Developed by the City of Toronto

A purchasing policy is an organization’s systems for purchasing. In the absence of clearly defined purchasing policy, there is an increased possibility that unauthorized purchases could be made and paid for by the corporation. To ensure that the Board of Directors is properly controlling spending it is necessary to define who has authority to make purchases on behalf of the corporation. In addition, the Board of Directors should develop and authorize a set of procedures for how the organization manages its finances.

Whenever possible the activities of initiating, approving and recording purchases should be separated. If these activities cannot be separated, the Board of Directors should ensure that other internal controls are put in place to compensate.

  • Compare prices for routine expenditures yearly.
  • Corporation must be able to support decisions on choosing outside suppliers or contractors. Board must discuss decisions to not choose lowest bidder and document this in the corporate minutes.

  • Mandatory expenses
  • Discretionary expenses
  • Emergency expenses
  • Capital expenditures

It is a good business practice for two signing officers to sign cheques and to attach the invoices, purchasing orders or cheque requisitions to the cheque submitted for signature.

Develop internal controls for disbursements

  • Document method by which purchases are initiated, such as a purchase order.
  • Established what documentation is required before a purchase can be approved.
  • Establish what documentation must be reviewed by individuals signing the cheques.

Bill/invoice is received by the corporation

  • Ensure all bills/invoices are initialed to confirm accuracy and approval of purchase.
  • Attach accompanying purchase order to bill/invoice.
  • Date stamp bill/invoice upon receipt.
  • Manager or other designate assign account code to invoice/bill.
  • Use cheque requisition forms when there is no invoice or bill (i.e. rent refund).

Preparing cheque for payment

  • Determine who prepares cheques for payment.

Signing of cheque

  • Determine who signs cheques (i.e. President, Vice-President and/or Treasurer).
  • Determine how many signatories are necessary (i.e. two).
  • Ensure that invoices, cheque requisitions and/or purchase orders are attached to the cheque prior to signing.

Sending cheque

  • Determine who mails the cheque.

Filing

  • Create filing system for invoices, bills and purchase orders (i.e. by supplier name).
  • Determine who is responsible for filing.

Recording of Purchasing and Reporting to the Board

  • Determine who prepares monthly reports (income and expenses).
  • Ensure that variances from the budget are reported to the Board in writing.

  • Periodically check records to ensure that purchases are made in accordance with the purchasing policy.
  • Ask your property manager if they are following your purchasing policy and procedures.