Document Edaran Digital Systems Berhad Policies and Procedures Manual STANDARD OPERATING PROCEDURE Index Version 1.0 Revision Date 1st June, 2002 Page No. Page 1 of 13 SOP 1 Procurement and Payment Section 1.1.0 Procedures SCOPE These written instructions set out the policies and procedures for all purchases and payment thereof. 1.2.0 OBJECTIVE The objectives of these instructions are: 1.2.1 To ensure that all purchases are supported with proper documentations and are duly approved. 1.2.2 To ensure that procurement is done at a reasonable price and at correct quantity and quality. 1.2.3 To ensure that liabilities are accrued in the books on a timely and efficient basis. 1.2.4 To ensure that EDARAN only deals with approved Vendors with reliable track record and performance. 1.2.5 To ensure that all disbursements are made only for authorised business purposes only and that they are properly recorded and supported by complete documentation. 1.2.6 To provide Senior Management with information for the assessment of Operational Risk. Document Process Owner STANDARD OPERATING PROCEDURE Document Edaran Digital Systems Berhad Policies and Procedures Manual Index Version 1.0 Revision Date 1st June, 2002 Page No. Page 2 of 13 SOP 1 Procurement and Payment Section Procedures Document 1.3.0 ABBREVIATIONS 1.3.1 The abbreviations for or related to documents referred to in these instructions herein are as follows: Abbreviation PRF PO DO GL TC POV PV PB PL SR 1.3.2 Exhibit The abbreviations for or related to Job Titles referred to in these instructions herein are as follows: Abbreviation PS KAM PM CCU LP AP AFM POF CEO MD LOA 1.4.0 Documents Name Purchase Requisition Form Purchase Order Delivery Order General Ledger Tender Confirmation Panel of Vendors Payment Voucher Project Budget Price List Supplier Reconciliation Title in Full Project Supervisor Key Account Manager Project Manager Commercial Contract Unit Logistics Personnel Accounts Personnel Accounts & Finance Manager Purchasing Officer Chief Executive Officer Managing Director Limit of Authority PROCESS FLOWS Please refer to Flowchart. Process Owner Document Edaran Digital Systems Berhad Policies and Procedures Manual STANDARD OPERATING PROCEDURE Index Version 1.0 Revision Date 1st June, 2002 Page No. Page 3 of 13 SOP 1 Procurement and Payment Section Procedures 1.5.0 POLICIES 1.5.1 All procurement-related transactions are under the responsibility of the CCU. For Back-to-back Transactions and Pre-determined Vendors (bidding partners during project tendering), are covered under SOP 5 – Project Financing & Back-to-back Transactions. Procurement for “Services” (Procuring Professional / Consultants for specific task / services) or appointment of Consultants is covered under SOP 26 – Panel of Vendor Selection and Procuring Professional / Consultant Services. 1.5.2 The CCU centralises the purchasing function for the following types of purchases:• Expense Assets and Fixed Assets • Supplies and Stationery • Contracted Services 1.5.3 The CCU co-ordinates the following 2 categories of purchasing: • For internal use • For project use 1.5.4 All procurements must be budgeted for. In the absence of budget allocation, the approval for the requested item would need to be obtained from the authorized parties prescribed in the LOA. 1.5.5 All procurements must contain Complete and Accurate relevant details. ‘The Turnaround Time’ for CCU to act on each PRF is two (2) office working days. Document Process Owner Document Edaran Digital Systems Berhad Policies and Procedures Manual STANDARD OPERATING PROCEDURE Index Version 1.0 Revision Date 1st June, 2002 Page No. Page 4 of 13 SOP 1 Procurement and Payment Section Procedures 1.5.6 All rejected PRFs / POs must be accompanied by a Memo stating the reason(s) for the rejection. 1.5.7 The procurements must only be made from authorised EDARAN POV. In the absence of a POV for the particular class of Purchase, the following minimum number of quotations must be prepared: • < RM250k - 3 quotations • > RM250k - 5 quotations 1.5.8 All documents must be signed by authorized signatories in accordance to the LOA. 1.5.9 All blank purchase documents must be kept in a locked cabinet to prevent unauthorised access. 1.5.10 All purchase documents must be sequentially pre-numbered, where possible, to ensure Completeness. 1.5.11 All procurements must be supported by Original copies of the purchase documents. 1.5.12 All documents must be properly filed, and supported by sufficient documentation, so as to constitute an audit trail. 1.5.13 The approval for any Procurement must be based on the following factors: • Whether procurement is budgeted or not-budgeted • Price / Value / Quality / Durability of procurement • The reason(s) for the procurement 1.5.14 Receipt of the Inventory must be physically inspected and confirmed for the Accuracy and the Quality of the Procurement, before the LP continues with further issuance of documents. Document Process Owner Document Edaran Digital Systems Berhad Policies and Procedures Manual STANDARD OPERATING PROCEDURE Index Version 1.0 Revision Date 1st June, 2002 Page No. Page 5 of 13 SOP 1 Procurement and Payment Section Procedures 1.5.15 All Invoices must be centrally processed and verified by the CCU. 1.5.16 The AP’s role in the Procurement Cycle is to record the Procurement in the Accounting System. Actual Monitoring and Control of the Procurement Cycle is to remain under the custody of the CCU. 1.5.17 Payments will only be made for original Invoices (not photocopies of Invoices) or CEO-approved photocopies of Invoices. 1.5.18 All Split / Partial payments must be verified and monitored by PS, and approved according to the LOA. 1.5.19 All Payments to Vendors must be made within the Credit Period, unless there is any dissatisfaction from User / Projects on goods purchased and services received. 1.5.20 All Payments are to be made by cheque and the cheques must be despatched to the Contractors / Suppliers immediately upon signing by the authorised signatories. 1.5.21 Electronic transfer of funds must only be performed for InterCompany transactions (Internal). 1.5.22 All relevant documentations must be properly prepared, checked, and communicated to the MD / CEO before they effect the electronic transfer of funds. 1.5.23 Third party collection of cheques is only allowed upon proper Identification of, and Authorisation from the Vendor / Payee. Document Process Owner Document Edaran Digital Systems Berhad Policies and Procedures Manual STANDARD OPERATING PROCEDURE Index Version 1.0 Revision Date 1st June, 2002 Page No. Page 6 of 13 SOP 1 Procurement and Payment Section Procedures 1.5.24 The AP must follow the following general criteria for releasing payment (in order of priority): • Urgent Invoices • Due or over due invoices • Monthly Utilities • Project Payments • Other Payments 1.5.25 The AP must “Hold” Invoices when they are under specific instructions from the Users and / or Management because of unresolved technicalities or for reasons of Cash Flow. Only when specific instructions are released the AP shall again proceed with raising the raising cheques. 1.5.26 All cheques must be crossed “A/C Payee Only” and signed according to the LOA. 1.5.27 The following Delivery Methods for Cheques must be used, according to the following criteria: • For Local Cheques, personal collection by the Vendor / Payee • For Outstation Cheques < RM 50,000, Normal Mail • For Outstation Cheques > RM 50,000, Courier or through Telegraphic Transfer Any request of other method of payment must be made in writing by the Vendor / Payee. 1.5.28 Supplier Reconciliation Procedures will be carried out on a monthly basis. Document Process Owner Document Edaran Digital Systems Berhad Policies and Procedures Manual STANDARD OPERATING PROCEDURE Index Version 1.0 Revision Date 1st June, 2002 Page No. Page 7 of 13 SOP 1 Procurement and Payment Section 1.5.29 Procedures Document Process Owner Cash Payment All Payments via cash or the issuance of cash cheque or its equivalent must be approved by the Managing Director. The Managing Director has the authority to approve cash payment or issuance of cash cheque or its equivalent up to the maximum amount of RM 50,000.00 only ( Ringgit Malaysia Fifty Thounsands only). 1.6.0 PROCEDURES 1.6.1 Procurement Ordering Procedures (Internal) 1.6.1.1 User shall submit a PRF to the HOD detailing reasons for the procurement. PRF User 1.6.1.2 The HOD shall then approve the PRF (upon assessing the Accuracy and Completeness of documentation, and the reasonableness of the procurement) before passing it to the POF at the CCU. PRF HOD The PRF must be processed by the CCU within two (2) office working days. PRF POF / CCU The HOD shall also prepare a Memo if the PRF is rejected, stating the reasons for the rejection. Memo CCU The POF shall match the PRF against the Budget, indicate the recommendations, and initial on the PRF. If the request is rejected by the CCU, the POF shall retain a copy of the PRF, and return the original copy of the PRF together with a Memo to the User, stating reasons for the rejection. PRF, Budget, Memo POF 1.6.1.3 Document Edaran Digital Systems Berhad Policies and Procedures Manual STANDARD OPERATING PROCEDURE Index Version 1.0 Revision Date 1st June, 2002 Page No. Page 8 of 13 SOP 1 Procurement and Payment Section Procedures Document Process Owner 1.6.1.4 If the request is recommended by the CCU, the POF shall hand the PRF to the authorised signatories for approval (according to the LOA). PRF POF 1.6.1.5 Upon receiving the approved PRF, the POF shall raise a 4-part sequentially pre-numbered PO and obtain approval from the authorised signatories according to the LOA, where • 1 copy is sent to the Vendor • 1 copy is retained by the POF for the Running Number File • 1 copy is retained by the POF for the Supplier File • 1 copy will be sent to the LP at the CCU PO, PRF POF 1.6.1.6 In order to obtain an immediate action by the vendor, the POF may fax a copy of the PO to the vendor for prompt action. PRF PS 1.6.2 1.6.2.1 Purchase Ordering Procedures (Project) The PS shall submit a PRF to the PM detailing reasons for the procurement. Document Edaran Digital Systems Berhad Policies and Procedures Manual STANDARD OPERATING PROCEDURE Index Version 1.0 Revision Date 1st June, 2002 Page No. Page 9 of 13 SOP 1 Procurement and Payment Section 1.6.2.2 Procedures Document Process Owner The PM shall then approve the PRF (upon assessing the Accuracy and Completeness of documentation, and the quantity, price and specification of the procurement against the PB) before passing it to the POF at the CCU. PRF, PB, PO, Memo PM The PRF must be processed by the CCU within two (2) office working days. PRF POF / CCU PRF, PB, POV, PL, Memo POF PRF POF The PM shall also review previous PO raised to ensure that no duplication of orders are made, before approving the PRF. The PM shall also prepare a Memo if the PRF is rejected, stating the reasons for the rejection. 1.6.2.3 The POF shall match the PRF against the PB, the POV, and the latest PL / Quotations, indicate the recommendations, and initial on the PRF. If the request is rejected by the CCU, the POF shall retain a copy of the PRF, and return the original copy of the PRF together with a Memo to the PS, stating reasons for the rejection. 1.6.2.4 If the request is recommended by the CCU, the POF shall hand the PRF to the authorised signatories for approval (according to the LOA). Document Edaran Digital Systems Berhad Policies and Procedures Manual STANDARD OPERATING PROCEDURE Index Version 1.0 Revision Date 1st June, 2002 Page No. Page 10 of 13 SOP 1 Procurement and Payment Section Procedures Document Process Owner 1.6.2.5 Upon receiving the approved PRF, the POF shall raise a *5part sequentially pre-numbered PO, and obtain approval according to the LOA, where • 1 copy (White Colour) is sent to the Vendor • 1 copy (Pink Colour) is retained by the POF for the Running Number File • 1 copy (Yellow Colour) is retained by the POF for the Supplier File • 1 copy (**Green Colour) will be sent to the LP • 1 copy (Blue) will be sent to user (PM, KAM, SP) PRF, POV, PO POF 1.6.2.6 In order to obtain an immediate action by the vendor, the POF may fax a copy of the PO to the vendor for prompt action. 1.6.3 Procurement Procedures from the Pre-determined Vendors (bidding partners during project tendering) and Back-to-back Transactions with suppliers covered under SOP 5 – Project Financing & Back-to-back Transactions. 1.6.4 Acceptance of Items Ordered Please refer to SOP 7 - Inventory Management for procedure on receipt of physical stocks / equipment. STANDARD OPERATING PROCEDURE Document Index Edaran Digital Systems Berhad Policies and Procedures Manual Version 1.0 Revision Date 1st June, 2002 Page No. Page 11 of 13 SOP 1 Procurement and Payment Section 1.6.5 Procedures Document Process Owner Invoice Processing – Accounts Payable Recording 1.6.5.1 Upon the receipt of physical stocks at the Store, the LP shall forward all matched DOs and POs to the POF at the CCU. DO, PO LP 1.6.5.2 The POF shall match the Invoices received from Vendors against the DOs and the POs submitted by the LP. Invoice, DO, PO POF The AP or the Financial & Accounting Department may also receive invoices direct from the Vendors. Upon receiving the invoices, the Financial & Accounting Department must forward the invoices to the CCU for processing and verification prior to payment. Invoice AP / Financial & Accounting Dept. The POF shall stamp each Invoice with the following stamp: Invoice POF 1.6.5.3 Signature Received by Verified by Allocated to Approval for Payment Forwarded to A/C Date (Procurement Officer) (Document) (Project code) (Limit of Authority - LOA) (Procurement Officer) 1.6.5.4 The POF shall then forward the Invoice together with a copy of the PO to the AP. Invoice POF 1.6.5.5 The AP shall check the Invoice against the PO and take up the Invoice in the Accounting System. Invoice AP 1.6.5.6 If there is any discrepancy between the amount on the PO, DO and the Invoice(s), the POF / AP shall: • Advise supplier of the difference(s) • Request the supplier to raise a CN to EDARAN for cases where Invoice(s) amount exceed the DO / PO amount or • Request the supplier to raise a DN to EDARAN for case(s) PO, DO, Invoice, CN, DN POF / AP Document Edaran Digital Systems Berhad Policies and Procedures Manual STANDARD OPERATING PROCEDURE Index Version 1.0 Revision Date 1st June, 2002 Page No. Page 12 of 13 SOP 1 Procurement and Payment Section Procedures Document Process Owner where Invoice(s) amount are less than the DO / PO amount. 1.6.6 Raising of Cheque and Payment Voucher (PV) 1.6.6.1 The AFM shall indicate ‘HOLD’ Invoices that should not be paid out yet. Invoice AFM 1.6.6.2 The AP shall arrange with the AFM for the raising of Cheques and PV upon receiving Invoices from the Suppliers. This is with the exception of ‘HOLD’ Invoices identified by the AFM. Invoice, Cheque, PV AP 1.6.6.3 1.6.6.4 All cheques issued must be crossed “A/C PAYEE ONLY”. The AFM shall use a 3-part sequentially numbered PV: • 1 copy is given to the Customer together with the cheque • 1 copy is attached with the supporting documents and filed in numerical order in the running number PV file. • 1 copy will be given back to the POF. PV AFM 1.6.6.5 The AFM shall check the PV against the Invoice and Cheque, and submit these to the Authorised Signatories for their approval. PV, Cheque AFM 1.6.6.6 Every cheque irrespective of amount paid shall be signed by at least 2 Authorised Signatories as per the LOA (please refer to the LOA). Cheque Authorised Signatories 1.6.6.7 The Authorised Signatories shall then check the documents, sign off the Cheque and the PV, and send these back to the AP. PV, Cheque Authorised Signatories PV, Cheque AP 1.6.7 1.6.7.1 Cheque Distribution Upon receipt of the signed Cheques, the AP shall ensure that the Cheques are duly supported, and file in the PV. Document Edaran Digital Systems Berhad Policies and Procedures Manual STANDARD OPERATING PROCEDURE Index Version 1.0 Revision Date 1st June, 2002 Page No. Page 13 of 13 SOP 1 Procurement and Payment Section Procedures Document Process Owner 1.6.7.2 The AP shall then distribute the Cheques according to 1.5.27 above. Cheque AP 1.6.7.3 For Personal Collections, the AP shall stamp the PV with the following: PV, Cheque AP • • • • • Copy: Name: I/C No.: Signature: Date: The Cheque Recipient shall complete the PV above as an acknowledgement of cheque received. The AP shall also stamp the ‘PAID’ stamp on the PV after passing the cheque to the Supplier / Payee. 1.6.7.4 For cheques sent by mail or courier, the AP shall indicate the date of posting on the PV as reference. PV AP 1.6.7.5 The AP shall then make a copy of the ‘PAID’ Invoices and file it up, and extend the original copy of the Invoice, and the PV, to the PO. Invoice, PV AP Statements, Invoice, SR PO 1.6.8 1.6.8.1 1.9.0 Accounts Payable Reconciliation Supplier Reconciliation Procedures will be carried out on a monthly basis. APPENDICES