SECTION OVERVIEW AND POLICIES

Overview

The purpose of this section is to provide guidance to ensure that agencies receive the goods and services they ordered in the proper condition and in accordance with the terms and conditions of the purchase agreement. The agency must complete the receiving processes timely to establish what was received, the quantity or amount received, the date of receipt, and who received the goods or services. As a separate and unique point of control, receipts can and should be entered in a timely fashion independent of other activities in the procurement to payment process. Agencies should use the receiving module in SFS to store documentation supporting receipt of goods or services. While it is an independent control point, timely receipts have downstream benefits such as facilitating the prompt payment of invoices and providing the opportunity to take full advantage of any discounts vendors may offer.

Title 2, Chapter I, Part 6.6 of the New York Codes, Rules and Regulations requires agencies to maintain adequate internal controls over the voucher process to support the validity of payments made. To assist with this requirement, agencies must have policies and procedures in place for receiving. Receiving should be accomplished and recorded outside of the payment process to ensure appropriate separation of duties. Receiving provides an agency with reasonable assurance that goods and services are properly received and the related prices are correct before certifying to the Comptroller that claims for payment are just, true and correct and, therefore, appropriate to pay.

Agencies should develop written policies and procedures to ensure staff consistently perform the receiving function agency-wide. A proper receiving process for goods and services guards against inherent risks that agencies may certify claims for payment that include a different quantity or quality of goods and/or services than the agency ordered and received.

Policy

Prior to certifying a claim for payment for goods and services, agency staff must confirm the agency received the quantity and quality of goods or services from the vendor based on the agency’s expectations, which ideally should have been communicated in a purchase order.

To document the act of acceptance, receivers must enter receipts in SFS for purchases from preferred sources, centralized contracts, agency-specific contracts and, with limited exceptions, open market purchases. This requirement applies to purchases where the agency issued a purchase order and purchases where the agency did not issue a purchase order. The following categories do not require agencies to enter a receipt in SFS:

• Procurement Card purchases where the mandatory use of PO is not required
• Utilities (including, but not limited to purchases of power, water, sewer and telephone service)
• Interagency bills
• Petty cash replenishment
• Postage meter replenishment
• Courier services
• Arbitration services
• Legal settlements
• Centralized contract purchases where prices are variable, changing frequently (e.g., daily) and where the vendor’s system tracks the receipt of goods against orders placed – examples of receiving through a vendor-provided system includes:
  • Receiving of prescription drugs (e.g., Cardinal Health)
  • Receiving of perishable foods (e.g., Sysco, Driscoll)

Agencies must practice “blind receiving” whenever possible on purchases from preferred sources, centralized contracts, agency-specific contracts and, with limited exceptions discussed further in this section, open market purchases where the agency has issued a purchase order. Agencies must also ensure proper segregation of duties between receiving, purchasing, and accounts payable. This helps reduce the risk of error, waste, or wrongful acts occurring at the agency.

Process and Transaction Preparation:

Blind receiving is facilitated when the agency issues a purchase order and provides order information to the intended receiver without the quantities listed. Thus, the receiver is “blind” to the quantities ordered, and must:

• independently identify and record the quantity of the goods or services received, and
• confirm that the quality of goods or services received matches the description of the quality the agency ordered.

When an agency purchases items without using a purchase order, it hinders the ability to practice blind receiving, and increases the risk that the agency may pay for goods and services that it did not order, did not receive, or received at a quality different than expected. For example, if an agency receives an invoice for which there was no purchase order issued, agency staff oftentimes routes the invoice, which includes the quantities listed, to the receiver and asks whether all the items on the invoice have been received. With the quantities present, the receiver does not have a need to independently count or keep records of the goods or services received.

Some instances when blind receiving is not necessary include:

• Prepaid services where there is no immediate delivery of the services to receive against. For example, payment advances, attendance fees for future trainings, insurance policies, warranty coverage, membership fees, etc.;
• Regularly recurring, fixed-cost lease payments;
• Grants that provide funds in advance, or do not have performance requirements before payments are made; and
• Utility, electric, water, sewer and other similar services.

Timely Receiving

The person receiving the goods or services should document the necessary information, such as the receipt date, quantity received, quantity accepted, etc., at the time the goods or services are received. If the receiver is unable to record the receipt into SFS at time of receipt, then the receiver is responsible for the accurate capture of the receipt by the next business day. For instances where receivers do not have access to SFS, the agency must establish procedures such that the receiver timely communicates receipt of goods and services to a designated SFS user who can record receipts.

For ongoing services such as temporary staffing or monthly maintenance, the agency must record receiving information when services are received or contractually due. If the billing period is for multiple dates, use the last day of the billing period. Information may include the names and titles of the workers and the services performed. The receiver should record this information without knowing the quantity the agency ordered.

For goods, the person receiving the shipment should ensure that the goods match the purchase order’s requirements related to item specifications such as the model type, size, unit of measure, and that the goods are free from defects or damage.

For services, the agency must monitor the service being provided both throughout the process and at its completion. This is important to ensure the vendor performs work to expectations and accomplishes the performance objectives specified in the purchase agreement. For example, for installation services, the agency should perform site visits to verify the vendor is working when they claim to be, inspect the quality and quantity of materials being used for the installation, and upon completion, confirm that service received satisfies the expectations of the purchase agreement. Also, the purchase agreement may require that the individuals providing the service possess certain qualifications (e.g., professional licenses, specialty certifications, past work experience, etc.). Qualifications may be required for both the vendor’s employees and for any subcontracted third-parties performing services under the agreement. The agency must ensure the vendor, and any subcontractors, are in fact qualified as this may impact the performance quality, and the final work product the agency receives.

Inspection

Where required by law or the terms and condition of the purchase agreement, inspection of items must be performed to ensure the goods received are working as intended. Inspections help determine whether goods received are in the proper condition and whether they meet the applicable details of the purchasing agreement. For example, inspections may be required on items such as IT hardware or software.

While inspection of goods and services is not always mandatory, some contracts or laws, or Items in the Item Master may require that an agency adheres to an inspection period. The person inspecting the goods or services should complete inspection as soon as practical, but no later than the last day of the inspection period noted in the law, contract, or purchase order. Inspection results must be entered timely in the SFS, whether by the receiver, or another designated user who can record the receiver’s inspection results. Where practicable, agencies should enter inspection results within one business day.

The inspection process may include verifying the version of software installed on computer equipment, ensuring perishables are in good condition and expiration dates have not been exceeded, etc. The agency should indicate on the appropriate purchase order line(s) that inspection is required. Regardless of inspection periods, the agency must comply with Section 179-f of the State Finance Law. This law requires the agency to notify the vendor within 15 days (7 days for self-certified small business) of the receipt of an invoice about the following: any defects in the delivered goods, property, or services; defects in the invoice; and suspected improprieties of any kind.

Agencies should extend the required payment date by the time it takes the vendor to satisfy or rectify properly notified defects and for an inspection period specifically required by statute or contract provision. Please refer to Chapter XII, Section 5.F – Adjusting the MIR Date of this Guide for additional guidance on this topic.

Online Agencies

Establish Receiving on Purchase Orders

To facilitate an efficient and effective receiving process, the agency must set up the purchase requisition and subsequent purchase order correctly. It must indicate whether receiving will be based on quantity or amount only. The agency should evaluate each purchasing scenario to determine the best practice for purchasing that will meet the agency’s needs. The reasonability, extent, and timing of receiving that is required will also factor into the purchasing decision.

Quantity based purchase orders allow the agency to order and receive up to the specific quantity and unit price of goods or services at a particular unit of measure. Quantity based receiving helps agencies keep a more accurate record of the goods or services actually received. This helps ensure that agencies do not exceed the amounts and quantities on purchase order lines, and therefore, pay no more than the price agreed upon in the purchase order. For example, it may be appropriate for the agency to conduct quantity based receiving for security guard services, nursing services, hourly based IT services, etc.

Amount only based ordering allows the agency to order and receive based on the aggregate cost of the goods or services purchased and provided. Amount only receiving should be used when quantity based receiving would not add value or services are not ordered on a specified unit of measure basis. For example, amount only receiving may be appropriate for the purchase of copier repair services, when the agency does not know ahead of time the extent and cost of necessary repairs. Amount only receiving may also be appropriate for professional services, where it would not be feasible to order, and bill for, the incremental time a professional works on a project.

SFS has an automated matching function and payment tolerances to help ensure agencies are not paying for more goods and/or services than they received; or paying higher unit prices for goods and/or services than established in the purchase agreement. Matching compares the information on a voucher to the purchase order referenced on the voucher, and receiving and inspection information entered into SFS, when applicable. When a match is not found, the voucher will have a match exception. The agency must resolve match exceptions before a voucher can process for payment.

Chapter XII, Section 8.B - Matching of this Guide provides additional guidance about configuring purchase orders in SFS and resolving match exceptions. See Section 8 – Payment Tolerances of this Chapter for information related to establishing minor price variances that will not affect matching.

Conducting Receiving

As agencies process vouchers in SFS, SFS matches each voucher line to existing receipts for the associated purchase order line. Receipts are matched generally in receipt date order until the voucher line quantity/amount is met or exceeded.

It is important that agencies enter receiving information timely to ensure that the proper invoice is matched to the proper receipt. For instances where goods are received in multiple batches, the agency must create a receipt for each delivery, and reference the appropriate purchase order, if applicable. Whenever possible, agencies must record receiving information in SFS at the time the goods or services are received, but no later than one business day after receipt.

Agencies determine the amount of goods and services to purchase based on their need. If a vendor provides and invoices for more goods or services than the agency ordered (i.e., needed), the SFS will produce a match exception based on the excess quantity or amount on the receipt. The agency should investigate the match exception to determine whether it is appropriate to (1) pay the vendor only for the amount ordered, or on an exception basis (2) seek approval from agency management to amend the purchase order to increase the quantity and/or dollar amount. Agencies should communicate with the vendor during this process to ensure the vendor is informed about the delivery discrepancy and the agency’s decision regarding excess delivery.

In addition to timely receiving, agencies must practice blind receiving whenever practical and make use of the SFS Blind Receiving Report to assist with this process.

To create a receipt in SFS, Agencies must first enter the purchase order ID, when applicable. The receipt should include, but not be limited to, the following information to ensure the receipt is matched with the proper invoice:

• Quantity of goods or services: Record the accurate quantity received.
• Unit of Measure: Confirm that the unit of measure for the goods or services received from the vendor is accurate and matches the unit of measure on the purchase order.

  For example, when an agency issues a purchase order for 12 cases of floor stripper, the unit of measure is “case” even though each case contains multiple gallons of floor stripper. The agency must receive based on the “case” unit of measure, and cannot receive individual “gallons” for this purchase order. The agency should record the proper unit of measure for goods and services received.

  If the agency identifies the vendor delivered goods or services in a unit of measure different than the unit of measure ordered, agency staff should perform additional work to determine whether it is appropriate to (1) not accept the goods or services that do not conform to the unit of measure the agency ordered, or on an exception basis, (2) seek approval from agency management to amend the purchase order to accommodate the goods or services delivered in a different unit of measure. Please access SFS Coach to find job aids containing more guidance on correcting purchase orders and receipts. Coach is accessible from the SFS home page after logging in with your SFS user ID and password.

• Receipt Date: Record the date the goods or services were actually received. This date also supports the accurate calculation of the MIR date.

Record Retention – Attachments in SFS

Agencies should use the receiving module in SFS to attach documents that support the receipt of goods or services upon conducting receiving. There are a variety of documents that support services were rendered or goods were received, including, but not limited to:

Services

• Certified Payroll Registers
• Timesheets
• Sign-In Sheets
• Cleaning Logs

Goods

• Packing Slips
• Bill of Lading
• Courier Delivery Number (e.g. FedEx, UPS)
• Specific Serial Numbers
• Receiving Slips

For more information on documentation to support accounts payable vouchers and how to verify a payment is appropriate, please see Chapter XII, Section 4.B.1 – Certification of Vouchers – Supporting Information.

Return to Vendor

When an agency determines that goods previously received in SFS need to be returned, it is the agency’s responsibility to contact the vendor and inform them of the intent to return the goods. The agency should obtain a return authorization from the vendor and enter a Return to Vendor (RTV) in SFS. Once the goods have been shipped for return, the agency must dispatch the RTV to restore amounts on the related purchase order and generate a Credit Memo which will reduce the next payment amount for that vendor and restore the agency’s appropriation in the same amount.

The RTV will dispatch to the vendor to inform them that the goods have been shipped back. The RTV is dispatched using the same method as the original purchase order.

Bulkload Agencies

The preferred method for receiving is within SFS. In the event that receiving cannot be completed in SFS (i.e., for bulkload agency receipts), the agency is expected to establish its own policies for receiving outside of SFS. These policies should be consistent with the guidance provided in this document.

Guide to Financial Operations

REV. 03/09/2021