Weekly podcast providing fraud information and training to protect the vendor master file. Giving a voice to Accounts Payable Vendor teams to tell their vendor story.Read more »
Weekly podcast providing fraud information and training to protect the vendor master file. Giving a voice to Accounts Payable Vendor teams to tell their vendor story.Read Less
Hello everyone, this is Debra Richardson and today I am Putting the AP in hAPpy where Accounts Payable teams are Empowered to Protect the Vendor Master File from Fraud. This podcast will give a voice to Accounts Payable team members by talking about the growing reality of fraud attempts in their world and which vendor setup and vendor management techniques they can apply to protect the vendor master file from fraud.
Episode Introduction:
Stay Tuned. If you work in a Finance, Accounting, Purchasing or Accounts Payable Department of a US Agency or Entity and are responsible for setting up vendors in your Accounting System or ERP – this blog post is for you. The information in this episode will keep you compliant with regulatory agencies and will also ensure that you are validating that the vendor is real, and the data is not fraudulent prior to adding the vendor to the vendor master file. And that’s what we want folks – real vendors!
Welcome to Episode 22: US Entity: Validations Required to Setup A US Vendor
Basic Requirements
Vendor Legal Name and Tax ID Validated Against Internal Revenue Service (IRS) Records
· Reason to Validate: Confirms that vendor is registered with the IRS and is not fraudulent and will not result in B-Notices from the IRS due to Legal Name and Tax ID mismatches.
· Required Document: IRS W-9 (US)
· How to Validate:
o Free - IRS.gov e-Services https://www.irs.gov/tax-professionals/taxpayer-identification-number-tin-matching. Registration is required and two to three weeks turnaround time.
o Paid – TinCheck.com www.Tincheck.com via a subscription plan.
Vendor Legal Name against Specially Designated Nationals List (SDN) from the Office of Foreign Assets Control (OFAC)
· Reason to Validate: Vendors that appear on this list should not be setup in your vendor master file. If there is a vendor match, please notify your leadership for further action. Compliance with OFAC regulations is required for all US individuals and entities. Failure to comply can result in both civil and criminal penalties.
o Free – US Treasury: https://www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx
Vendor Address Validated against US Postal Service (US) and Google Earth
· Reason to Validate: Confirms that vendors are not fraudulent attempting to use addresses that do not exist. Also reduces the potential that check payments or distributed 1099 will not be returned causing rework for the team. Standardizes address formats in accordance with US Postal Service (US) For PO Boxes, also require a street address and validate both.
· Required Document: IRS W-9 (US) or Invoice (if remit address is different) or Fully Executed Contract
§ Free – US: US Postal Service www.usps.com
§ Free – Google Earth: www.google.com/earth
Additional Requirements If the Payment Method is ACH/Wire
Vendor Bank Name and ABA Routing Number against the Federal Reserve
· Reason to Validate: Confirm that ACH or Wire payments are processed successfully. This is key to ensure that the correct ABA routing number is used for the right payment. Some bank ABA routing numbers can be used for ACH and Wire payments, while some are restricted to ACH or Wire.
· Required Document: Vendor Letterhead, Bank Letter or Company Branded Banking Setup Form (recommended).
o Free – ACH Payment: https://www.frbservices.org/EPaymentsDirectory/agreement.html
o Free – Wire Payment: https://www.frbservices.org/EPaymentsDirectory/agreement.html
Vendor Bank Name against Specially Designated Nationals list (SDN) from the Office of Foreign Assets Control (OFAC)
· Reason to Validate: Banks that appear on this list should not be setup in your vendor master file. If there is a bank match, please notify your leadership for further action. Compliance with OFAC regulations is required for all US individuals and entities. Failure to comply can result in both civil and criminal penalties.
· Required Document: Vendor Letterhead, Bank Letter or Company Branded Banking Setup Form (recommended)
o Paid – TinCheck.com: www.Tincheck.com via a subscription plan.
Additional Requirement if the Vendor is a Non-Profit Vendor
Vendor Legal Name and Tax ID validated against Internal Revenue Service (IRS) Records for Exempt Organizations (EO)
· Reason to Validate: Confirms whether the vendor is registered for tax exempt status which can protect against a request to set up a fraudulent charitable organization. It can also identify those vendors that are classified as a 501c3, whose tax-deductible contributions may be monitored and require approval due to reporting tax requirements for your company.
o Free - IRS.gov EO Select Check tool https://apps.irs.gov/app/eos/
Additional Requirement If You Are a Government Agency or Entity
Vendor Legal Name Against System for Award Management (SAM)
· Reason to Validate: Governments are prohibited from awarding contracts to contractor entities that are on this exclusion list. Search by name to verify the vendor is not on this list.
o Required Document: IRS W-9 (US)
o How to Validate:
§ Free – Direct search through System of Award Management (SAM) https://www.sam.gov/portal/SAM/#1#1
Additional Requirements If Your Company is a Healthcare Organization
Vendor Legal Name Against Exclusion List of Office of Inspector General (OIG)
· Reason to Validate: OIG has the authority to exclude individuals and entities from federally funded health care programs. Search by name to verify the vendor is not on this list.
§ Free – Direct search through Office of Inspector General (OIG) https://exclusions.oig.hhs.gov/
As normal, review these recommendations with your leadership and/or auditing team and adjust based on your Accounting system/ERP or 3rd Party systems for your company processes and your industry. This could include verifications for Insurance Certificates, checking with the Better Business Bureau, Dunn & Bradstreet, Denied Persons List or more.
If you have a vendor self-registration portal, review and supplement as needed.
Want a handy Cheat Sheet that includes the links to the validation resources listed here and more? Sign up for my mailing list below, download the Vendor Validation Reference List and share with your entire team! All Subscribers are entered into a monthly drawing to win a Putting the AP in hAPpy coffee mug.