Accounts Payable/Contracts Payable
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Transcript of Accounts Payable/Contracts Payable
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Accounts/ContractsPayable
Presented by: Zac Morris, CPA
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Overview
What will we be covering today? ORC requirementsCompiling accounts payable and contractspayable for GAAP financial statementsInternal controls over accounts payableFraud risk factors in accounts payable
processesCommon audit deficiencies in accountspayable
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Ohio Revised Code
Ohio Compliance SupplementLocated on Auditor of State of Ohio website
http://www.auditor.state.oh.us/services/lgs/publications/LocalGovernmentManualsHandbooks/ohio_compliance_supplement.htm
Used by all auditors in Ohio (AOS and IPAs)
Includes Suggested Audit Procedures
Most common audit citations:5705.41(D) purchase orders dated after expenditure is incurred
Not utilizing a Then & Now
No Board approval on Then & Now Certificates > $3,000
Contracts extending beyond the end of the fiscal year
http://www.auditor.state.oh.us/services/lgs/publications/LocalGovernmentManualsHandbooks/ohio_compliance_supplement.htmhttp://www.auditor.state.oh.us/services/lgs/publications/LocalGovernmentManualsHandbooks/ohio_compliance_supplement.htmhttp://www.auditor.state.oh.us/services/lgs/publications/LocalGovernmentManualsHandbooks/ohio_compliance_supplement.htmhttp://www.auditor.state.oh.us/services/lgs/publications/LocalGovernmentManualsHandbooks/ohio_compliance_supplement.htmhttp://www.auditor.state.oh.us/services/lgs/publications/LocalGovernmentManualsHandbooks/ohio_compliance_supplement.htm -
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Purchase Orders
How to deal with problematic employees/departmentswho do not get POs prior to ordering items
Address at an in-service training
Ask auditors to come in and speak to the groupIf you are getting cited in your audit for this, send a copy of the audit report/management letter to the specificindividuals/departments who caused the noncompliance.
Require them to formally respond to the citation.
Require explanation for anything requiring Board approval ona Then and Now or simply implement a policy requiringcommunication of all violations.
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Purchase Orders (Continued)
Threaten to not pay the invoices
No orders or contracts involving the expenditure of money are to bemade unless there is a certificate of the fiscal officer that the amountrequired for the order or contract has been lawfully appropriated andis in the treasury or in the process of collection to the credit of anappropriate fund free from any previous encumbrances. [Section5705.41(D)].
Processing of Then and Now certificate: The taxing authority has 30days from the receipt of such certificate to approve payment byresolution or ordinance. If approval is not made within 30 days, thereis no legal liability on the part of the subdivision or taxing district.
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Purchase Orders (Continued)
Contracts extending beyond the end of the fiscal year Should be evaluated prior to year end and closed out for amountsnot payable for work done in FY12
Work done in June 2012, paid in FY13 can remain open
Work done in FY13 should be closed out
Pursuant to Section 5705.44, Ohio Rev. Code, where acontract or lease runs beyond the termination of the fiscalyear in which it is made, only the amount of the obligationmaturing in the current fiscal year need be certified.
Reopen PO in FY13 for amount of work expected to be completed inFY13
The remaining amount is a fixed charge required to beprovided for in the subsequent fiscal year's appropriations.
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Bidding of Contracts
Required for contracts > $25,000 (Section D: Board of Education ORC 3313.46)
Common exceptions:an urgent necessity 10 [Section 3313.46 (A)]
acquisition of educational materials used for teaching; [Section 3313.46(B)(1)]
any item which the Board, by a two-thirds vote, determines is available and canbe obtained only through a single source; [Section 3313.46(B)(2)]
energy conservation measures, with the approval of two-thirds of the Board[Section 3313.46(B)(3)] or
acquiring computer software or hardware for instructional purposes pursuant toSection 3313.37 (B) (4). [Section 3313.46(B)(4)].
School districts that participate in a joint purchasing contract are exempt fromusing competitive bidding. [R.C. Section 9.48(C)-(D)]
If you can acquire the same item for a lower price from another vendor, no biddingrequired
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W-9s and 1099s
W-9s sent to all vendorsSend when they submit an invoice for payment
Payments for services to an individual, partnership or LLC thatexceed $600 for the year require a 1099.
This includes payments made during the normal course of business,including but not limited to: Sub contract labor
Repairs of equipment
Construction
Lawn Care Rent payments
Payments to any attorney in excess of $600 for the year. These feesare reportable even if paid to a corporation.
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Internal Controls over Purchasing
Controls must be testableMake sure to take credit for what you are doing
Checkmarks, initials, signatures, etc.
What happens when someone is on vacation?
Bank reconciliationsHave seen an increase in falsified bank statements in recent years
Should be performed and reviewed by someone other than theindividual responsible for generating checksShould be reviewing endorsements on checks during reconciliation,if possiblePayroll clerk do bank reconciliation on general checking account,and AP Clerk perform reconciliation on payroll account
Both reviewed by Treasurer
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Internal Controls over Purchasing(Continued)
Controls over vendor files
Is there a policy in place over access/editing to vendor master list?
Who is authorized to set up new vendors in USAS?
Who is authorized to make changes to existing vendors in USAS?Require authorization forms that must be approved by Treasurer
Search existing vendor files prior to setting up new requests
Review vendor files regularly
Inactivate after a specified period of no payments
Review files for missing details (no address, only PO Box, etc)
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Internal Controls over Purchasing(Continued)
Data extraction softwareCompare employee master to vendor master for commondetails (names, addresses, phone numbers)
Analyze vendor master file for potential duplicate vendors(same name, address, etc)
Can be caused by different department using same vendor
Can result in duplicate payments on invoices
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Compiling Accounts Payable for GAAP
Accounts PayableDefinition: goods or services were received prior to June 30and were paid for after June 30
Easiest method utilize PAYABL report from USAS Only works if you are diligent about properly entering Invoice Date
and Received Date fields
If dates are not entered here, it defaults to date paid
No manual data entry for your staff
GAAP preparer can typically run this report themselves (if you haveprovided them Read-Only A-site access)
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Higher Risk Expenditures
Credit card or procurement card purchasesPolicies should, at a minimum, identify authorized users,guidelines for allowable use/ purchases,, specific unallowableuses, reporting, monitoring
Need solid internal controls over physical access to the cards
Complete request form prior to signing out a card
Require detailed receipts be turned in for all purchases
No sales tax should be paid on these transactions
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Higher Risk Expenditures
Employee reimbursementsThese policies should, at a minimum, identify the types of travelauthorized; guidelines for allowable and unallowable expenses;limitations on amount of reimbursement; types of supportingdocumentation required for reimbursement requests; reporting;monitoring of use by appropriate levels of management; and other guidelines the legislative body deems appropriate.Common issue lack of approval for Treasurer and/or Superintendents reimbursements
Treasurer approve Superintendent
Superintend approve Treasurer
Board/Board President approve both
Auditor of State of Ohio Best Practices (Spring 2004/Winter 2009/10)
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Contact Information
Zac Morris, CPA
Senior Manager, Rea & Associates, Inc.
Office: 330-674-6055
DL: 330-521-4539
Cell: 330-231-2493
mailto:[email protected]:[email protected]