CASE STUDIES CASE A: Bondstreet Company (Accounts payable and cash disbursements pro...

CASE STUDIES

CASE A: Bondstreet Company (Accounts payable and cash disbursements processes)

The Bondstreet Company sells medical supplies to hospitals, clinics, and doctors’ offices. Bondstreet uses an ERP system for all of its business processes. Bondstreet employs the following procedures for accounts payable and cash disbursements.

The accounts payable (AP) department receives invoices from vendors. An AP clerk enters the PO number from the invoice into the computer, and the computer displays the PO. The clerk then keys the invoice data. The computer matches the invoice data with data on the PO (purchase and receipt data). If there are price or quantity variances of more than 5 percent, the invoice is routed, via workflow, to a purchasing agent for approval. Once validated (by the computer and, if necessary, purchasing), the computer records the invoice (i.e., accounts payable) and updates the PO and general ledger master data.

Every morning, the accounts payable department reviews open invoices (i.e., accounts payable) to determine if they should be paid. An AP clerk selects those invoices that are to be paid, and the computer prints a check in the accounts payable department and updates the accounts payable and general ledger master data. Accounts payable mails the check to the vendor.

CASE B: Internet Payment Platform (Accounts payable and cash disbursements processes)

The following describes the accounts payable and cash disbursements processes at the U.S. Department of the Treasury’s Bureau of Engraving and Printing (BEP) during a pilot of the Internet Payment Platform (IPP). Components of the IPP include a server with an “appreciating database” located at Xign, Inc.21 and an Intel® server at BEP called the enterprise adapter. BEP’s mainframe, legacy enterprise system, called BEPMIS, has an IDMS network database.

After goods or services are provided, a supplier employee logs on to IPP for the PO “flip” (to create and record an invoice that is posted to the IPP appreciating database). IPP then encrypts the invoice data and sends it to the enterprise adapter at BEP, where the invoice data are translated from XML into IDMS format for posting to the BEPMIS accounts payable database.

After invoices are posted, BEPMIS performs a three-way match of the invoice, PO, and receipt. BEP and the supplier can view these records on the IPP database and resolve disputes (e.g., disagreements regarding price or quantity listed on the invoice) as required. As the status of invoices changes, BEPMIS extracts and formats the change data, and transmits these changes to the enterprise adapter for translation from IDMS format into XML. These changes are then encrypted and sent to the IPP server for posting to the IPP appreciating database. The supplier can review the status of an invoice on IPP as it moves through the payment-generation process. BEP and the supplier can each drill down on IPP from the invoice to the PO.

After invoices are posted to the BEPMIS accounts payable database and payments are due, an accounts payable accountant triggers the payment process for all invoices and selects those invoices that are to be paid. BEPMIS then extracts and formats payments for participating suppliers, generates a payment instruction file (PIF), and transmits this file to the enterprise adapter for translation from IDMS format into XML. The translated file is then digitally signed (using a VeriSign certificate) and sent to the IPP server, where it is posted to the IPP appreciating database. At the same time, a BEP accounts payable accountant manually issues an e-mail notification detailing the number of payments and total dollar amount of payments in the PIF. This notification goes to the BEP contracting officer (CO), the Financial Management Service (FMS) disbursing officer (DO) at the Regional Finance Center (RFC) in Kansas City, and the Boston Fed. The CO and DO log on to IPP to approve payment files. Optionally, an auditor in Kansas City might also be required to approve the payment file. COs and DOs used smartcards with a thumbprint reader (a form of biometric identification) to execute these approvals, via any PC that is equipped with a Web browser and smartcard reader.

Following approvals, IPP generates an ACH-formatted file from the PIF, encrypts the file, and sends it to the Boston Fed. At the same time, IPP automatically sends an e-mail detailing the number of payments and total dollar amount of payments in the ACH file to the BEP accounts payable accountant, CO at BEP, DO at the RFC, and the Boston Fed. Also, IPP notifies the supplier via e-mail that a payment is coming. The ACH-formatted file is transferred to the Federal Reserve Automated Clearing House (FedACH) system, where the payment is settled by debiting the U.S. Treasury account at the Fed, crediting the accounts of the supplier’s bank at the Fed, and notifying the supplier’s bank of these credits. FedACH sends a bulk data acknowledgement to the BEP accounts payable accountant, the CO at BEP, the DO at the RFC, and the Boston Fed detailing the number of payments and total dollar amount of those payments. The supplier’s bank then credits the supplier’s account.

For the company assigned by your instructor, complete the following requirements:

a. Draw a systems flowchart.

b. Prepare a control matrix, including explanations of how each recommended existing control plan helps to accomplish—or would accomplish in the case of missing plans—each related control goal. Your choice of recommended control plans could come from this chapter plus any controls from Chapters 9 through 12 that are germane to your company’s process.

c. Annotate the flowchart prepared in part (a) to indicate the points where the control plans are being applied (codes P-1, . . . , P-n) or the points where they could be applied but are not (codes M-1, . . . , M-n).