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

City of Brookfield
Internal Controls Documentation Accounts Payable Disbursements Process

Process Documentation (A) (B) Vendor Invoice Processing: Invoices for goods and services are received and approved by the department that ordered them. Each department receives and signs for the goods that they ordered. They are responsible for checking the quantities and 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 may approve items for payment. Checks requests are used to process noninvoiced items for payment such as refunds of deposits, employee reimbursements (other than travel), refunds of overpayments, etc.. Contractor payment requests for public works projects are submitted on special forms generated by the Engineering Department. Invoices for capital projects require project and sub-projects numbers in addition to the appropriate G/L account numbers. Procurement Card Transactions: Procurement cards are issued to select City employees to purchase goods and services in instances where the issuance of a purchase Initiation of transaction order is not required and where the supplier accepts credit card payments. Each cardholder is assigned daily and monthly transaction limits. In addition, each cardholder is assigned to a Merchant Category Group which restricts use by certain vendor types (MCC codes). Cardholders review and approve their monthly charges using an online system provided by JP Morgan Chase, the card issuer. As a part of this process the cardholder must enter an expense description and the G/L account number to be charged for each transaction.

Control Procedure (C)

Each department has been issued a stamp for approving invoices. This stamp includes lines for the date, PO number, signature of the person approving, and G/L account number(s) to be charged.

Department Approval Authorization Lists are kept on file in the Accounting Department. These lists are updated on an annual basis. Check request forms are provided to the various departments by the Accounting Dept.. Only original (blue print) forms are accepted, no copies. All check requests must be approved by the Accounting Manager. The Accounting Manager must approve all contractor payment requests. The Utility Accountant approves contractor payments for water/sewer projects. All capital project invoices must be approved by either the Accounting Manager or the Utility Accountant.

The City's Procurement Card Program is administered by the Accounting Manager who has been designated as the City's Program Administrator. Changes to cardholder profiles can only be made by the Program Administrator. JP Morgan Chase requires a security identification code whenever requesting charges to cardholder profiles. Cardholders print an Expense Report listing all their charges for the current billing cycle. They sign and date their report and forward it to the Accounting Manager. The Accounting Manager reviews all cardholder transactions and compares them to the monthly statement from JP Morgan Chase.

184028735.xls.ms_office - AP Disbursements Matrix

Process Documentation (A) (B) ACH Transactions: Certain payments such as debt service, payroll taxes, pension contributions, and health insurance claims are paid via an ACH automatic debit to the City's bank account. Prior to withdrawal, ACH documentation is placed in a special file with the Accounts Payable Clerk. These transactions are posted on a weekly basis in the same manner as vendor invoices. Vendor Payments By Check: Approved vendor invoices are forwarded to the Accounting Department on a daily basis. Invoices are entered by batches into the accounts payable system by the Accounts Payable Clerk. Once all of the invoices have been entered a Vendor Invoice Edit Listing is run. Running this report also generates an Error Listing report. If errors exist, the batch will not post. If correct, the batch is posted which updates vendor files and creates the general ledger journal entry. The journal entry is then posted to the general ledger. A/P checks are run on a weekly basis. Invoices are selected for payment based upon the due date. A Selected Invoices Edit Listing is run and saved to compare with the check register which is generated when the checks are run. Next, the checks are generated, totals are verified, and the checks are printed. Note: Checks are automatically signed as they are printed. Once checks are run and the totals verified, the Accounts Payable Clerk runs the Post Vendor Payments option that updates the 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 check file to Tri City Bank for positive pay and gives the Accounting Manager a copy of Transaction recording the check register to review.
and processing

Control Procedure (C) All ACH transactions are initiated by authorized Finance/Accounting personnel.

ACH transactions are approved and coded (G/L account numbers) by the person who initiated the transaction.

The Accounts Payable Clerk runs a tape of the amounts of each invoice in the batch and enters the total into the accounts payable system. The system tracks the amounts of each invoice being entered and compares the total amount entered to the batch total. The Accounts Payable Clerk compares the total amount on the Vendor Invoice Edit Listing to the batch total and checks the Error Listing report. The Vendor Invoice Edit Listing and Journal Post Listing (Summary & Detail) are retained for audit purposes. Accounts payable checks are prenumbered and kept in a locked storage room in the Accounting Department. Check signatures are stored in a secure computer file that can only be accessed by authorized IT personnel.

The Selected Invoices Edit Listing, Check Register, and Journal Post Listing (Summary & Detail) are retained for audit purposes.

The Accounting Manager reviews the check register and approves the uploaded check file on the Tridata system. The Accounting Manager writes the Tridata confirmation number on the check register and initials it.

Procurement Card Payments: Procurement card charges are paid via ACH automatic debit to the City's bank account on the 18th of each month. This payment is processed along with other ACH payments.

The Accounting Manager receives, codes, and approves the monthly statement from JP Morgan Chase.

184028735.xls.ms_office - AP Disbursements Matrix

and processing

Process Documentation (A) (B) Monthly procurement card transactions are uploaded into the accounts payable system from a file created through JP Morgan Chase Smart Data On-Line. The Accounts Payable Clerk uploads the Excel file into the accounts payable system which creates an invoice batch. Each P-Card transcation is recorded as invoice in the batch. The Accounts Payable Clerk edits invoice information including adding vendor numbers when necessary and entering purchase order 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 vendor files and creates the general ledger journal entry. The journal entry is then posted to the general ledger. ACH Payments: The Accounts Payable Clerk processes ACH transactions on a weekly basis. The process is similar to the recording of vendor invoices that are paid via check. Corrections to posted ACH and procurement card transactions can only be made through an adjusting journal entry. The Accounts Payable Clerk gives documentation to the general accountant who makes the adjusting journal entry. Corrections to posted vendor invoices paid by How the incorrect check can be made by voiding either the processing of transactions is resolved check or invoice through the accounts payable system, or through an adjusting journal entry. Voids processed through the accounts payable system automatically generate the appropriate journal entry.

Control Procedure (C) The Accounting Manager downloads the JP Morgan Chase transaction information into an Excel file. A copy of this worksheet is filed with the JP Morgan Chase payment detail. The Accounts Payable Clerk compares the batch total to the JP Morgan Chase monthly statement.

The Accounts Payable Clerk checks the Error Listing report and makes corrections as needed.

The Vendor Invoice Edit Listing and Journal Post Listing (Summary & Detail) are retained for audit purposes.

ACH transactions are processed using a special bank code and documentation is filed separately from A/P invoices paid by check. Adjusting journal entries can only be made by the City's Accounting Manager, Utility Accountant, or Accountant.

Adjusting journal entries can only be made by the City's Accounting Manager, Utility Accountant, or Accountant.

Voiding of vendor checks or invoices through the accounts payable system must be approved by the Accounting Manager or other designated Accounting Dept. personnel. The Accounts Payable Clerk runs the Open Invoice Aging Report and provides the information to the Accounting Manager.

Reconciliation of the various Vouchers Payable general ledger accounts is done on a quarterly basis. An Open Invoice Aging 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 outstanding (unpaid) vendor invoices are made.

A Selected Invoice Edit Listing is run and the total is compared to a tape total of the actual unpaid invoices. 4

184028735.xls.ms_office - AP Disbursements Matrix