Purchasing Forum May 2011 The integration of the activities, plans, attitudes, policies, and efforts of the people of an organization working together to provide reasonable assurance that the organization will achieve its mission. Ensure efficient & effective operations Compliance with laws & directives Provide reliable data & timely reports Safeguard resources Everyone in an organization has responsibility for ensuring the internal control system is effective. The greatest amount of responsibility rests with the managers. Top executive has the ultimate responsibility. Control Environment Risk Assessment Control Activities Information & Communication Monitoring Control Environment Risk Assessment Control Activities Monitoring Information & Communication Influences all of the decisions and activities of an organization, and on the control consciousness of its people. The atmosphere created by the people of an organization Tone at the Top The foundation for all the other components Procurement employees need proper training on NYS laws, rules and regulations Promote fair and open competition Solicitation requirements should not be overly restrictive (just meet your form, function and utility) Solicit vendors each time goods/services are procured or in regular intervals The possibility that an event will occur and adversely affect the achievement of objectives To evaluate; to examine carefully; to determine or set the value of something 1. What are the objectives 2. What could go wrong (the Risk) 3. Whats the likelihood of it occurring 4. Whats the impact if it happens 5. Prioritize and respond accordingly Likelihood The probability that an unfavorable event would occur if there were: 1. no internal controls OR 2. existing internal controls Impact A measure of the magnitude of the effect on an organization if the unfavorable event were to occur. Judgment Required LOW IMPACT HIGH LOW LIKELIHOODLIKELIHOOD HIGH Area I Least Concern Area III Moderate Concern Area IV Most Concern Area II Minimal Concern A risk assessment is never done Have laws, rules or regulations changed? Have new people been hired? Do your new contracts have strong criteria? Are there new vendors? The greatest risk is turning a blind eye to the possibility of risk The tools both manual and automated that help prevent or reduce the risks that can stop an organization from meeting its objectives and goals. Directive - guide an organization toward desired outcome. Preventive - deter the occurrence of an undesirable event. Detective - identify undesirable events and alert management. Judgment Required LOW IMPACT HIGH LOW LIKELIHOODLIKELIHOOD HIGH Area I Least Concern Area III Moderate Concern Area IV Most Concern Area II Minimal Concern The cost of the controls shouldnt be greater than the cost of the potential loss. Cost v. Benefit There needs to be appropriate approval for every purchase request Purchasing department employees should select the vendor, NOT the end user Create the purchase order prior to receiving the invoice and goods/services (no confirming purchase orders) Send purchase order to Receiving department without quantities listed (blind receiving) Plan procurements over a12 month period The exchange of information between and among people and organizations Information should be: 1. Timely - when the user needs it. 2. Useful - sufficiently detailed. 3. Tailored to the user. Information should travel: 1. Down from management 2. Up from the staff 3. Across units and departments Communicate with other departments Receiving Accounts Payable End User Communicate with your vendors Communicate expectations for clear and specific deliverables Keep a strong procurement record Obtain and document preferred source waivers The ongoing review of the organization's daily activities and transactions to determine whether controls are effective in ensuring that operations work as intended. MonitoringEvaluation Daily or routine procedures like supervision, transaction review and problem resolution. Periodic assessments of the organizations performance over time. Monitor purchases over the last year to Effectively plan next years procurements Follow procurement guidelines such as advertising and contracting Monitor any changes in laws, rules or regulations Are we complying with our system of internal controls? Are we doing things the way we should to accomplish our mission?