Goal
Introduction
Followup on Introduction as of 11/27/95
9/9/96 Introduction Update
10/24/96 Introduction Update
Guidelines
Description of Data Elements in on-line screen AP82
Payments Excluded
NAID Numbers
Verification of Data Input
Filing Invoices and Record Retention
Taxpayer Identification Numbers(TINs)
Segregation of Duties and Approvals
Purchasing Rules
Security Access

Improve the timeliness of vendor payments so there are no late payments and all available discounts are taken. Achieve efficiencies in the accounts payable process both in the central office and in participating departments. Provide for a transition in the role of the Accounting/Accounts Payable Office to more of an emphasis in service and training.

As an experiment, the NDSU Accounting/Accounts Payable Office and the North Dakota Higher Education Computer Network (HECN) developed a special on-line screen that could be used by departments outside of the central Accounting Office to input invoices that would create payments to vendors. The on-line screen is almost identical to the screen used by the NDSU Accounting/Accounts Payable Office to enter request for payment forms. The new departmental screen has additional controls built in to prohibit certain transactions from being entered.

It is believed that this process will eliminate the need to type a four-part request for payment form, photocopy and attach invoices, and route to the Accounting Office. It is believed that the departments could input their own invoices, verify their input, and retain the invoices at the department site. These invoices would be subjected to audit sampling by NDSU Internal Auditing or the Accounting Office and periodic audits by the North Dakota State Auditors Office. The intent is to take the routine payments out of the central Accounting/Accounts Payable Office in order for the office to focus on problem payments and training. The intent is also to take advantage of early payment discounts and avoid late payment charges. Another advantage is that payments will show immediately on the institution's general ledger - reducing the need to record payments in a separate ledger and reconciling to the general ledger.

As we proceed with the experiment and receive input from departments we will expand on our guidelines. The Varsity Mart will be the pilot site at NDSU. If this is found successful NDSU will first look at other auxiliary enterprise departments. The NDSU branch campus at Bottineau will be another early candidate.

The Varsity Mart began using the new system in March 1995. Reports from the Varsity Mart indicate this new process has been very beneficial. In addition to ensuring that all early payment discounts are taken, the process has saved on paperwork in the department. It was not found to be necessary to type request for payment forms.

In September 1995, NDSU - Bottineau began using the new process. This process has also been a success at this branch campus. The business office has no longer had a need to hire student help to type request for payments and photocopy invoices.

In October 1995, Dining Services began using the new process. Early reports look favorable at this site.

Our preference is to go slow, steady, and sure with the implementation in order to gain acceptance with this change. Acceptance with this change is necessary both internally and externally.

In January 1996, Physical Plant began using the new process. In addition to the benefits cited above, Physical Plant was able to eliminate a manual record which tracked payments by vendor.

As of July 1996, administration of NDSU-Bottineau was assigned to Minot State University. Therefore, Bottineau no longer became a user of the NDSU departmental input system, but did use the AP82 screen for processing their payments through the Minot State system.

We will continue to look for new candidates for this process. The next likely candidates will be Residence Life and Memorial Union. This will complete the Auxiliary Enterprise departments, except for Athletics.

Other departments/divisions we plan to work with is the Experiment Station and Extension Service. At this point we are still looking for a small number of departments that process a large volume of expenditures. These type of departments should have the capability for including the necessary internal controls. In addition, a small number of departments gives us fewer potential control concerns.

The State Auditors Office has informed us they have concerns about weakening internal control. Our plan is to continue to work with the auditors and support the new process.

A written survey was issued to the departments using the new process (see attached). Written feedback is expected in a couple of weeks. Verbal feedback has all been positive to this point.

Over the past two weeks, Accounting has been working with a statistician to help implement sampling procedures that will properly measure the results of this new process. With the help of the NDSU Statistical Consulting Lab, we plan to develop a process to evaluate our sample results using appropriate control charts.

In this process upper control limits will be determined based on confidence levels, expected occurrence rates and sample reliability. The first step will be to identify and eliminate exceptions that would be considered special variation (i.e., exceptions exceeded the control limits) to maintain the process in statistical control. This statistical process is not completed at this time.

Our plan at this time is to decentralize nearly all vendor payments by using this new input screen. Using statistical procedures, these vendor payments will be audited on a sample basis rather than a 100% basis - including payments charged against grant and contract funds.

Over the course of the next year we will transition departments into using this new screen for their vendor payments. Our plan is to implement by division starting with completing the rest of the departments within Business and Finance. For example, Business Office, Purchasing Office, Human Resources, etc. This implementation should take about one month.

The next division we will setup is Student Affairs. We will start by working with the Vice President's Office and proceed from there based on size. This should take one to two months.

We will next setup the President's Office and his related offices (i.e., University Relations, Athletics). This implementation should take about two weeks.

After Presidents Office we will proceed to the Academic Affairs Divsion. Academic Affairs should take about 8 months to complete.

Although this new process will significantly affect the workflow in the portion of the Accounting Office that handles Accounts Payable, there will be no reduction in personnel due to this change in process. Time previously spent processing every vendor payment will now be spent training departments, executing statistical sampling (auditing samples), following up on vendor statements and old unpaid bills. Other accounting duties are available to be transferred between positions, such as bank reconciling, general ledger maintenance and assisting with special projects.

CICS On-line screen AP82 will be used to enter each invoice. On-line screen AP88 is used for modifying input. On-line Screen AP95 is used to verify session totals.
The following is a description of the data elements in on-line screen AP82:

Three types of edits have been built into the new screens. The new screen will not allow entry of the following types of payments:

TCC

Balance Sheet TCCs	001 - 099
Revenue TCCs	101 - 237
Addition & Transfers In	240 - 295
Salaries & Wages	301 - 379
Rents and Leases	451 - 455
Capitalized Repair & Labor	475 - 476
Equipment	601 - 636
Scholarships	651 - 671
Plant Acquisitions	701 - 749
Deductions & Transfers Out/ Indirect Costs	750 - 799

NAID Type

Payments to individuals

If no NAID number exists for a vendor, the department should fax a copy of the invoice to the Accounting Office to setup a new number. AP82 will only allow NAID's setup as a company to be input. The Accounting Office will fax the NAID information back to the department.

Each invoice will be input separately. A batch of invoices should be established. Usually about 25 in a batch is a good rule of thumb - although this optional. An adding machine tape total of the batch should agree to the session total on screen AP95. If the totals do not agree, the user must compare each invoice entered to the detail transactions on screen AP95. The detail on screen AP95 is viewed by entering "I" at the prompt.

If any input error is discovered, the on-line screen AP88 must be used to modify the transaction the day of input. If the user modifies a transaction on AP88, the user should view the transaction on AP90 after the modification is completed. This is especially important if the modification is to an NAID number. If an error is discovered after the day of input, a journal entry will be necessary to correct the transaction.

After a payment is entered on AP82 the name associated with the NAID and the remittance address will be displayed on the screen. This information should be carefully verified by the input operator in order to make sure the correct NAID was input and that the accounts payable check is going to the right place.

Under this new process, departments are responsible filing, retaining, and retrieval of the original vendor invoices. The method of filing (i.e., alphabetical, chronological, numerical) is at the discretion of the department, since the department is responsible for the retrieval.

The accounting office files its invoices alphabetically within the day of input. No filing standards have been established for departmental input at this time. However, as a suggestion, it may work best for filing and retrieval to file the invoices alphabetically.

Since the invoices will be staying at the department input site and not be routed to the Accounting Office, the original invoices represent the official source document that will be subjected to internal and external audits. Our current policy is to retain invoices for a four year period. For invoices input at the department, this four year retention policy would apply.

In cases where we do not have a TIN number entered in our NAID file for the vendor, a warning message will appear on AP82 after a transaction is entered. This message should alert the operator to have the Accounting Office (Renee) send a W-9 form to the vendor to avoid backup withholding. The Accounting Office is responsible for mailing the W-9 form to the vendor for their completion. Requests should be routed to Renee Kapaun (#17325) in the Accounting Office.

In order to maintain strong internal control, it is important to demonstrate that the functions of ordering, receiving and acceptance are properly segregated. Each invoice that is entered should have a minimum of two approvals (initials or signatures) to help prevent errors or fraud. The person inputting the invoice should sign or initial the invoice. In addition, at least one other approval should be on the invoice.

Although the processing of vendor payments is decentralized with this new screen, policies of the Office of Purchasing all still apply. The purchasing policies are located in Chapter 4 of the NDSU Policy Manual. If expenditures meet certain criteria, set forth in the policy, the purchase requisition process must be used.

The Accounting Office will need to closely monitor who has access to this new screen. When employees in a department that have access to this screen change jobs, the department is responsible for notifying the Accounting Office immediately so security access can be updated.

Each invoice will be input to AP82 separately. As shown under the data elements, above, that many fields are optional. Although they are optional in the screen, it is necessary for departments to enter as much information as possible to the screen. Much of this information will be shown on the accounts payable check that the Accounting Office mails to the vendor. Most vendors find this information useful so they know what is being paid for in order to apply the payment on their books.

Entry should be based on original vendor invoices. There are rare occasions when the vendor does not issue invoices, but instead only issues statements. In this case departments will have to find some identifying date, department name, individual name, or something that will inform the vendor what is being paid for.

After entry the input operator should initial the invoice documenting it has been input. The invoice should be filed immediately to help ensure it is not input again causing a duplicate payment.

Once the department has entered the invoice to AP82 an encumbrance is immediately created. The system immediately checks for available funds, TCCs, and project numbers. The next day the transaction is posted to the general ledger.