Approval for Payment ?

A co-worker and I are having a little debate that I was wondering if you could clear up for us. It is regards to approval to pay. The situation is that we use an online supplier where employees will place their order online. During the order they are stating the account to be charged and the requisition is then routed to the appropriate management to be approved. Once approved the order is placed to the online supplier who charges a pcard. These are all low dollar office supply items and are not "received" into a system formally.

Her argument is that someone needs to print off the pcard transaction log each month and sign it as proof of "approval to pay". My argument is that there is no value in such an activity as the person has no idea whether the things have been received or not and truly is doing nothing more than rubber stamping the log. My contention is that the management is approving payment when they approve the order. They are approving the expenditure of company funds at that time and the need to print a transaction log and sign it is non-value added.

Now... the question may arise of "how would you ever know if the supplier wasn't adding charges to the card against orders that were never officially made?". And to be honest I don't have a great answer to that other than 1) it is low dollar transactions, 2) there has to be some level of trust in a relationship, and 3) periodic audits, while maybe not as thorough, would eventually catch such a thing if it did occur and require much less tactical time from an employee.

Thoughts? I'm not an accountant so do not know how this relates to GAAP but would guess that GAAP doesn't go into such detail.

Reply to
thoughtbender
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wrote

GAAP is the accounting for the transaction, not necessarily the controls (or lack of) that the company has.

How about this, each department has a different "pcard" such that each department manager who is responsible for approving orders, reviews the bill for approval prior to payment. The manager should at least have some clue as to what was ordered and received for his department. It may be additional work for someone, but it would at least add one level of control and "double check" before a bill gets paid.

The problem with one card is, out of 100+ purchases, can I find the ten that are my department's purchases and sign off on ten line items out of the bulk. Most people are busy and won't pay attention to that level of detail. But if the only thing on the page is your responsibility, then....you'll probably take a second or three to see if it looks right.

This same method of segregation works well for traveling sales or service people. Their charges appear on one page for them to approve.

Reply to
Paul Thomas, CPA

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