Q. (cont.) ... and sign off annually for automatic recurring payments that are paid through A/P without signature from manager or purchase order (i.e. utilities, copiers, etc.). Does anyone currently do this and do you have a template form? We are wanting to request lease information from the departments.
A. I received this reply from Judy Bicking, our practitioner expert, who has extensive experience in AP from her long tenure with Johnson & Johnson. She says:
We put a presentation together for Internal Audit, covering the current process and issues that were arising from that process, along with costs. We then submitted a proposal for a new process, eliminating the issues and cost without raising risk. Examples:
Utility bills were sent directly to AP to be paid. This included any utility in which rates were governed; this was then sent to the Economics group for review after the fact.
Any contracts that had a recurring payment (leases of equipment, buildings, vehicles, etc.). All payments were set up via an in-house check request, because that had system repeat payment options. The approval was for the full yearly amount, then it showed if the payment was monthly, bi-monthly or quarterly, with the appropriate amount. That involved one form, was approved once and contained a contract number. Condition: even if it was a three-year contract, it was only set up and approved for one year at a time.
To ensure internal controls are in place and the new process is efficient, cost effective, compliant and is low- or no-risk, Audit should sign off.