Inter Tribal Council of Arizona, Inc. WIC Program. Inventory Audit Manual FY 2012

Transcription

1 Inter Tribal Council of Arizona, Inc. WIC Program Inventory Audit Manual FY 2012 Inventory Audits FY 2010 Page 1 of 10 April 2010

2 Inventory Audits An inventory audit is an examination of food invoices or other proofs of purchase by the vendor to determine whether a vendor has purchased sufficient quantities of WIC authorized foods to provide clients the quantities specified on checks/fruit & vegetable checks redeemed by the vendor during a given period of time. Inventory audits will be conducted on authorized independent/tribal vendors in lieu of or in addition to compliance buys to meet the federal requirements of performing compliance investigations on at least 5% of authorized vendors. Vendors selected for inventory audits may be selected using one or more of the following criteria, which is not an all-inclusive list of criteria: The vendor has, in the previous 4 months, been reported for low variance as a high risk vendor; The vendor has, in the previous 4 months, been reported for high mean as a high risk vendor; The vendor has, in the previous 4 months, has had more than 3 client complaints; Inventory audits are conducted on WIC authorized foods and contract formula based on category. Each food category or contract formula audited counts as an individual food audit. Food audits may be conducted on an individual food category or contract formula; more than one food category or contract formula; or all food categories and contract formulas. Food audits may be conducted on any combination of food categories and contract formula. Many aspects of the audit involving inventory and redemption data will be conducted with a least two staff present. Any correction to hard copy documents should be crossed out, using a single line, and initialed by appropriate staff. Inventory Audits FY 2010 Page 2 of 10 April 2010

3 Prior to initial in-store inventory count 1. Create an online file for the vendor. a. The file should be created and remain at s:drive/vendor/inventory audits/fy 2010 b. Copies of all worksheets, letters, phone logs and any other electronic documentation pertaining to the audit should be kept in this file. (Documents will be scanned and saved in this file.) c. A paper file will also be made to keep copies of signature forms, correspondence, invoices and receipts, and any other documents pertaining to the audit. 2. Save a copy of the blank inventory audit template in the vendor s online file. a. The template file name is Inventory audit with claims TEMPLATE b. Rename the template in the vendor s online file using the vendor s name. 3. Enter the vendor information on the Signatures & Outline tab of the vendor s inventory audit template. a. Print the Signatures & Outline tab for the inventory audit paper file. b. During the course of the audit, this signature sheet should be signed and dated by appropriate staff as each step is completed. c. Once the audit is complete and all dates and signatures have been acquired, enter this information into the vendor s online audit file. 4. Save a copy of the blank in-store inventory audit form template in the vendor s online file. a. The template file name is: In-store Inventory Audit Initial Form b. Rename the template in the vendor s online file using the vendor s name. 5. Enter the vendor information into the vendor s template. a. Print the template for the paper file. b. This template is the form that will be used during the initial in-store inventory audit to record the quantity, price and expiration of the stock available. Conduct initial in-store inventory count 1. The initial in-store audit should be conducted no earlier than the last week of the month. Inventory Audits FY 2010 Page 3 of 10 April 2010

4 a. Unless a vendor endorses each check with a redemption date, there is not a way to prove when a vendor accepted a check. However, vendors are authorized to accept the checks between the first and the last day to use only. Therefore, conduct in-store audits as close to the end of the month as possible. i. Example: If the in-store audit was conducted April 25 th, checks with a first day to use prior to 5/1 would not be included in the audit, even if the bank redemption date is after 4/25. b. Consider the shelf price survey schedule when planning an audit. Shelf price survey responses can help to determine how consistent and stable a vendor s prices have been. 2. Introduce state staff to vendor staff and explain that a routine monitoring will be conducted, which will include inventory, price and expiration date collection. 3. Collect all in-store inventory, prices and expiration dates recording the data on the In-store Inventory Audit form. a. Inventory all types, sizes, brands, and flavors of WIC-authorized foods in the food categories selected for the audit. b. Inventory only contracted formulas. (Similac Advance EarlyShield 12.9 oz cans powdered and Similac Isomil Advance Soy 12.9 oz cans powdered) c. Do not include any expired food in the total in-store inventory count for a specific food. Pull any expired products from the shelf, note the food type, brand, size, expiration date and count on the in-store inventory form. Give any expired food to the vendor staff to discard. 4. Ask vendor staff if there is additional stock anywhere not on shelf (stockroom, etc). a. If there is additional stock, collect the count, price and expiration date and add to the shelf count. 5. Ask vendor staff for missing prices of any eligible foods. 6. Once all data has been collected, request vendor staff to review the inventory for accuracy. 7. If the vendor staff is in agreement with the inventory counts, prices and expiration dates, have them validate this agreement by signing and dating the inventory form. Inventory Audits FY 2010 Page 4 of 10 April 2010

5 a. If changes are necessary before vendor staff will sign, cross out data in question with a single line, write corrected data and have both state WIC staff and vendor staff initial the change. 8. WIC staff members should also sign the inventory prior to leaving the store. A copy of the inventory audit form will be given only if requested by the vendor. 9. Upon return to state office, enter the lowest price for each food category based on the collected shelf prices into the Shelf Price tab of the vendor s online audit file. 10. Enter the in-store inventory collected during the visit into the Inventory tab of the vendor s online audit file. Audit notification 1. Approximately four months after the inventory, no later than the 10 th of the month, send the vendor notification of a three-month inventory audit. a. For example, if the in-store audit count was conducted on January 28 th, the notification of inventory audit should be sent no later than May 10 th. b. This notice will be sent certified mail with return receipt requested. c. Note certified mail tracking number on the signature form. 2. Request all invoices/receipts for the eligible foods purchased by the vendor during the audit period. a. For example, if the in-store audit count was conducted on January 28 th, request invoices/receipts dated January 28 th through April 30 th. b. Include in the all notifications that failure to provide ITCA with the requested inventory records will be disqualified for one year and reference the sanction schedule. 3. Allow the vendor two weeks from the date of the letter to gather and send the required purchase documentation. 4. If the vendor does not send the required purchase documentation by the deadline, send a second notice of the inventory audit and allow one week from the date of the letter for the vendor to gather and send the required information. Inventory Audits FY 2010 Page 5 of 10 April 2010

6 5. If the vendor does not respond after the second notification, send a final notice of the inventory audit and allow one week from the date of the letter for the vendor to gather and send the required information. 6. If the vendor does not respond to the final notification, the vendor will be sent a notification of being disqualified for one year for failure to provide requested inventory records. Purchase documentation 1. Once the requested documentation has been received, enter the total number of each food purchased by the vendor during the requested period into the Inventory tab of the vendor s online audit file. a. The Invoice Worksheet tab can be used to enter counts from individual documents and will total the amounts in the Invoices column of the Inventory tab. 2. If the vendor sends you original documentation, photocopy the documentation and return the originals to the vendor certified mail with return receipt requested. a. Document on the signature form if the vendor sent originals or copies of their purchase documentation. b. Document the certified mail tracking number on the signature form. Redemption data 1. Run the check redemptions (excluding fruit & vegetable checks) based on the dates of the inventory audit using the Solutran SOAR online banking website site to find which check types the vendor redeemed during the audit period. 2. Add new check type tabs to the vendor s online audit file. a. Add a worksheet tab for each new check type added to the inventory audit workbook. b. Change foods and quantities based on check types described in row 1. c. Change foods and quantities in row 2. d. If lowest price calculation is needed, link correct Shelf Prices and change quantities as needed. Inventory Audits FY 2010 Page 6 of 10 April 2010

7 e. Change quantities and links to Shelf Prices in formulas in row 3. f. Add totals from row 250 to correct food(s) on Audit Results and Claims tabs. 3. Download the redemption data by check type from the Solutran SOAR banking website and copy the data into the appropriate check type tab of the vendor s online audit file. a. Go to b. On the search screen, enter Vendor ID number, Check Type, and First Day to Use. c. Download and save data in excel spreadsheet. d. Repeat above search and download steps for other months included in the audit. e. Copy and paste Check Number, Presentment Date, and Amount columns into appropriate Check Type tab of the inventory audit worksheet. f. If a vendor has more than 250 redemptions for a Check Type, copy and paste the totals (row 250) to a new row and correct necessary formulas on the Audit Results and Claims tabs. g. Do not count any rejections. i. Checks with a current status of rejected, will not be included in the audit to prevent inclusion of any inadvertent checker errors. h. Count checks only with first day to use within the audit period. i. Checks with a first day to use within or prior to the in-store audit month will not be included in the audit. Because checks can be deposited within 60 days of the first day to use, this process will prevent counting any checks redeemed prior to the audit period. Redemption reports will be run for the first day to use for the month(s) following the in-store audit month. i. For all check types that weren t redeemed by a vendor, make sure the totals (row 250) are zero. j. Paid checks with a single food, in a quantity of 1 (e.g., 1 gallon milk), regardless of redemption dollar amount, will equal a quantity of 1 for that food. Because only one food with a quantity of 1 is authorized for purchase, redeeming this Inventory Audits FY 2010 Page 7 of 10 April 2010

8 check should mean that the food listed on the check was purchased. Otherwise, it was a substitution. k. Paid checks with a single food, in a quantity more than 1 (e.g., 3 cans of Similac Advance EarlyShield powder), divide the redemption dollar amount by the shelf price to calculate the number of items purchased, but do not exceed the maximum quantity listed on the check. Example: $20 redemption amount, $5 shelf price, 3 cans listed on the check. $20/$5 = 4 cans. Report as 3 cans as that is the maximum allowed on the check. l. Paid checks with more than one food and various quantities (e.g., 1 gallon milk, 2 cans juice, 1 lb cheese), use the vendor s shelf prices to calculate the lowest possible redemption price for the combination of foods on the check. i. Only those checks that have a redemption dollar amount at or above the lowest possible price will be included in the audit. Therefore, either all foods or none of the foods on these checks will be included in the audit. ii. Any redemption price over the lowest possible price is assumed to be fully redeemed. iii. Any partial redemptions (i.e., checks with a redemption price less than the lowest possible price) won t be included in the audit as it can t be determined which foods were purchased. m. For any check that lists 36 oz cereal, cereal will be counted as 2 boxes, even if vendor carries 12 oz boxes. It is assumed that the average shopper selects 2 boxes. n. For any check that lists 30 oz tuna, tuna will be counted as 5 cans. It is assumed that the average shopper selects 5 cans. Audit Results 1. Once the inventory and the redemptions are entered into the vendor s online audit file, the Audit Results tab will automatically calculate whether or not the vendor has passed or failed each foods audit. a. The Audit Results tab will display each food separately and calculate a count and pass/fail determination. However, the Claims tab will combine all Similac Inventory Audits FY 2010 Page 8 of 10 April 2010

9 formulas (Similac Advance EarlyShield and Isomil Advance and all fluid cow milk except lactose-free milk. b. The combination of these two food groups on the claims tab allows for any unintentional formula or milk substitutions, yet still shows whether or not the vendor had enough of a product type to meet redemption amounts. c. Shrink rate (includes theft and human error) averages less than 2% for supermarkets. An error rate of 5% is added to the total inventory (in-store and invoice combined) to account for potential vendor shrinkage and auditor errors. d. Any claims will be calculated using the vendor s lowest price for each food resulting in a claim. 2. If a vendor passed the audit calculation for all foods, print the Claims tab, sign, date and send to the vendor along with a final audit letter concluding the audit. a. Print a copy of the signed Claims tab and the final audit letter for the paper file. 3. If a vendor fails for one or more food audits, contact the vendor requesting additional purchase documentation to validate the redemptions. a. A food audit is failed and a pattern of this failure is shown if the vendor shortage with error rate is an amount three times greater than the maximum amount of the food category printed on any one Check Type. i. For example, if the vendor shows a shortage of 6 gallons of milk and the greatest number of gallons on any check type is 2 gallons, the vendor has redeemed at least 3 checks with 2 gallons of milk and has therefore shown a pattern of violating OAR (3)(b)(C). a. Document and date all contact and response with the vendor on the signature form. If there is not enough space to document on the signature form, create and save a new document in the vendor s audit file for this contact. Remember to include date, time, who was contacted and contact outcome on this form. b. Use any additional purchase documentation to recalculate the vendor s audit. c. If the vendor passes the audit calculation with the additional purchase documentation, follow the steps outlined in number 2 of this section. Inventory Audits FY 2010 Page 9 of 10 April 2010

10 4. If the vendor refuses or is unable to produce additional purchase documentation to reconcile the vendor s WIC redemptions, print the Claims tab, sign and date and Vendor Coordinator will begin claim and disqualification procedures. Inventory Audits FY 2010 Page 10 of 10 April 2010