Look Beyond The Busy-Work To Find The True Value Of Your Entity’s Purchase Order Procedure
You already know that your entity’s purchase order process is critical to maintaining the financial integrity of your organization. But sometimes it might seem like you’re the only one who truly appreciates the importance of this activity. While you look at the process as an important tool in your accountability arsenal, your staff might feel bogged down and resentful of the paperwork, which means gaining buy-in (not to mention compliance) can be difficult. But here’s the deal, not only do purchase orders help you manage your entity’s spending, it’s a legal requirement. As a government funded organization, you must utilize purchase orders for the expenditure of public funds. But if that wasn’t enough to motivate your team to comply with your purchase order process, consider the fact that this particular requirement has the added benefit of helping you prevent fraud.
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Government Compliance
In an ideal environment, spending procedures begin with an approved requisition. Next, the funds are certified by approval of the purchase order. Finally, the expenditure is made by placing an order with a vendor or purchasing it directly from a local vendor. Sounds simple enough, right? But even the simplest procedures can be difficult to implement and are often tested or circumvented.
How can you get more people to comply with this procedure? The first step is to look for patterns of dissension. Are there particular departments or employees who often order or purchase items before requesting the purchase order? If so, the following are some steps you can take to deal with any problematic departments or employees:
- Train Staff. Address the purchase order system at an in-service training or seminar. For new employees, this is the time to train. For seasoned or veteran employees, this is the time to refresh the rules.
- Request Accountability. If your entity is cited in the annual audit report, send a copy of the report to the specific department or individual and require a response to the citation.
- Enforce Strict Adherence. You could even consider adopting a policy that would require an individual to personally pay for the purchase if purchase order procedures are neglected.
It’s your responsibility to show your staff that purchase order policy compliance is a matter the district takes seriously. Don’t just share the fact that this is a regulatory issue, communicate that it’s also protective one.
Fraud Prevention
Ours is an economy where fraudulent activity continues rise. Fortunately, your purchase order procedures can be used to help deter and detect fraud.
When your employees follow the proper procedures, you will have an upper hand in fraud deterrence. The purchase order system is a way to help identify and deter false vendors. It can also assist you in weeding out personal purchases. Additionally, purchase orders can help you detect false or duplicate invoicing from an existing vendor – keeping money from leaking out of the organization.
This protection works two ways though. The individuals doing the purchasing are protected since they have provided documentation that shows the purchase is valid. Additionally, they have peace of mind knowing that the purchase is approved and they are able to go ahead and spend district dollars.
Stronger Procedures
If your purchasing policy isn’t giving you all of the benefits outlined above, it may be time to review and update your procedures. Implementing and enforcing good internal controls over purchase order procedures is a vital step for your own protection, and the protection of your entity’s spending.
Your audit team can help you review your processes and find ways to help you strengthen and enforce those procedures. Email the government services team at Rea & Associates to learn more about strong purchase order procedures and how to make sure yours is up to par.
By Annie Yoder, CPA, CFE, CFF (New Philadelphia Office)
Check out these helpful resources for even more great insight into how you might work to prevent fraud in your organization.
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