Background: UCSD department buyers spend approximately $350 million per year on goods and services. Follow these internal control practices and learn the importance of separating duties, obtaining appropriate authorizations and approvals, securing assets, and verifying charges.

To learn more about internal control practices for purchasing explained on this page, click the links below:

• Separation of duties
• Accountability, authorization, and approval
• Security of assets
• Review and reconciliation

Separation of duties
To ensure proper separation of duties, assign related buying functions to different people. With proper segregation, no single person has complete control over all buying activities.

• Best practice is to have different people:
  • Approve purchases
  • Receive ordered materials
  • Approve invoices for payment
  • Review and reconcile financial records
  • Perform inventory counts

• Potential consequences if duties are not separated:
  • Unauthorized or unnecessary purchases made
  • Improper charges made to department budgets
  • Excessive costs incurred
  • Goods purchased for personal use

Accountability, authorization, and approval
You maintain accountability when you authorize, review, and approve purchases based on signed agreements, contract terms, and purchase orders.

• Best practices:
  • Comply with ethical buying practices and policy.
  • Review and update signature authorizations periodically.
  • Obtain pre-approval of consultant agreements by Purchasing.
  • Verify receipt of goods and services against contract/ purchase order and invoice information.
  • Reconcile ledgers for accuracy of recorded transactions.
  • Monitor to ensure that invoices are paid in a timely manner.

• Potential consequences if accountability does not exist:
  • Unauthorized, unnecessary, or fraudulent purchases
  • Unauthorized work performed by suppliers
  • Lost supplier discounts due to late payments
  • Improper charges to incorrect account/ funds resulting in a misappropriation of funds
  • Conflict of interest when paying UCSD employee for unauthorized outside work

Security of assets
Once you have received your purchased goods, secure the materials in a safe location. To ensure that your resources are accounted for, 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 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

Review and reconciliation
Practice timely review of supplier’s invoice, packing slips, and purchase orders. Check accuracy of the information for prior payment, correct quantity ordered, and price charged. Monthly ledger reconciliation enables you to find improper charges and validate appropriate financial transactions.

• Best practices:
  • Review supplier 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 ensure accuracy and timeliness of expenses.

• Potential consequences if review and reconciliation is not performed:
  • Improper charges 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 purchasing responsibilities, contact Purchasing, (858)534-3084. For information on internal control practices, contact Debbie Rico, (858) 822-2797.