Background: UCSD pays approximately $2 million in invoices each day. Using proper internal controls, you can ensure that goods and services are received, and payments are properly processed.
To learn more about the internal control practices for accounts payable explained on this page, click the links below:
Separation of duties
Ensure that payment documents are processed correctly by having different people involved in the payment process. This principle is called separation of duties.
- Best practice is to have different people:
- Approve purchases
- Receive ordered materials
- Approve invoices for payment
- Review and reconcile financial records
- Potential consequences if duties are not separated:
- Erroneous or fraudulent invoices approved for payment
- Unauthorized payments made to non-existent vendors
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Accountability, authorization, and approval
Accountability ensures that you authorize, review, and approve invoices for payment based on signed agreements, contract terms, and purchase orders.
- Best practices:
- Review and update signature authorizations periodically.
- Obtain pre-approval of consultant agreements by Purchasing.
- Verify receipt of goods and services to contract/ purchase order and invoice information.
- Reconcile ledgers for accuracy of recorded transactions.
- Monitor that invoices are paid in a timely manner.
- Potential consequences if accountability does not exist:
- Unauthorized, unnecessary, or fraudulent payments or purchases
- Unauthorized work performed by vendors
- Loss of supplier discounts due to late payments
- Improper charges to incorrect account/ funds
- Conflict of interest when paying a UCSD employee for unauthorized outside work
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Security of assets
Once you receive your purchased goods, secure the materials in a safe location. To account for resources, periodically count your inventory and compare the results with amounts shown on control records.
- Best practices:
- Secure goods received in a restricted area.
- Restrict inventory access to appropriate staff.
- Lock up goods and materials, and provide key or combination to as few people as possible.
- Keep inventory records and periodically calculate beginning and ending inventory amounts.
- Potential consequences if your assets have not been secured:
- Theft of goods
- Inventory shortages
- Additional costs incurred for replacement of goods
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Review and reconciliation
Your reconciliation activities confirm that you're paying for approved purchases and are being billed correctly. Perform monthly ledger reconciliations to catch improper charges and validate transactions.
- Best practices:
- Review vendor invoices for accuracy by comparing charges to purchase orders.
- Verify that the goods and services purchased have been received.
- Perform monthly reconciliations of operating ledgers to assure accuracy and timeliness of expenses.
- Potential consequences if review and reconciliation is not performed:
- Improper charges made to your department budgets
- Disallowances resulting from costs charged to incorrect accounts/funds
- Payments made for items or services not provided
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Questions? For information about accounts payable responsibilities, contact Disbursements, (858) 534-4080. For information on internal control practices, contact Debbie Rico, (858) 822-2797.
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