draw up clear and comprehensive guidelines on the payment procedures
include the following elements in the guidelines:
the different authorisation levels for approving payments/signing cheques and their corresponding financial limits
the different payment methods acceptable based on the amount of transactions
documents required to support a claim for payment
provision for non-routine payments such as advance payments and conditions attached
the need to settle credits in accordance with the specified payment terms
staff’s relationship with suppliers and contractors (i.e. the need to declare conflict of interest and prohibition on acceptance of lavish or frequent entertainment from them)
regularly review and update the procedural guidelines to meet changing circumstances
Payment Methods
1. Autopay
maintain an autopay list detailing the payees’ particulars and the goods/services they provided
verify any additions to and deletions from the autopay list and submit for approval by appropriate authorities
specify instructions on the upper payment limit, frequency and expiry date (if appropriate) of autopay for individual payees
verify autopay authorisations and any standing instructions and submit them for approval by designated staff member before referring to banks
review the autopay list regularly to ensure the particulars of payees and payment instructions are up to date
2. Cheques
require all cheques be signed by at least two authorised signatories
prohibit the authorised signatories to sign cheques drawn in their favour
issue of cash cheques should be avoided as far as practicable and be signed by designated persons
cross the cheques
pay only to the approved suppliers
prohibit the signing of blank cheques in advance
serially number payment cheques and cross-reference them with the payment records (e.g. purchase orders and invoices)
cancel voided cheques and retain them for audit purposes
keep blank cheque books by staff other than the signatories
account for each cheque issued
establish a system to ensure that banks are promptly notified of the withdrawal of any cheque signatories
3. Petty Cash
maintain petty cash under an imprest system
maintain petty cash at a specified level which should be based on actual expenditure and review the level periodically
require petty cash claims should be made on a reimbursement basis against a written request and an invoice certified by an authorised staff member
maintain specimen signatures of authorising staff members
require claimants to acknowledge receipt of payments by signature
prohibit cash advance unless approved by authorised staff with reasons
Payment Records
require payment records be supported by the following documents:
copies of requisition authorisation and purchase orders
suppliers’ invoices/delivery notes showing details of the goods/services provided and the amount claimed
certification that the goods/services have been received in good order
serially number payment records and cross-reference payment records with the respective payment account entries
prohibit erasures of payment records/entries
require any corrections/amendments be shown and initialled by the authorising officer and/or the payee in the records
cross out unused space in these records to prevent insertion of unauthorised entries
certify only on original invoices
maintain a list of specimen signatures of certifying staff
record invoice receipt dates to monitor any undue delay in payment
stamp “paid” on invoices to prevent double payments
Control and Supervision
require the opening of company bank accounts and appointment of cheque signatories be approved by the senior management
subject all cash and bank balances to general ledger control
reconcile regularly general ledger accounts with sub-ledger accounts
prepare summaries of certified payments monthly or bi-monthly for the scrutiny of the authorising staff concerned
prepare regularly bank reconciliation statements and financial statements for examination by the management
prepare regularly expenditure reports detailing procurement costs and highlighting any discrepancies and abnormal trends for management information
specify the retention period of payment and accounting records and the authority for their disposal upon expiry of the period
subject petty cash, payment and related accounting records to random checks
Physical Security
establish physical security measures to prevent unauthorised access to and loss of cheques, petty cash and accounting records
entrust designated staff members with the custody of these items and hold them accountable for their security
Computer Security
establish physical access control to computer terminals and storage media (e.g. the server)
establish password control to restrict of access to computer information and functions to appropriate level of staff
verify data input to ensure accuracy of data input and checks on audit trail reports to prevent tampering of data
Segregation of Duties
Assign different officers to handle the following functions as far as practicable:
administering cash accounts, including petty cash
preparing cheques for issue and
general and sub-ledger accounting
Job Rotation
formulate a policy on staff rotation to reduce the possibility of syndicated corruption
Internal Audit
subject payment operations to internal audits to verify the extent of compliance with established procedures and to detect other malpractice
