VIII. Supplies and Operating Expenses

Supplies and operating expenses are items which are reasonable and necessary for the agency to implement the project.  Agencies should have written Purchasing procedures detailing the authority and mechanics of obtaining supplies and various operating expenses and to ensure that funds are expended in accordance with an approved budget.  Consideration should also be given to the availability of funds to pay for such purchases and in compliance with contractual provisions and relevant laws and regulations.

Guidance for written purchasing policies and procedures can be explored in Chapter XII. Procurement of Goods and Services.

Basic internal controls over purchases include establishing the following:

1.        Initiation of Purchase: Any staff member authorized by the Project Director or designee may initiate a purchase. When a purchase is initiated, a standard requisition, or a memorandum describing the type of item and quantity desired, is prepared and signed by the staff member initiating the purchase.

2.        Authorization of Purchase: Staff members must make direct purchases of items when the total cost does not exceed a prescribed limit. When items may cost more than the prescribed limit, the Project Director or designee must give advance approval of the acquisition. All requisitions, regardless of amount, should be submitted to the Project Director or designee. Orders totaling less than the prescribed limit may be submitted after the order is placed.

3.        Qualification of Vendor: All vendors providing supplies, equipment, or services should be reputable firms having demonstrated capacity to produce or provide supplies, equipment, services, and other items within a reasonable time or within specific time limits established by the purchaser. Vendors should be subject to disqualification if they misrepresent quality, quantity, or price of what is being purchased. Vendors that exceed reasonable time limits should also be disqualified.

4.        Purchase Orders: Purchase orders can reduce misunderstandings, errors, and duplicate payments. They should include the date, vendor name, type, quantity, price of supplies and equipment, and other items to be purchased. A staff member officially designated to sign purchase orders should sign each order and submit the original to the vendor. File the first copy numerically; it constitutes an official authorization for disbursement after the order has been satisfactorily filled.

1.        Receipt of supplies and equipment should be certified by a staff member who has been assigned responsibility for receipt of all purchased items.  Deliveries should be compared against the second copy of the purchase order and packing slip or invoice and should be examined for conformance to specifications in the order.  The packing slip or invoice and the second copy of the purchase order should be signed if the delivery conforms to the purchase order.  (If the invoice does not accompany the delivery of goods, the signed packing slip should be compared to the invoice prior to the invoice being approved for payment.)  The invoice, requisition, and second copy of the purchase order should be filed in invoice date order, alphabetically by vendor name.

2.        Match billings with the signed invoice, purchase order or requisition.  Examine the billing to ensure that the amount requested for payment matches cost, types, and quantities shown on the signed invoice(s).

3.        The Project Director or designee should review the invoice, purchase order, requisition, and billing, and certify as to qualification for payment.  No invoice or bill should be paid without such certification.

4.        Purchase orders are not required for utility services (telephone, gas, electricity) or for rental payments.  Bills for these services should be reviewed by the appropriate official and paid in accordance with standard procedures for disbursement of funds.  However, retain copies of all bills received for rent and utilities and file them chronologically, by vendor, or by expense category for no less than three years.

5.        Disbursement of Funds: Upon proper certification of invoices and bills, make disbursements in accordance with standard grant procedures for the issuance of checks and vouchers.

SUPPORTING DOCUMENTATION

Present supporting documentation to justify each journal entry. In most cases, staff members should use preprinted sequentially numbered forms, and written policies concerning the use of the forms should be established.

1.        The following are examples of supporting documentation:

1.            All journals and ledgers

2.        Annual financial reports with working papers

3.        Annual program reports, including statistics, with working papers

4.        Bank reconciliation

5.        Bank statements

6.        Checks/Warrants

7.        Contracts

8.        Correspondence

9.        Deposit slips

10.    Fixed assets inventory listings

11.    Inventory count sheets

12.    Invoices

13.    Journal vouchers

14.    Leave requests

15.    Petty cash count sheets

16.    Petty cash receipts

17.    Petty cash reimbursement receipts

18.    Pre-numbered cash receipt

19.    Purchase orders

20.    Support for sole-source-decisions

21.    Telephone logs

22.    Time sheets

23.    Travel claims

24.    Written policies

2.        Maintain a current roster of grant or contract agreements. Include the following information for each grant:

1.        Grantor

2.        Grant number

3.        Title of grant

4.        Catalog of Federal Domestic Assistance

5.        Period Covered

6.        Approved budget (latest revision)

7.        Grantor share

8.        Match Requirements

9.        Purpose of grant

3.        Maintain a file on each grant. The file should contain at least the following items:

1.        Grant agreement, including grant budget

2.        All grant agreement amendments

3.        Copy of periodic financial reports

4.        Other pertinent information (e.g., correspondence, monitoring reports)

4.        Maintain information on in-kind contributions and matching requirements by grant in separate file folders, as necessary.