17 percent of Contracting Entities (CEs) reviewed in Program Year (PY) 2015 did not have an adequate financial system.

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1 Introduction Class Description This class provides you with one example of a simple, organized method to track your expenses on a day-to-day basis. This paper method of tracking makes it easy to organize the daily details and maintain a current and accurate record filing system, it helps you to assess the validity of your financial transactions, and helps you to maintain and organize the documentation necessary to demonstrate financial compliance. This method of tracking expenses can work for even small and less financially savvy organizations. Acknowledgment Statement You understand and acknowledge that the training you are about to receive does not cover the entire scope of the program and that you are responsible for knowing and understanding all handbooks, manuals, alerts, notices and guidance, as well as any other forms of communication that provide further guidance, clarification or instruction on operating the program. You also understand and acknowledge that this class teaches only one method of tracking expenses and that you should assess the method s appropriateness for your organization. Frequent Findings 17 percent of Contracting Entities (CEs) reviewed in Program Year (PY) 2015 did not have an adequate financial system. 17 percent of CEs reviewed in PY 2015 reported expenses that were not reasonable, necessary and allowable. Tips Capture all financial transactions and activities in a comprehensive record management system. Keep documentation that establishes exactly what was purchased and proof of payment for all financial transactions. Perform periodic checks to make sure your records are complete and have been adjusted when needed. This demonstrates full oversight and accountability for all program assets. Compare your actual expenses against your budgeted expenses regularly, and adjust when necessary. Maintain and organize documentation that allows TDA to determine if your reported expenses were necessary, reasonable and allowable. Foundation The financial documentation you track needs to show that the expenses you incur are allowable. Allowable means that the expense is necessary, reasonable and allocable. You also need to show that you payed for those expenses with Child Nutrition funds. File your financial documents daily in such a way that they are easy to retrieve later. 1

2 Terminology Purchase and Sales Order When you buy an item from a seller or vendor you may complete a purchase order that lists the items, quantity and price. The seller or vendor issues you a sales order as acceptance of a purchase order or as an initiation of the purchase if you did not use a purchase order. The sales order lists the items, quantities and price. In most cases the seller or vendor will provide a delivery receipt with the shipped, posted or delivered items. The delivery receipt often includes a description of the delivered items so that you can compare the delivery to your sales order when you receive the items. Best Practice: Make sure to inspect the delivered items quantities and condition before signing the delivery receipt. Ask the delivery person to note any discrepancies in writing on the delivery ticket. Sales Invoice (The Bill) When a seller or vendor sells you an item the seller or vendor will issue you a document called an invoice that provides all of the details of the sale. If the seller or vendor does not require payment before sending you the item, the seller or vendor will list the payment terms on the invoice. The payment terms outline the length of time before you must pay for the item. For example, the payment terms may direct you to pay by the 30 th of the month following the invoice date. If the invoice is paid beforehand, the vendor may mark it as paid. Credits Sometimes a seller will need to adjust the original sales invoice. For example, the seller may deliver different items or different quantities than what was listed on the sales order. A seller or vendor issues a credit when they reduce the amount you owe due to missing, damaged or returned items. Best Practice: Document any changes from the sales order on the delivery receipt so that the person who makes payments is aware of any changes before paying the sales invoice. Checks A check is a special bank note that represents the cash that you pay to the seller or vendor. Each check contains a space to record the name of the payee. A person in your organization authorized to sign for the bank account from which the check is issued must sign the check. A processed or cleared check demonstrates that you paid for goods or services. Best Practice: Record the unique check number for each check you write in your bookkeeping system. Receipts When you pay for your items or services the seller/vendor or service provider should issue a receipt. The receipt will show whether the items or services were paid by cash, check, or credit card. Brick and mortar retail and grocery stores usually provide receipts automatically when you buy something. Best Practice: You should always make sure that the receipts you receive show itemized items or services. Bank Statement A bank statement outlines all transactions for a bank account and outlines the amount of funds available for the bank account owner to use. The bank statement will list expenses such as debit card transactions, processed checks, Electronic Funds Transfers (EFT) and cash withdrawals. The bank statement may also list income such as cash or check deposits, EFT deposits or any money credited back to you from a seller or vendor. Best Practices: Keep in mind that the name on your bank account should tie back to your business name and not your personal name. 2

3 Tracking Expenses Examples Basic Method Sales Order Label by month and vendor name: For example, July 2016 Happy Cow Milk Company Compare When you receive the sales invoice compare it to the sales order and delivery receipt for that transaction to ensure that you were charged correctly. Sales Order Sales Invoice Keep corresponding sales invoices, sales orders and delivery receipts together in reverse chronological order behind this page 3

4 Ordering Goods from a Seller or Vendor Substantiating Payment Accounting source documents contain the details necessary to substantiate transactions (payments) entered into your record filing system. Payment documentation without source documentation does not adequately support the necessary, reasonable and allocable part of allowable. Accounting source documents when ordering goods from a vendor or seller include the following: Sales Order Sales Invoice The person that pays the bills in your organization (whether it is you or someone else) should see the source documents before they issue payment. Prior to paying, the person who pays bills must verify that the expense was allowable through the details in the sales order and invoice. They must also be able to verify that the items were actually received through the details provided on the delivery receipt. Demonstrating Payment The documentation that demonstrates payment, on behalf of your organization, using Child Nutrition funds must include: The transaction date The amount The name of both businesses/people A unique payment number A description of the transaction 4

5 Purchasing Items from a Brick and Mortar Store Rolling It Up into Your Master Bookkeeping System My goal is Set a goal to help you get better at tracking your expenses. Make sure that you goal is SMART. Specific Measurable Achievable Realistic Time Sensitive 5

6 In accordance with Federal civil rights law and U.S. Department of Agriculture (USDA) civil rights regulations and policies, the USDA, its Agencies, offices, and employees, and institutions participating in or administering USDA programs are prohibited from discriminating based on race, color, national origin, sex, disability, age, or reprisal or retaliation for prior civil rights activity in any program or activity conducted or funded by USDA. Persons with disabilities who require alternative means of communication for program information (e.g. Braille, large print, audiotape, American Sign Language, etc.), should contact the Agency (State or local) where they applied for benefits. Individuals who are deaf, hard of hearing or have speech disabilities may contact USDA through the Federal Relay Service at (800) Additionally, program information may be made available in languages other than English. To file a program complaint of discrimination, complete the USDA Program Discrimination Complaint Form, (AD-3027) found online at: and at any USDA office, or write a letter addressed to USDA and provide in the letter all of the information requested in the form. To request a copy of the complaint form, call (866) Submit your completed form or letter to USDA by: (1) mail: U.S. Department of Agriculture Office of the Assistant Secretary for Civil Rights 1400 Independence Avenue, SW Washington, D.C ; (2) fax: (202) ; or (3) program.intake@usda.gov. This institution is an equal opportunity provider. 6