PURCHASING and RECEIVIENG _______________________________________________ _

Commitment to Authorized Purchases and Expenses

Purchasing Table of Contents

Copedia License Agreement using the content means you agree and accept the terms of the license. Manual Cover Page Table of Contents Overview Purchasing .. Purch Purchasing Accounting Manual Cover Page Purch-001 Purchasing Manual Table of Contents Purch-010 Purchasing Policy 100 Purchasing Flowchart 150 Purchase Order Policy 200 P Card Policies 300 Procurement Policy 400 Internal Controls for Purchasing 500 Receiving PurchPurchPurchPurchPurchPurch-

Receiving Flowchart 100 Receiving Internal Controls Receive-500

Receive-

Purchasing Policy
ID: Purch-100 Purchasing Policy
Effective Date: 01/01/10 Last Revision: 01/01/10

Purchasing
Version: 10.0 Total Pages: 2

Purpose
The purpose of this document is to describe how you buy goods, services, and assets at our organization.

Overview
Purchasing means the act of buying or obtaining goods, services, or assets on behalf of the company for a price or its equivalent. All purchasing must comply with the following policies and procedures: Purchasing is authorized by the Delegated Authority Policy. Purchasing is implemented by the Accounts Payable Procedures, Disbursement Approval Procedure, P-Card Policies, Purchase Order Policy and Procedures, and the Procurement Policy and Procedures.

Policy
General Purchasing Policies All purchases over $100 require the use of a purchase order. Verbal Quotes and Awards must be documented. Purchasing amounts between $1,000 and $5,000 require at least three price quotes. Purchases between $5,001 and $24,999 require written quotes be submitted from 3 qualified vendors for approval by the purchasers supervisor. Purchases of $25,000 or more must comply with the procurement procedures. All real estate leases and transactions must comply with the procurement procedures regardless of amount and without exception.

The company uses p-cards to increase purchasing efficiency and reduce accounting costs. Company P-Card Employees are authorized to use their pcards according to the p-card policies and procedures Division of Duties All inventory purchasing activities should be separate from the associated receiving activity. P-Card purchasing and receiving activities should not be separated but should be independently verified by use of a log. All purchasing activities must be separate from accounting activities.

Purchasing Flowchart

Start

Purchase Order Issued Vendor Copy

Requisition
Purchasing receives approved requisition from department

Department Copy Receiving Department Copy Accounts Payable Copy Purchasing Department Copy

Off Page Connector Department Purchasing

Purchasing identifies best price and vendor

Off Page Connector Receiving

Off Page Connector Accounts Payable

Purchasing Flowchart 6

Purchase Order Policy and Procedures

ID: Purch-200 Purchase Orders
Effective Date: 01/01/10 Last Revision: 01/01/10

Purchasing
Version: 10.0 Total Pages: 2

Purchase Order Authority Policy

Purchases Only supervisory personnel are permitted to make purchases on the company behalf. All purchases over $100.00 require a Company Purchase Order. The controller issues Purchase order books. Purchase Orders and Approval Supervisory personnel may sign purchase orders up to $1,000.00. A member of management must authorize any purchase over $1,000.00 and under $10,000.00. A Company officer must sign all purchase orders over $ 10,000.00. All purchases over $25,000 are subject to the company procurement procedures. All information required on the Purchase Order Form must be completed including the proper coding. Once the purchase order is completed, one copy is given to the vendor and the other copy is turned in with the employees paperwork.

Small Tools
Tools Rental Supervisors may rent small tools as needed and in accordance with the purchasing policy.

Purchasing Small Tools Project Managers are authorized to purchase small tools in accordance with the purchasing policy. Small tools shall be charged directly to the job.

Purchasing Flowchart 7

Equipment Rental Policy

This policy provides direction to those who need to rent equipment and defines how the equipment cost will be accounted for by the Company. The objective of this policy is to control and efficiently utilize rental equipment. All equipment rentals shall be closely monitored. The Company differentiates between short and long term rentals. Short Term Rentals Short-term rentals are those rentals less than 1 month in duration. Project Managers are authorized to rent short-term rentals. All costs for short-term rentals shall be charged directly to the job. Do not place equipment numbers on the machine. Long Term Rentals Long term rentals are those rentals that will exceed 1 month. Only the equipment manager and any vice president are authorized to rent long term rentals. Equipment numbers are required on all long term rentals. All equipment costs will be charged to the equipment and a rate shall be charged to the job using the equipment.

Purchasing Flowchart 8

Purchasing Card Policies and Procedures

ID: Purch-300 Purchasing Cards

Effective Date: 01/01/10 Last Revision: 01/01/10

Purchasing
Version: 10.0 Total Pages: 3

Overview
Purchasing Cards, or P-Cards, are credit cards issued to authorized employees to make purchases for the company. The proper use of P-Cards helps our business operate more efficiently and reduce costs. This document describes the proper use of P-Cards. Definitions Cardholder Cardholder means the name of the employee that appears on the P-Card.

Policies
Purchasing Cards may be used for small purchases up to 2,500. Purchasing Cards may not be used to purchase temporary or contract labor which requires 1099 reporting. Authorized Card Use Only Cardholders are authorized to use P-Cards. P-Card authority can not be delegated. Cardholders are responsible for all use of their P-Card. All purchases must comply with the purchasing, purchase order, travel, and accounts payable, and procurement policies and procedures Un-Authorized Use Cash Advances of any type are prohibited.

Charges for meals must be supported by an approved travel itinerary. P-Cards shall not be used for personal purchases or identification Cardholder Recordkeeping All Cardholders shall keep a Purchasing Log. Cardholders are responsible for retaining the documentation necessary for proof of purchase. This includes the invoice, shipping documents, and Customer Copy of the charge receipt. Purchase Orders Purchase Order must be issued according to the Purchasing Policy, so we can track and process commitments and payments. Purchase Order numbers shall be posted on to your Purchasing Log.

Procedures
Monthly Statement Review All Cardholders must check each transaction against the purchasing log and supporting documentation. The original documents shall be attached to the monthly statement. A copy of the purchase log reconciliations shall also be attached to the monthly statement. Any transaction with missing documentation requires a written explanation for the missing documentation. Include the vendor name, date, description of purchase, and reason for the missing documentation. The monthly statement, original supporting documentation, and reconciliation shall be turned in to the appropriate supervisor for approval. The approving supervisor shall review the documentation, purchasing log, and verify all merchandise receipts. The approving supervisor shall sign the monthly statement and submit the package to accounts payable. Returns Returns are the responsibility of the Cardholder. Returns must be noted on the P-Card log and shipping documentation attached to the monthly statement review.

Disputes Disputes must be noted on the P-Card log. A Dispute form must be attached to the monthly statement review.

Procurement Policy
ID: Purch-400 Procurement Policy
Effective Date: 01/01/10 Last Revision: 01/01/10

Purchasing
Version: 10.0 Total Pages: 4

Purpose
The purpose of this document is to describe the organizations policy regarding purchases in excess of those covered by the purchasing policy. This includes large and capital purchases in excess of $25,000.

Policy
It is our policy that all purchases over $25,000 for a specific project or purpose require competitive procurement. This includes the aggregate of purchases for a particular project or purpose. Competitive procurement includes procurement by competitive bidding, negotiation, and the use of independent appraisals to help us ensure fair value is received. The following contract categories are governed by this policy without exception: Advertising Design and Engineering services Construction and Project Management services Accounting, Legal, and Consulting services Lease Agreements Insurance Agreements etc.

Board Approval The following types of contracts and documents require the prior approval of the Board: All contracts for the acquisition, sale, or conveyance of real estate. Contracts for the lease of real estate which have an annual cost of $25,000 or greater, or which have a term of three years or greater The acquisition of goods or services when the projected cost is $25,000 or greater, or transactions of $10,000 or more Capital outlay projects or change orders having a total projected cost of $25,000 or greater Authority Procurement and Purchasing is authorized by the Delegated Authority Policy. All contracts shall be awarded as specified by the Delegated Authority Policy. Purchasing is implemented by the Accounts Payable Procedures, Disbursement Approval Procedure, P-Card Policies, Purchase Order Policy and Procedures, and the Procurement Policy and Procedures. Code of Conduct and Business Ethics All employees and Directors are expected to comply with our Code. Responsibilities Officers and senior managers of the organization are responsible for: Executing contract documents in accordance with the Delegated Authority Policy The VP Operations and Financial Controller shall maintain a list of approved contractors and vendors. The Procurement Agent is responsible for: Ensuring the technical specifications sufficiently describe the required quality to allow for fair competition. Providing adequate terms for delivery, inspection, acceptance, payment, warranty, etc

Planning, scheduling, and implementing the procurement to ensure the process is smooth and effective. Managing contracts and Issuing contract awards, issuing purchases orders, notices to proceed, and stop notices, etc Managing the purchase and ensuring the quality at delivery meets the contract specifications. Documenting vendor performance The Project Manager is responsible for proper execution and completion of the project according to the Project Management Polices and Procedures.

Methods of Procurement
Independent Appraisals All real estate purchases and purchases of a one of a kind item require an independent appraisal. Sole Brand The organization may approve sole brand purchasing if the brand selection is justified and not simply to purchase a favored product. For example, the IT department may want all laptops or cell phones to be of the same brand and configuration for support purposes. Or the Equipment Division may want standardization in the fleet for inventory and maintenance reason. If you need to implement sole brand purchasing, you must submit a Sole Brand Justification Form for approval by the Financial Controller. Sole Source In instances when only one source is available, document the situation. Approval for sole source purchasing must be obtained by submission of a Sole Source Justification Form to the Financial Controller. Competitive Bidding Competitive Bidding from three qualified vendors is required for all projects in excess of $25,000. No contract, other than the lowest bid, shall be awarded without the approval of the VP Operations or Financial Controller. Rational for all contract awards shall be documented. Negotiating with the Lowest Responsible Bidders

Sometimes it is in the best interest of the organization to negotiate with the lowest bidders. Examples include Insurance and Design Build type contracts. You must submit for approval by the Financial Controller a Negotiated Bidder Justification Form prior to contract award. Competitive Negotiation Professional Services shall be retained on a competitively negotiated basis. Purchase Orders Regardless of the Procurement Method used to make a purchase, a Purchase Order must be issued so we can track and process commitments and payments. Attach bid results or approved justification forms to the purchase order to support your purchasing determinations.

Requirements
Retainage All construction contracts shall include a provision for the withholding of a 10% Retainage until final project acceptance. Retainage shall be paid with final payment. Bid Bonds All bids and proposals for construction contracts in excess of $25,000 shall be accompanied by a bid bond for 5% of the bid amount to ensure the bidder will enter into a contract for the work bid. Performance bonds Performance bonds ensure the work will be completed according to the contract and specifications. The organization requires Performance bonds in the amount of the contract for all bid work. Payment Bonds Payment bonds help ensure that prime contractors pay all material, subcontract, labor, and equipment suppliers furnishing work on the contract. Payment bonds in the amount of the contract are required for all contracted construction work.

Internal Control Purchasing

ID: Purch-500 Purchasing Controls

Effective Date: 01/01/10 Last Revision: 01/01/10

Purchasing
Version: 10.0 Total Pages: 2

Overview
This document provides a checklist to review internal control over purchasing. Division of Duties Purchasing and receiving functions are separate from invoice processing, accounts payable and general ledger functions. Disbursement approval is separate from general ledger entry. Approval There is a delegated authority policy which authorizes specific individuals to authorize purchases and requisitions. All expenditures are approved in accordance with the company written Accounts Payable and Purchasing Polices and Procedures. A policy and procedure for competitive bidding is in place for purchases over a specified amount. Sole Source purchasing is justified by notation on Purchase Orders, Contracts, and Requisitions for purchases over a certain amount. General Controls Purchases are reviewed and tested for reasonableness of derived benefit. If Purchase Orders are used, they are issued sequentially with numbers. It is company policy that all Purchase Orders are priced, signed, and coded. Purchase Orders and Requisitions are actually reviewed to ensure the coding is correct. Vendor invoices are received and reviewed by the accounting department first.

The accounting department compares the invoice to the purchase order and receiving documentation. Bonds and retainage are used to ensure completion of construction contracts. The project manager reviews and signs all purchase orders. Duplicate copies of invoices are destroyed to prevent duplicate payments. Vendor invoices are received at a central location. Someone periodically reviews and compares signatures on purchasing documents. A procedure is in place to review backorders and prevent duplicate purchases. If Blanket Purchase Orders are used, proper review procedures are in place to prevent abuse.

Receiving Flowchart
ID: Receive-100 Receiving Flowchart
Effective Date: 01/01/10 Last Revision: 01/01/10

Purchasing
Version: 10.0 Total Pages: 2

Flowchart Name 18

Start

Purchase Order From purchasing with quantities empty or blacked out Receiving Reports

Prepare Reports

Goods received and counted

To Department that issued requisition

Off Page Connector Inventory Control

To Purchasing

To Accounts Payable

Flowchart Name 19

Internal Control Receiving and Warehousing

ID: Receive-500 Receiving Controls

Effective Date: 01/01/10 Last Revision: 01/01/10

Purchasing
Version: 10.0 Total Pages: 3

Purpose
This document provides and internal control checklist for the receiving and warehousing functions.

Checklist
Asset Protection and Division of Duties The Company has written Inventory Management and Control Procedures. Receiving of materials and supplies is assigned to individuals. One person is not responsible for receiving, disbursement and preparation of transaction documentation. There are adequate controls to ensure that an individual cannot initiate a purchase and authorize payment without detection. Someone monitors the receiving and warehousing functions. The staff assigned to monitor the receiving and warehousing functions has the requisite knowledge to adequately monitor the functions. Receiving documentation is prepared for all deliveries. There are inventory records that accurately account for items received and disbursed. Deliveries of materials and supplies are accepted only at secure locations. There are separate areas for receiving, storing, staging, and shipping of inventories. Delivery areas do not create traffic or safety hazards.

After hour access to storerooms is limited. The Company does not receive personal materials for employees. Receiving of Goods The receiving area is properly equipped to receive material. Carrier information is logged, quantities of packages noted, and bill of lading signed. Damaged Goods Exterior: Packages are visibly checked for damage. Interior: The warehouse personnel are responsible for the immediate inspection of the material. A damage claims procedure exists to notify accounting, the vendor, shipping carrier and the insurance carrier if necessary. Items not Conforming to Specifications Material received is checked for quality and conformance with any specifications. Special Receipts Procedures exist for the receipt of any hazardous, live, and perishable materials. Back orders and Partial Deliveries There are follow-up procedures for back orders and partial shipments to assure receipt of proper quantities? Acceptance of items delivered is required by noting what and how many items were received on the copy of the receiving report. The receiving report copy is sent to Accounts Payable. Returns A procedure exists to notify accounting of returned items to ensure proper credit or prevent inaccurate payment. Previously transferred/shipped and unused materials and supplies are returned to the warehouse inventory.

Items that are inactive for twelve months are considered for disposal. Systems and Processing Inventory receipts are entered into a computerized system. There are automatic reorder points for stock replenishment? Inventory items are actually being ordered in the right quantities and at the right times/intervals to control the amount of inventory on hand without experiencing out of stock conditions. Inventory transfers are properly coded and recorded. Purchase orders and receiving documentation is verified for received material to ensure proper payment of invoices? Physical Inventories are actually taken. Physical inventory adjustments are reviewed and approved by persons who do not maintain custody of inventories.