contracts with the local government for the physical performance of services Attorney General indicates a purchase order is a contract Affidavitmust be maintained 5 years36 OCGA 13-10-91(b)(1)Other Items Check vendors for debarred listing federal grant expenditures Positive pay Set software controls to restrict access to authorized 2015 The Carl Vinson Institute of Government. All rights reserved.