Policy and Procedures for Accounts Payable
Policy and Procedures for Accounts PayableBACKGROUND INFORMATIONAccounts payable?is money owed by a PHA to its suppliers, vendors and contractors and is shown as a liability on a PHA's?balance sheet. An account payable transaction is typically recorded at the time an invoice is approved for payment and is recorded in the?general ledger?or accounts payable?subledger as an outstanding or open liability because the invoice has not been paid. Example of common PHA accounts payable are those for office supplies, maintenance materials, and utilities.A review of accounts payable is key to understanding the ability of the PHA to fulfill its financial obligations and determining the claims against available cash resources. This policy applies to all recognized vendor liabilities incurred by the PHA This document provides two (2) samples of a PHA accounts payable policy and procedures.Sample 1 – PHA with a Fee Accountant. This sample provides an example accounts payable policy for a small PHA that does not have a finance department to process accounts payables. This function would likely be performed by the fee accountant during the year-end process.Sample 2 – PHA without a Fee Accountant. This sample provides an example accounts payable policy for a large PHA with a finance department. This function would likely be performed by a staff accountant with a Finance Director overseeing the process.PHAs can simply cut and paste either or both samples into their policy and procedures documents and then modify as needed.ITEMS FOR CONSIDERATIONThe following provides items that the PHA needs to consider when developing the policy and procedures for accounts payable and the major assumptions that were used to develop the sample policy and procedures.Assumption – Small PHAs use a fee accountant and therefore the PHA does not have a finance director that can review and monitor the accounts payable function. (For proper controls, the Board Chair should review and sign all checks.) (PHAs with a fee accountant)Assumption – Small PHAs use a fee accountant and generally accounts payable is accrued as part of the year-end function. (PHAs with a fee accountant)Assumption – Large PHAs generally use a software system to track accounts payables as invoices are received. (PHAs without a fee accountant)Assumption – All accounts payables have been entered into the PHA’s accounting software system or sent to the fee accountant. (All PHAs)SAMPLE 1 – PHA WITH A FEE ACCOUNTANTACCOUNTS PAYABLE POLICYIt is the policy of the PHA to report all existing vendor account payable liabilities in the financial statements on an annual basis. This policy will ensure that the PHA’s year-end submission of the financial data schedule and the PHA’s financial statements are GAAP compliant and provide for more accurate reporting of the PHA’s financial position for the PHA’s various programs and projects.ACCOUNTS PAYABLE PROCEDURESAccountingLiabilities of PHA shall be accrued as a payable as part of the year-end process.The amount of the liability shall be valued based upon the supporting documentation related to the transaction with adjustments for returned or un-received merchandise taken into account.A liability is deemed to have been incurred when the amount becomes payable.For tangible items (e.g., office supplies or maintenance materials), the liability will be considered incurred when the ordered item is received.Intangible items such as insurance, training, and advertising will be considered incurred when the item is ordered.Utility expenses will be considered incurred when the resources are used which is often prior to the invoice date.Liabilities will be maintained on an individual project/program basis in accordance with the distributions defined in the PHA’s cost allocation plan in effect for the period incurred.Accounts Payable ManagementThe following procedures will be used to manage accounts payable.The Executive Director will reconcile monthly the purchase orders, shipping bills, invoices, etc. Where monthly vendor statements are provided, such as credit card statements from major box stores (e.g., Lowes), the credit card statements will be reconciled to the PHA’s monthly statements to verify that goods or services were actually received and that the amounts match the PHA’s monthly statements.The Executive Director will review monthly the financial statements received by the fee accountant to determine whether all payables have been recorded.At year end, a copy of the unpaid payable invoices shall be submitted to the fee accountant for proper recording in the financial statements. The invoices will be attached to the check voucher as part of the disbursement policy when they are paid to the vendor.SAMPLE 2 – PHA WITHOUT A FEE ACCOUNTANTACCOUNTS PAYABLE POLICYIt is the policy of the PHA to report all vendor account payable liabilities in the financial statements on an annual basis. This policy will ensure that the PHA’s year-end submission of the financial data schedule and the PHA’s financial statements are GAAP compliant and provide for more accurate reporting of the PHA’s financial position for the PHA’s various programs and projects.ACCOUNTS PAYABLE PROCEDURESAccountingAll payables are to be entered into the accounting software system as billing statements or invoices are received from the vendor.The amount of the liability shall be valued based upon the supporting documentation related to the transaction with adjustments for returned or un-received merchandise taken into account. Upon receipt of the proper documentation, the liability shall be accrued as an expense/asset and payable of the appropriate project/program within the PHA’s accounting system and in accordance with the distributions defined in the PHA’s cost allocation plan in effect for the period incurred.The liabilities will be posted within the period that they are incurred. A liability is deemed to have been incurred when the amount becomes payable.For tangible items (e.g., office supplies or maintenance materials), the liability will be considered incurred when the ordered item is received.Intangible items such as insurance, training, and advertising will be considered incurred when the item is ordered.Utility expenses will be considered incurred when the resources are used which is often prior to the invoice date.Accounts Payable ManagementThe following procedures will be used to manage accounts payable.After ordered merchandise has been received, the purchase order along with an approved shipping bill, invoice, order confirmation, and/or receipt will be provided to the Finance office.The accounts payable clerk will reconcile the purchase orders, shipping bills, invoices, etc. Where monthly vendor statements are provided, such as credit card statements from major box stores (e.g., Lowes), the credit card statements will be reconciled to the PHA’s monthly statements to verify that goods or services were actually received and that the amounts match the PHA’s monthly statements.As part of the monthly reconciliation process, the Financial Director will review the financial statements to determine whether all payables have been reconciled and recorded.The unpaid payable invoices shall be filed together by vendor until they are matched with a payment. The invoices will be attached with the payment information during the disbursements process as the voucher is paid.Liabilities of the PHA shall be accrued as a payable prior to payment. Accounts payable liabilities will be relieved in accordance with the PHA’s disbursements policy. ................
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