Sample Flow Chart

Tab

Description

A B C D E F G H I J K L M N O P Q R S T

Index Revenue cycle Customer set up & changes A/R & bad debt reconciliation A/R credit memo process Cash receipts & cash applications Purchasing & Receiving cycle Vendor set up & changes A/P vouchering & reconciliation A/P disbursement Payroll Cycle Payroll - Commissions Pricing Fixed assets Inventory Verification Treasury cycle - open/close/changing a bank account Treasury cycle - bank account reconciliation Financial reporting G/L chart of accounts maintenance Intercompany balance reconciliation & confirmation Production Cycle

1 2 3 4

Process for Customer Returns Preliminary lien notice process flow Order Entry / Credit Hold / Work Order flow Receiving process

EXHIBIT A Process Flowchart - REVENUE CYCLE START (Changes)

CUSTOMER/ SALESMAN

START (Rep Whse)

START

Customer or salesman faxes or calls in change

Rep faxes order & credit approval to Customer Service

Customer or salesman faxes or calls in order

If order is shipping from a rep whse, is credit approval attached?

CUSTOMER SERVICE

Customer or salesman faxes or emails order to Credit

If order is shipping from a representative whse, C/S verifies that credit approval is attached. If approval is not attached, the order is forwarded to Credit for approval prior to entry [3].

No

The system applies all applicable discounts for the customer [1 & 2]. If the order is entered with special pricing, C/S verifies that all approvals are present and in accordance with company policy [1 & 2]. Documantation is obtained for all deviations greater than 1%. After the order is entered, the system prints an order acknowledgement which shows the order details and pricing. The acknowledgement is compared to the customer PO and, if there are any variances, authorization and agreement are documented and attached to the order [1 & 2].

Rep faxes shipping log periodically to customer service to have orders shipped and invoiced in the system.

Yes 1

Salespeople, both internal and external, quote customer jobs per approved list prices and customer discount multipliers. Either customer or salesman calls in or faxes order to customer service. If product is shipping from a representative warehouse, the order is forwarded to Credit for review [3]. If order is approved by credit, the rep faxes the order with credit approval to Customer Service.

2

Order entry & Pricing process (See exhibit M)

Rep warehouses fax shipping logs to customer service to ensure that shipped orders are shipped and invoiced in the system. If product is shipping from a representative warehouse, the order is forwarded to Credit for review [3]. If order is approved by credit, the rep faxes the order with credit approval to Customer Service CREDIT

Is cust pastdue or over-

No

Credit reviews for credit approval & informs rep of the decision

Credit reviews for credit approval

Upon entry of the order, if the customer is past due, over limit or is flagged as “always hold” the order is placed on credit hold, pending review by the Credit Analyst [3]. Analysts review orders being held on an hourly basis to ensure that same-day orders are given priority.

Yes

3

If agreement has been reached between Credit and the customer on correcting past-due and over-limit situations, Credit has the ability to release an order for manufacturing by taking it off of credit hold and placing it back on manual hold. This will allow product to be manufactured to meet the due date, while allowing the customer time to bring their account into good standing.

Credit reviews account and contacts cust for payment if necessary and releases order to production/shipping when accepted

If the product needs to be produced, the system creates a work order which is reviewed & released by engineering. Upon release, the order is scheduled for production by Production Control. No

PRODUCTION

Does order need to be produced?

7 Yes Production schedules and produces product

Is order on credit hold?

SHIPPING

Shipping sends product to customer and ships in the system. Invoices produced nightly by system

No

Once an order is ready to ship, Shipping prints the system generated sequentially controlled shipper [4] & bill of lading. If an order is on credit hold, the system will not allow the shipper to print and the order can not be invoiced. Outside rep warehouses use their own shipping forms and fax shipping logs to C/S. Once production has been reported and credit has been satisfied, Shipping allocates the inventory and ships the order in the system.

4

Yes

PLANT CONTROLLER

Errors

No

5

ACCOUNTING 1

System generates price over-ride report to be reviewed & approved weekly by CFO & Nat'l Sales

Accounting posts system generated sales related entries.

4

8

Periodically, and specifically at month end, the Plant Controller verifies the manual shipping log against the invoicing registers to ensure that all shipments are properly accounted for. All orders are shipped FOB origin; title to the equipment passes to the customer and revenue is recognized upon shipment. [5]

Yes

Plant Controller reviews "shipped not invoiced," "alloacated not shipped," "closed work orders," and "shipped work orders" reports prior to month end.

Plant Controller compares invoicing and shipping logs to one another to identify discrepancies.

Plant Controller accrues any shipped orders that were not invoiced, and defers any invoiced orders that were 8 not shipped.

Staff Acct defers service & warranty revenue over contract life

Accrual approved by CFO/Controller

6

During the month end process, the Plant Controller accrues any sales that were shipped but not billed and defers any orders that were invoiced and not shipped, and defers warranty revenue over the life of the contract. Revenue, A/R, inventory and COGS transactions are system generated and posted in the period that the transactions occur. [8]

Price over-rides (locks) are reported weekly to the Sales Mgr & CFO for approval [1]. General Accounting posts the system-generated journal entries as of the actual fiscal month end cut-off [4 & 8]. All back up for the system-generated entries is filed and retained pursuant to records retention policies. Revenue for warranties are deferred by the Staff Accountant over the life of the contract [6]

Process Flowchart - SIGNIFICANT CONTROL ACTIVITIES 1 2 3 4 5 6 7 8

Invoices reflect current approved prices and include explanations and approvals for deviations from list prices. Customer orders, contracts and subsequent modifications are approved in accordance with authorized approval levels. A formal credit policy exists and includes: 1) Annual review of customer credit limits 2) management approval is required for changes in terms and limits 3) credit limits are reviewed prior to order acceptance. Sequentially controlled shipping documents are verified against customer orders prior to delivery and invoicing. Revenue is recognized only when delivery has occurred, the customer has taken title and has assumed the risks and rewards of ownership of the product. Revenue associated with maintenance/service agreements is recognized over the contract period. Ensure duties are segregated within the customer order process such that the following activities are independently performed: 1) order initiation and approval 2) shipping 3) invoicing 4) cash collection 5) cash application. Inventory costs are relieved and appropriately matched to sales transactions in the proper period. Page 2 of 26

EXHIBIT B

START

Run annual customer review report

1

Process Flowchart - CUSTOMER SET UP AND CHANGES New customers are identified by salesmen who provide the customer with an company credit application and blanket resale certificate. The customer must fill out the credit application (larger customers are allowed to submit their corporate credit information in lieu of the company application) and the resale certificate if their account is to be non-taxable. After credit evaluation the customer is set up in the system by the Credit Analyst and confirmed to the customer by mail [1]. New customer files are created at least weekly. A weekly email is sent to the customer service managers to verify customer pricing, sales territories and salesmen associated with new customers.

NO

NO Is this a line increase or annual review?

Is this a new customer?

YES

Update information in customer masterfile

YES

Customers for new ship-to locations for existing customers are usually driven by the sales force. Additional ship-to’s for existing customers do not require their own credit application and folder but may, in certain instances, require additional tax exemption certificates. When new customers are set up the tax software is also updated with the exemption information for the states specified as well as Alabama (01), North Dakota (35), Arizona (03), Ohio (36), Arkansas (04), South Carolina (41), Colorado (06), Utah (45), Connecticut (07), Virginia (47), Florida (10), Washington (48), Georgia (11), West Virginia (49), Iowa (16), Wyoming (51), Kansas (17), Minnesota (24), New Jersey (31), and North Carolina (34) all of which accept home state certificates.

Obtain: Credit references Credit Group Email D&B Report

CREDIT

**Evaluate Credit on New customers and for annual credit review per policy

Approve or reject credit line: ≤ $50,000 Analyst ≤ $100,000 Credit Manager > $250,000 CFO & Controller

Customer changes can be initiated by the salesman, customer or the annual credit review [2]. All changes to the customer master file are performed by the Credit Analysts. Any changes to terms or limits will be documented and authorized by a customer status change form [2].

2

Each new customer with credit terms will have a credit application, results from credit references, a Dunn & Bradstreet report and new customer approval form on file. As part of the process, an email is sent to the credit group requesting any credit experience. The credit group distributes the email to credit personnel across all divisions. Per credit policy, standard terms are net 30 with any deviations being approved by Credit in advance of accepting orders [3]. Credit evaluation is performed by the Credit Analysts and approved in accordance with the company Credit Policy and stated approval matrix [3].

3 Credit Approved?

NO

Notify customer & Cust Svc of credit decisions

YES A review of all active customers is required by company policy. The annual credit review is performed by obtaining a database of credit information from Dunn & Bradstreet, merging it with internal payment experience and producing a single sheet review page. These pages are reviewed at the appropriate authorization level, at which time additional information may be requested [1].

Verify sales information fields with cust svc manager

Update customer masterfile

Review weekly report of changes to customer masterfile

CONTROLLER

Weekly customer change detail reports are produced by the Staff Accountant identifying changes to customer records and the addition of new customers [4]. These reports are reviewed to verify that changes are made only by authorized individuals and any terms or limit changes are properly authorized. These are filed, and final reviewed, by the Controller.

4

Process Flowchart - SIGNIFICANT CONTROL ACTIVITIES 1

A formal credit policy exists and includes: 1) Annual review of customer credit limits 2) management approval is required for changes in terms and limits 3) credit limits are reviewed prior to order acceptance.

2

A formal credit policy exists and includes: 1) Annual review of customer credit limits 2) management approval is required for changes in terms and limits 3) credit limits are reviewed prior to order acceptance. A formal credit policy exists and includes: 1) Annual review of customer credit limits 2) management approval is required for changes in terms and limits 3) credit limits are reviewed prior to order acceptance. An edit report containing all additions, changes or deletions to customer and pricing masterfile information is generated and independently reviewed.

3 4

Page 3 of 26

EXHIBIT C

Process Flowchart - A/R & BAD DEBT ALLOWANCE RECONCILIATION During the final week of the fiscal month the Credit & Collections Supervisor runs a summary aging by customer. This aging is compared against and is used to update the bad debt calculation spreadsheet. In this spreadsheet is listed each customer which is a known credit risk and all customers with balances over 360 days past due per Carrier Finance Manual section 5.2A [2].

START

CREDIT SUPERVISOR

3 Run A/R Agings for month end processes & file.

1

Reconcile bad debt accounts to G/L

Review allowance for doubtful accts. Identify specific accounts to be reserved for.

Identify delinquent accounts for follow-up

Accounts Receivable is reconciled each month end as part of the standard month-end processes. The A/R Department produces a month-end cut-off aging files copies for future reference and forwards a copy of the summary report to the Staff Accountant [1]. Each Credit Analyst produces a detailed A/R aging of their accounts for follw-up during the month [3]. Review of A/R performance is reviewed on a monthly basis with the Controller and Credit Supervisor.

STAFF

Reconcile A/R detail to G/L

ACCOUNTANT

On a monthly basis, the Staff Accountant prints the general ledger detail and identifies all reconciling items. The staff accountant reconciles the detailed A/R aging to the general ledger on a monthly basis [1]. The reconciliation is approved by the Controller.

File in month end recon files

The Controller provides the Credit & Collection Supervisor the detail posting to the bad debt reserve on a monthly basis. The C&C Supervisor produces detailed analisys schedules and reconciles the allowance for doubtful accounts, which is approved by the Controller.

File in month end JE files A/R reconciliation Enter JE's

CONTROLLER

The Controller produces journal entries based upon the bad debt calculation to adjust the allowance accounts accordingly.

Prepare entries for Bad Debts and Customer Dispute Reserves

Review and approve A/R reconciliation

When month-end financials are finalized the reconciliation is finalized and forwarded to the Controller for review and approval and are then forwarded for filing with the month-end reconciliations.

2

A detailed reconciliation of the bad debt account is produced monthly by the Controller, is approved by the CFO and is filed with the monthly working papers [2].

Review and approve bad debt & customer dispute entries

CFO

Process Flowchart - SIGNIFICANT CONTROL ACTIVITIES 1 2 3

A detailed aged AR trial balance is maintained and reconciled to the general ledger on a monthly basis (including investigation of reconciling items). Management periodically makes an assessment of the allowance for doubtful accounts in accordance with company policy. Customer accounts are monitored and delinquent accounts are identified and followed up timely.

Page 4 of 26

EXHIBIT D Process Flowchart - CREDIT MEMO PROCESS Sales & pricing Allowances & Sales Concessions adjustment credits can be initiated by any Sales, Customer Service or Accounting employee. The employee initiating the credit is responsible for obtaining any necessary approvals from Sales & Customer Service. The employee initiating the credit verifies the pricing and commissions on the credit and forwards to Collections for review.

START

Complete credit memo request form

EMPLOYEE or Sales Rep

NO

Is this a warranty issue?

YES

All warranty credits are initiated by the respective Warranty Department. Warranty Department personnel verify the existence of the warranty, that the claim charges are within the parameters of the warranty terms and adjust the claim amount as necessary. Claims are signed off, entered into the warranty claim database, and forwarded to Collections for review [1]. Return credits can be initiated by any Customer Service or Accounting employee. The employee initiating the credit is responsible for obtaining verification that the merchandise has been received from the customer. The employee initiating the credit verifies the pricing and commissions on the credit and forwards to Collections for review [1].

Verify existence of warranty

Ensure amount being credited is correct and within policy.

1

CUSTOMER SERVICE Is CM approved?

NO

Notify Originator

YES File with original invoice Enter into offline database if applicable.

2

Verify prices, customer, invoice, PO, reasons, commisions and that it's not a duplicate credit

CREDIT

Sales tax & freight credits can be initiated by any Customer Service or Accounting employee. The employee initiating the credit is responsible for verifying shipment weight, etc.. for freight credits and obtaining copies of resale certificates for tax credits. The employee initiating the credit verifies the pricing on the credit and forwards to Collections for review.

1

All credits with the exception of rebates goes through Collections who verify that the credit has not already been issued, pricing is correct, commissions are correct and that the correct boxes are check to ensure the correct coding. After review & approval by Collections, the credits are forwarded to the Controller or designee for final review. The information is verified, approved and forwarded to data entry or to a higher approval authority based upon the company Authorization Matrix [1].

Verify prices, customer, invoice, PO, reasons & commisions.

CONTROLLER or designee

CM amount within authorization limit?

NO

Forward for additional authorizations per matrix

1

Review and approve results of monthly credit memo audit.

YES

CM ENTRY

JR. ACCOUNTANT

Data entry verifies appropriate approvals based upon the company Authorization Matrix, codes based upon the boxes check on the request form, and enters into the system [1].

Enter CM's per information provided. Note CM order number on CM request to prevent duplication and provide audit trail. Audit random sample of 5 credits monthly to ensure proper documentation and approvals.

Forward results of audit to Controller for approval

File approved results in management testing files.

1

Rebate credits are initiated by Accounting personnel based upon the rebate agreements provided by the Sales Department and may be monthly, quarterly or annual. After rebates are calculated, approval is obtained from the Regional Sales Manager responsible for the account. Rebates are forwarded with all substantiating paperwork to the Controller for approval prior to entry.

Process Flowchart - SIGNIFICANT CONTROL ACTIVITIES 1

Adjustments to customer accounts (e.g. credit memos) are properly supported and approved in accordance with the authorization matrix.

2

The Customer Service/Warranty Department maintains off-line databases of certain credits for quality discussions. These databases provide no accounting related data and are outside of the internal control environment. Page 5 of 26

EXHIBIT E Responsibility

CASH RECEIPTS

CASH APPLICATIONS PROCESS CASH APPLICATION

CREDIT CARD

Send payment.

CUSTOMER

B CONTROLLERS

1

Process

Narrative Customer payments are sent directly to the company lock box and in the event that a check is received at a company location, they are logged and forwarded by personnel who lack the ability to apply checks in the system. Cash is applied based upon customer information from collections. Reconciliations are performed by personnel who lack the ability to apply checks in the system and are approved by the Controller. All payments are sent directly to the lock box. In the event that a check is received at one of our physical locations the Plant Controller, or Corporate Controller at the corporate office, logs the receipt of the check and forwards directly to the lock box. [1]

Logs & forwards checks received to Lock Box

The lock box processes all payments and forwards a copy of the check and any accompanying back up to Cash Applications in the corporate offices on a daily basis [1].

1

Process payment received.

LOCKBOX

Copy check & stub.

Sweep funds to Carrier cash concentration account on a daily Bank mails to basis company 4

A credit card authorization form is faxed to the customer by either collections or customer service as appropriate identifying the sales order(s) or invoice(s) being paid and the amount. The customer fills in the card information, signs the authorization, and faxes back to collections. Collections personnel process the card through the credit card machine prior to any orders being released to ensure that it is not declined. Collections maintains a spreadsheet listing of credit card transactions to aid in research and applications. Batches and the accompanying spreadsheet are forwarded to Cash Applications on a weekly basis at a minimum [4].

Obtain Customer Approval

Process through machine

CREDIT

Enter into spreadsheet

Print spreadsheet for cash application

Analysts identify customers

CASH APPLICATIONS

ACCOUNTING

2

Jr. Acct prints daily banking activity from Bank One

3

C/A applies credit to A/R.

Staff Accountant reconciles cash applications to bank deposits on a daily basis

2

A Federal Express package arrives each morning with the previous days lock box activity, credit card processing information is forwarded from collections each Friday at the minimum, and wire application information is forwarded from collections the morning after receipt by the bank. All cash receipts are applied and balanced on a daily basis based upon customer information provided by collections and miscellaneous cash is applied to general ledger accounts based upon coding from the Controller or designee [2 & 3]. All deposits to both the lock box and credit card accounts are swept to the Carrier cash concentration system nightly. Each morning Accounting prints the previous days banking activity which lists all wires received. A copy of each wire is forwarded to the appropriate Analyst to identify the customer and invoices to apply the wire to. This information is forwarded to Cash Applications within an hour. Cash receipts and bank deposits are balanced on a daily basis by Accounting. Month to date postings to the general ledger are balanced to month to date bank deposits on a weekly basis [2]. Monthly general ledger postings are balanced to the daily activity and to cash concentration information provided monthly by Carrier Corporate Accounting.

Process Flowchart - SIGNIFICANT CONTROL ACTIVITIES 1 2 3 4

All cash receipts are sent directly to a lockbox or company bank account. Any payments received on site are logged and then forwarded/deposited to the lockbox or company bank account on a daily basis. Cash is applied to customer accounts timely and unmatched receipts are investigated and resolved on a timely basis. CIA are properly recorded as contra-assets and are properly liquidated in accordance with sales contracts. All bank accounts for customer collections are automatically swept daily into a main concentration account, using fixed banking instructions defining the source and destination bank accounts. All cash inflow and outflow is summarized daily in a cash journal and compared to incoming and outgoing funds as reported by corporate in its daily sweep activity. Thus, differences in receipts and disbursements are accounted for prior to preparing the bank reconciliation. Page 6 of 26

Process Flowchart - PURCHASING & RECEIVING EXHIBIT F REQUIRING DEPT / MRP

Requiring dept submits requisition

START

Obtain necessary approvals

MRP process or Mat'l Control

3

2 Approval match written guidelines?

No

No

Yes

Yes No

1

Existing Blanket Order?

PURCHASING

Existing Blanket Order?

Is there a need for a blanket order?

Yes

Yes

Buyer manually enters PO or converts electronic requisition to PO. All PO & req numbers are auto assigned by the system.

Buyer will create blanket order

Purchase order

The purchasing cycle begins when a department on the floor identifies a material need: Material Control identifies material need through the MRP process, or maintenance identifies the need for a repair or purchase. The purchasing department is notified through a system-generated requisition, an MRO form, email, or by telephone. System-generated requisitions are restricted to those with the proper access level, as defined by the Company approval matrix. MRO forms require the signature of an approved manager and emails and telephone requests only originate from approved managers. The purchaser confirms that the requisition has the proper approval level and than check s if the requirement should be filled via an existing blanket purchase order. If so, the release of quantities on the blanket purchase order is authorized and the order is placed. If there is not an existing purchase order to fulfill the requirement, then the requisition is converted into a purchase order, either electronically or manually (depending on whether or not the requisition was systemgenerated or not).

No

2

This narrative covers the purchasing & receiving components of the expenditure cycle. Purchasing functions are segregated from receiving functions through a series of approval matrices and system controls.

A PO number is sequential and is automatically assigned by the system. The system will then provide a price history by vendor and “vendor preference” level for each product for the purchaser’s reference. The purchaser must then select an approved vendor for the PO. (See “Vendor Masterfile” section for further information). The PO automatically prints from the system, and the purchaser contacts the vendor to place the order. Price confirmations / audits are a new process currently underway to ensure consistent and accurate PO pricing.

Requirement is placed with supplier as to qty and date needed

Receives PO or blanket release from Purchasing

VENDOR

Vendor ships to plant

The receiving cycle begins when items are delivered to receiving/warehouse. The fork operator checks the amount offloaded against the freight bill / packing slip (“P/S”) for the proper quantities. If there is an overage / shortage, it is noted on the P/S and signed. During offloading, the items are also inspected for damage. If damage has occurred, it is noted on the P/S. Damaged items will still be received for supplier payment. The LTL carrier is responsible for paying claim damages.

Items are received from vendor

Inspect items for any damage

Damage?

1

Yes

FOB Origin?

No

RECEIVING 5

Packing slip, P/O & rec'd qty within established tolerance?

No

File freight claim.

Yes

No Investigate and resolve issues

Work with Purchasing to obtain debit memo or vendor credit.

Once the offloaded product has been inspected and audited against the P/S, items are received into the system by a warehouse / receiving person with the appropriate system-level access. Items must be received against the originating PO, and part numbers must match; the system will not allow items not on a PO to be received. A receiver is generated by the system and numerically sequenced and prints automatically. An individual that did not receive the product audits the printed receiver against the P/S. Any issues are resolved and the packing slip and receiving tickets are forwarded to accounts payable (offsite) for payment.

7

Yes 4

6

Enter receipt into production system

Receiver is created from system and is numerically sequenced.

Forward documentation to Accounts Payable.

Process Flowchart - SIGNFICANT CONTROL ACTIVITIES 1 2 3 4 5 6 7

The 4 key areas of the expenditure cycle (Purchasing, Receiving, AP Processing, and Cash Disbursements) are segregated. All purchase orders are numerically controlled and are properly approved according to the authorization matrix. For certain types of expenditures that may not have a Purchase Order, a proper approval needs to be obtained before goods or services are purchased. Access to the Receiving database is restricted to Receiving personnel only (password protected). Receiving personnel inspects incoming goods for discrepancies with the corresponding Purchase Order. A numerically sequenced document is generated for the receipts of materials, stating actual quantities received. Debit and credit memos are properly documented and authorized.

EXHIBIT G

Process Flowchart - VENDOR SET UP AND CHANGES Request for changes or additions must be in writing, approved by a supervisor, and sent to the Accounts Payable Dept.

START

PURCHASING

A/P MANAGER

Buyer completes Vendor Master add/change request

1

Access to the Vendor Master File is limited to accounts payable personnel only. Purchasing, receiving, and accounting personnel are able to view data. Any changes made to the Vendor Master File are compared to the original request document.

Update Vendor Master as necessary

Review monthly report of changes to vendor masterfile

CONTROLLER

3

2

3

An audit of the Vendor Master is performed monthly. By the Staff Accountant and is reviewed & approved by the Controller.

File vendor masterfile audit report

Process Flowchart - SIGNIFICANT CONTROL ACTIVITIES II_1.2 Access to vendor master file is segregated from the receiving, purchasing functions. ** II_1.3 A list of approved vendors (e.g. vendor masterfile) is maintained. All additions and changes to the masterfile are approved by an individual independent of the purchasing and accounts payable processing functions. II_1.4 VM changes done by A/P at direction of Purch. Mgr & reviewed by Controller

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EXHIBIT H

Process Flowchart - ACCOUNTS PAYABLE ENTRY & RECONCILIATION Certain types of non-inventory expenditures will not have a Purchase Order, such as seminars, dues, and professional fees. These items START must be approved before goods or services are purchased and have a completed Check Request with appropriate approvals attached in order Invoices rec'd by to be processed by the Accounts Payable Department. The Controller Accts Payable reviews all check requests before they are entered into the accounts payable system. PO Item?

No

Obtain proper approvals based on approval guidelines

6

Yes

Obtained approval

A/P PROCESSORS

Receivers from warehouses

No

END

1

Match receivers to invoices

Yes

7 Forward to Purchasing or Receiving for correction

Are receiving & PO variances within tolerance? No Yes Match A/P voucher to purchase order receipts in system. System calcs pay date based upon terms in vendor masterfile (see exhibit J)

Enter non-PO vouchers, including payment terms, in system

2

3 Receipts not vouchered report

PLANT CONTROLLER Accrue RNV at month end

4

Reconcile A/P to G/L on monthly basis & differences investigated.

STAFF ACCOUNTANT

Misc. A/P Reconciliation

A/P Reconciliation

Review and approve J/E's and recons.

CONTROLLER/CFO

5

Add to month-end reconciliation book.

Review and approve Non-PO check requests

Reconciliation of Accounts Payable Trial Balance (sub ledger) to the General Ledger is performed at month end. Any differences are investigated and if necessary, corrected so that the Accounts Payable balance reflected in the general ledger is accurate. Any reconciling items and the action taken are noted on the Reconciliation. During reconciliation debit balances are also reviewed. A listing of the debit balances is created and submitted to the Controller and Accounts Payable Supervisor for disposition.

On an ongfoing basis, Controller or designee reviews & approves nonPO check requests and ensures correct GL coding. Controller reviews & approves month end accounts payable reconciliation.

Process Flowchart - SIGNIFICANT CONTROL ACTIVITIES 1 2 3 4 5 6 7

Proper approval is obtained for all non-PO expenditures. Vendor invoices are entered into the A/P database on a timely basis to ensure recording in the proper period. A/P performs a 3-way match prior to the processing of invoices for payment. All discrepancies are reviewed, investigated, and resolved on a timely basis. There is a process that ensures that goods and services received/rendered but not invoiced by the supplier are accrued at month-end. Reconciliation of Accounts Payable subledger to the G/L is performed monthly and differences are investigated and timely dispositioned. Disbursements are authorized pursuant to an appropriate approval matrix. Receiving variances at all plants have a zero tolerance - all invoices with a receiving variance are referred to plant personnel. Price variances have a +/- $25 invoice total

EXHIBIT I

Process Flowchart - CASH DISBURSEMENT (Selection)

Process Flowchart - CASH DISBURSEMENT (Check issuance)

START Post checks & generate check register

Print Checks Run payment selection in system based on payment date

Narrative Disbursements are authorized pursuant to an appropriate approval matrix. Checks are normally run once per week by the accounts payable staff. The Controller will grant the AP supervisor access to the blank check stock. Once the checks are run, accounts payable personnel will submit the checks for signature to a staff accountant.

Make changes to selection

Review payment selection for errors

Match backup to checks Is the selection correct?

Yes Finalize payment selection

A/P PROCESSORS

No

Is check $250K Entries

(NOTE 1)

(NOTE 1)

CORPORATE Corporate Controller

(NOTE 2)

X

LOCAL MANAGEMENT Division CFO Division Controller Assistant Controller Senior Accountant

X X X

X X X

PLANT Plant Controller Cost Accountant

X X

X X

X

X X

X X

X

X

X X

NOTES AND RESTRICTIONS: (1) All journal entries require approval one level up from the person preparing the entry. For example, the CFO must approve all entries from the Controller, entries from the Plant Controllers require the approval of the CFO or Corporate Controller, and Plant Accountants entries require the approval of the Plant Controllers or above. (2) All adjusting (non-standard) entries in excess of $250,000 require the approval of the business unit CFO or Controller AND the approval of the Corporate Controller.

77701763.xls.ms_office -- JE Matrix

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