‘PURCHASE TO PAY’ (P2P) COMPLIANCE
RECOVERY PLAN
Introduction
1.Two recent internal audits[1]by Mazars identified practices that did not comply with the University’s Financial Regulations. Most of these practices formed part of the University’s ‘purchase to pay’ processes. Mazars identified that raising purchase orders in some areas was the exception rather than the rule. This observation is confirmed by transaction data from FY2008/09 that shows that 59% of all invoice payments lacked a purchase order (42,000 of 70,000 transactions).
2.This Plan outlines how a project group will improve these practices to attain an acceptably high standard of compliance with the University’s Finance Regulations.
Aim
3.The aim of the project is to ensure that the University’s ‘purchase to pay’ (P2P) activity complies with the Financial Regulations.
Scope
4.Processes. The Procurement-to-payment processes and signing authorities.
5.Organisations. All University colleges and services, across all three campuses are included. PCMD is included for transactions originating on the University’s own financial system, to the extent that there is no conflict with PCMD’s own governance and internal control arrangements. Where the University administers third party accounts (e.g. GWR), the payment process will be in scope, but not the procurement process because it will not be appropriate to raise University of Exeter purchase orders on behalf of a third party.
6.Systems. The financial management system (APTOS), the FM system (Concept), the Library system (Innopac) and purchasing cards.
7.Audit observations not to be tackled. The IT observation[2] in the Accounts Payable report will not be tackled in this project because it is significantly different from the ‘purchase to pay’ processes.
Objectives
8.The recommendations made in the two internal audit reports are listed in Annex A. They can be summarised as the following objectives:
a.Segregation of Duties. Implement procedures for segregation of duties in colleges and services.
b.Signatory Lists. Review and update all authorised signatory lists. Implement processes to ensure these lists are maintained and kept current.
c.Requisitioning. Developand implement the process for requisitioning in colleges and services.
d.Purchase Orders. Order all goods and services on suitably detailed purchase orders. No retrospective purchase orders. Defineexceptions.
e.Invoices. All invoices scheduled for payment on APTOS are to be matched to a purchase order, except for agreed exceptions. Supplier invoices that do not detail a valid purchase order number should be returned unpaid to the supplier.
f.Authorisation. All invoices must be correctly authorised.
Fundamental Principles
9.There are some fundamental principles supporting the purchase-to-pay process, which include the following:
10.Purchase Orders. Purchase orders have several purposes including:
- formally stating what the University intends to buy or pay;
- setting the conditions of the acquisition including price, payment terms, delivery location and date, quantity, and the identity of the ordering department and officer to other staff can understand what has been procured;
- protecting the University with appropriate conditions;
- providing a commitment on a financial management system (usually APTOS); and
- assuring the authoriser of the invoice that the purchase was legitimately authorised, that the invoice is legitimate and accurate, and that the supplier is not fraudulently or inadvertently demanding an unwarranted payment.
11.Segregation of Duties. The segregation of duties prevents or restricts fraudulent activity. A lack of this segregation and the acceptance of retrospective purchase orders or invoice sign-off allow items to be ordered by a budget holder without prior authorisation, for that item to be delivered direct to that member of staff who can then sign off the resultant invoice for payment.
12.Types of Purchase Order. The approved University purchase orders are those generated through Parabilis, APTOS, Concept/Innopac and orders made with purchasing cards. The priority is in that order.
Method
13.Governance & Participation.
a.Introduction. A temporary project group will be set up to resolve the problems described above. This project group will be a working group of the Research and Finance Common Action Team (CAT). The group will be chaired by the Head of Procurement, supported by the Deputy Director of Finance and include representatives for each college and service.
b.Membership. Each college and service will be represented by someone with the authority and ability to implement change in his or her department, and to lead or support working groups to solve specific problems. The following representatives are envisaged:
College or Service / Person / NotesProcurement Services / John Malloch
Peter Fletcher / Chair
Project Co-ordinator
Finance Services / Anne Shrubshall / Tanya Hitchen / Deputy Chair
BusinessSchool / Diana McNeill
LES / Alan Binge
SSIS / Joanna Lunnon
Humanities / Dawn Teed
EMPS / Paula Sanderson
PCMD / TBC
CS / Barry Clark / Representing Campus Svcs, EDS, Legal & Ins Svcs and Sports
AS / Sally Turner
AS (Innopac system) / Beverley Hughes / Co-opted only if needed
HR / Philippa Jackson
Communications and Marketing Services / Trish Tester or Kim Malins
Planning / Eileen Stevens or aroline Innalls
International Exeter / Charlotte Bardell
RKT / Angela Escott
DARO / Teresa Hunt
Exec Suite / Jean Lloyd or Jess Harrington
ASU / TBC / Representing UoE procurement in Cornwall
14.Understand the Problem. The Project Group and working groups will understand the nature and scale of the problems by reviewing the audit findings, analysing historical transaction data and reviewing current processes.
15.Agree standardprocesses. Standard processes will be clarified to form the basis of the project. The working groups may later develop non-standard processes to complement the standard processes.
16.Resolve non-compliant practices. Non-compliant practices will be resolved by assigning working groups to develop and implement solutions (including non-standard processes, methods and training) for each type of non-compliance. For example, the following commodities and services, among others, are known to be procured using non-compliant practices:
a.Generic processes.
b.Food ordering.
c.Hiring of guest lecturers.
d.Booking of schools for students’ teaching practices.
e.Mobile phone bills
17.Publish revised and new guidance. The processes and guidance will be reinforced and introduced through publication, briefing and training.
18.Actions. Each agreed action will be recorded and monitored by the project Co-ordinator on the Action List shown at Annex B.
19.ComplianceMonitoring. Progress will be monitored from the start of this project and reported regularly as follows:.
a.Performance Indicators. The following indicators will be used to record the Project’s progress in colleges, services and the University as a whole. Publication will be monthly. Additional indicators may be developed to measure work done by the group.
(1)Invoices matched and unmatched (Number and proportion).[3]
(2)Invoices that pre-date purchase orders (Number and proportion).[4]
(3)Single supplier set-up (Number of requests.)
(4)Unfulfilledpurchase orders (Number and value).
(5)Purchasing Card transactions (Number and value)
(6)Expenses (Number and value of transactions)
b.Reporting. PSMG will be updated every month on the Project’s progress, and the CAT will be concurrently updated. Problems will be handled by the Project Chair, being escalated to the CAT. Persistent issues will be escalated to PSMG if necessary. The Audit Committee will be updated in November 2010 and February 2011.
20.Draft Timetable. The timetable for the project will depend on the work to be done, which will be fully scoped by working groups. Some non-standard activity may require significant activity and time to change, which we expect to identify during the project. The programme is likely to take at least 6 months to complete and it is possible that some types of expenditure will take longer to develop working processes. The key dates are shown below:
Sep 10 Issue this plan for PSMG’s approval.
Sep 10 Confirm nominations with college managers and service directors.
8 Oct 10Publish drafts of the standard processes for discussion and agreement by the Project Group.
Oct 10 First Meeting of the Group to understand problems, agree core process, review key indicators and set up working groups.
16 Nov 10First report to PSMG (thereafter monthly – 14 Dec, 25 Jan, 22 Feb and 22 Mar)
24 Feb 11Report to Audit Committee
28 Feb 11Targeted completion date for standard processes.
Issue new schedule for remaining non-standard processes.
Summary
21.This plan outlines how the colleges and services will identify and fix their non-compliant ‘purchase to pay’ practices. Procurement Services and Finance Services will lead the overall project and provide advice and support. The schools and colleges will implement the changes required to achieve compliance in their organisations. This joint approach will allow the problem to be targeted effectively.
22. PSMG is requested to consider and approve this plan. College managers and service directors are requested to confirm or nominate their representatives in paragraph 13b.
John Malloch
Head of Procurement
18 Sep 2010
Annexes:
A.Internal Audit Summary Findings.
B.Action List.
Annex A to
P2P Recovery Plan
Dated 18 Sep 10
INTERNAL AUDIT SUMMARY FINDINGS
Internal Audit Recommendations / Reference1a. Raise and approve purchase orders before the goods or services are ordered.
1b. Include sufficient detail in the purchase order to allow other staff to understand what has been procured.
1c. No invoices are to be scheduled for payment on APTOS without a purchase order, except for agreed procurements.
1d. No retrospective purchase orders except where pre-agreed for certain non-standard categories.
1e. All invoices should quote the PO number to be processed for payment. Those that do not detail a valid purchase order number would be returned unpaid to the supplier. / Maintenance VFM – June 2010.
Maintenance VFM – June 2010.
Accounts Payable report June 2010.
2. The requisition functionality on Aptos should be rolled out to all Schools and Departments and the order requisition procedure should be formalised across the institution in a manner which achieves the expected control processes over ordering of goods and services. / Accounts Payable report June 2010
3. The University procurement procedures should be reviewed and revised in preparation for new Collegiate structure. / (Accounts Payable report June 2010)
4. All authorised signatory lists should be reviewed and brought up to date. Suitable processes should also be put in place to ensure these lists are maintained and kept up to date. / (Accounts Payable report June 2010)
5. Staff authorising invoice batches for payment should ensure that only authorised invoices are included. / (Accounts Payable report June 2010)
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Annex B to
P2P Recovery Plan
Dated 18 Sep 10
ACTION LIST
Ser / Date of setting Action / Action / Action Owner / Target Completion Date / Notes1 / Jul 10 / Issue this plan for PSMG’s approval. / John Malloch / Sep 10
2 / 18 Sep 10 / Confirm nominations with college managers and service directors / Sep 10
3 / Jul 10 / Publish KPIs / Tanya Hitchen / Sep 10
18 Sep 10 / Publish drafts of the standard processes for discussion and agreement by the Project Group / 8 Oct 10
4 / Jul 10 / First Meeting of the Group to understand problems, agree core process, review key indicators and set up working groups / Peter Fletcher / Oct 10
5 / 18 Sep 10 / First report to PSMG (thereafter monthly) / 19 Oct 10
6 / 18 Sep 10 / First report to PSMG (thereafter monthly) / 16 Nov 10
7 / 18 Sep 10 / 2nd report to PSMG / 14 Dec
8 / 18 Sep 10 / 3rd report to PSMG / 25 Jan
9 / 18 Sep 10 / 4th report to PSMG / 22 Feb
10 / 18 Sep 10 / Report to Audit Committee / 24 Feb 11
11 / 18 Sep 10 / Targeted completion date for standard processes.
Issue new schedule for remaining non-standard processes. / 28 Feb 11
12 / 18 Sep 10 / 5th report to PSMG / 22 Mar
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[1]The Mazars reports are ‘Maintenance VFM’ and ‘Accounts Payable’, both dated June 2010.
[2] Recommendation 3 states: ‘The University should put appropriate controls in place to ensure that only IT equipment authorised and approved by the IT Department can be ordered.’
[3] The value of these orders will be considered for reporting.
[4] The value of these orders will be considered for reporting.