Introduction

Last modified: October 12, 2010

Accounts payable are created as a part of the normal procurement process. Budgeted funds are encumbered when a purchase order is issued for goods and services. When the goods or services are received, the encumbrance is liquidated while accruing expense, by debiting expense and crediting accounts payable. The payment process will debit the accounts payable and credit cash in bank.

This section provides a brief summary of rules and regulations affecting accounts payable at University System of Georgia (USG) institutions. Each institution must comply with regulations regarding encumbrances, expenses, payments, and credits.

6.1 Controls, Documentation, and Assembly of Documents

Last modified: October 12, 2010

Appropriate controls must be in place to insure that the matching of the requisition, purchase order, receiving evidence, and vendor¡¯s invoice involves adequate separation of duties. In no circumstances should the same employee be authorized to issue a purchase order, match receiving evidence, match the vendor¡¯s invoice, and to authorize payment. Periodic supervisory review of disbursement journals should be accomplished as a precaution to prevent unauthorized procurement/payment activity.

6.1.1 Documentation

Last modified: October 12, 2010

The accounts payable function will receive, or have electronic access to, the following individual documents:

• Departmental Requests
• Purchase Requisitions
• Purchase Orders
• Requests for Authority to Travel
• Receiving Records
• Vendor Invoices
• Travel Expense Statements
• Other authorizations for payments

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6.1.2 Assembly of Documents

Last modified: October 12, 2010

The accounts payable function will assemble all related supporting documents in the process of preparing payments. This process may be a manual paper matching or electronic matching with supporting files. Obviously, periodic auditing of the process is easier if all of the matched paper documents are filed centrally and can be easily linked to a check number. The most cost effective method, however, may not support having all of the matched paper filed centrally. Files of paper documents located where the document is received and processed will be considered adequate if the matching process is done electronically, and a computerized detail matching can be produced allowing auditors to located the required paper trail.

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6.2 Payment Scheduling

Last modified: October 12, 2010

USG institutions are expected to process payments to vendors in a timely manner. A good working relationship between the various vendors and the institution will benefit both parties. In addition to maintaining good business practices, the institutions are mandated by Executive Order of the Governor of the State of Georgia to pay invoices within thirty (30) days from the latter of:

• Invoice date
• Date the invoice is received by the institution
• Date goods and/or services are received by the institution

6.3 Credit Memos

Last modified: June 28, 2011

Proper management and application of credit memos is expected. Failure to properly manage and apply credit memos obviously reduces the institutions limited budget resources.

Vendors issue credit memos for returned goods as well as pricing discrepancies. If a credit memo is anticipated, the institution may hold the original invoice until it receives the corresponding credit memo. The credit memo and the invoice should then be processed together for the net payment amount. If a credit memo is received after an invoice has been paid and the institution does not anticipate additional business with the vendor, the institution should request a refund from the vendor. Institutions should exercise care when dealing with a vendor that will not provide refunds. Obviously, credit memos may be retained and applied in future years if the vendor will not provide a refund.

When refunds are received, they should be credited to the same accounts charged for the expenditure if received in the same fiscal year as the expenditure. If the refund applies to a prior year payment and the payment was funded from state funds, the refund will increase the surplus to be remitted to the state treasury at the end of the fiscal year. Refunds for continuing sponsored grants should be credited to the sponsored grant.

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