The University will make payments for allowable non-payroll obligations that are authorized, approved, compliant with policies and procedures and within the scope of the University’s mission. Departments and Clusters are responsible for ensuring that payment processing is accurate, timely, avoid penalties, cash discounts are taken when offered; supports cash management strategies, and appropriate University account string is charged. Employees, vendors and other payees will be paid in accordance with the terms set by the University or contractual agreement.
The most appropriate payment (and purchasing) method, per University policy and procedures, should be used (PO, non-PO or Procurement Card). Usually checks are not made to University units (see appropriate accounting policies).
Effective internal controls and proper separation of duties supporting these processes are essential and required at every level. To ensure separation of duties within the procurement process, careful consideration must be given to staffing each role involved in the process; person(s) initiating procurement transactions, the Requisitioner, the Receiver and the Invoice/Payment Preparer. The same employee should not be allowed to place an Order, receive it and process the payment. Authorized approvers of University business transactions cannot approve their own transactions or transactions payable to their immediate supervisor, the supervisor's business or the supervisor's immediate family (spouse, parents or children). In addition, authorized approvers cannot approve transactions which are payable to, or on behalf of:
- Individuals where a conflict of interest would be perceived
- Family members
Documents presented for approval and payment of vendor invoices should be reviewed and authorized by an independent person at an appropriate authority level to ensure that transactions are approved without any influence and to avoid the appearance of a conflict.
This policy and related procedures establish the payment process in which University faculty and staff must use to ensure compliance with Regent’s policies, accounting standards, IRS regulations and financial control measures.
To communicate and set expectations that all employees involved in any aspect of the Payables process are responsible for and expected to ensure integrity, prevent fraud and conflict of interest, safeguard the assets of the University and be compliant with all University policies and procedures.
To establish payables methods that will ensure consistency, accuracy of financial reporting, enhance administrative efficiency, provide financial controls, and minimize costs.
EFS procedures for this policy are being developed and will be added as they are available. Please contact LaCretia Bell at 612-626-4473 or bellx053@umn.edu for more information.
- Federal Excise Tax Exemption
- The University of Minnesota is exempt from Federal excise taxes on the purchase of
communications (telephone) and gasoline. An exemption for communications must be filed with the vendor (one time only). An exemption certificate for gasoline should be filed annually (or whenever requested) with the vendor.
- Invoice Approval
- Vendor’s invoices must be matched against a Purchase Order (when applicable) and/or the receipt of the goods or services prior to payment. There are two processes supporting invoice approval:
- Approval of PO related invoices takes place within the financial system when it is matched with the related approved PO and receipt(s).
- Approval of non-PO invoices takes place when the financial system routes the transaction to Dept ID approver for their approval. Department staff is responsible for communicating to the Dept ID approver, their verification that the goods and/or services were received as invoiced and should be approved for payment.
- Non-Payroll Expenses
- Expenses incurred and paid by the University for the purchase goods or services, legal obligations, taxes collected, judgments rendered, or refunds due. It is meant to reflect any payments the University makes that does not relate to paying its employees for wages earned.
- Non-Purchase Order Payment
- Payments that do not require a purchase order
(see: http://www.policy.umn.edu/groups/ppd/documents/appendix/purchAppE.cfm) and may be paid via an invoice, Procurement Card or Check Request.
- Purchase Order (PO)
- A purchase order is the written evidence of a contract between the buyer and seller for the purchase of goods or services at an agreed upon price under specified terms and conditions.
- Sales Tax Exemptions
- The University of Minnesota is exempt from sales tax on the purchase of most goods and services pursuant to Minnesota Statutes Section 297A.70, Subdivision 2. A completed Minnesota Exemption Certificate, Form ST3, is available at http://tax.umn.edu. Alternatively, a University purchase order number and form may be used as evidence of the University's tax exempt status. Minnesota state statute requires that the University of Minnesota PAY DIRECTLY for any items purchased with the University's tax exemption. This means that the only acceptable forms of payment are the University issued procurement card or a University issued check. The exemption CANNOT be used when an employee pays for items with his or her own funds (cash, check, or credit card) EVEN IF they will be reimbursed by the University later. Penalty for improper use of the University's tax exemption may be a fine to the user in the amount of $100 per transaction.
- The following purchases are subject to sales tax:
- Prepared Food, Candy and Soft Drinks
- Lodging
- Waste Disposal Services
- Purchases or Leases of Motor Vehicles
Exceptions: a marked police patrol vehicle or a vehicle purchased as an instructional aid in a University automotive training program, including motor vehicle body and mechanical repair courses, but not driver education programs.
- Construction Materials Purchased by a Contractor
Example: When hiring a contractor to make an improvement to real property, such as replacing a door, the contract would typically be a lump-sum contract covering both labor and materials. The University’s exempt status may not be used by the contractor to buy materials exempt from tax for use in the lump-sum contract. However, if the University buys materials directly and hires a contractor in a labor only contract, the items may be purchased exempt by the University.
- Standard Payment Terms
- The University’s standard payment terms are Net 30 days for external vendors. Payment terms start from the date of the invoice. Employee business-related reimbursements are paid, one day after posting to the Account Payables system.
- Accountant
- Reconciles budget records for the unit, ensures payments are booked to the correct accounts, identifies and resolves discrepancies.
- Approvers
- Ensures overall accuracy, compliance and validity of payments. Certified Approvers approve payments to Sponsored Accounts.
- Clusters
- Service Centers for processing procurement related transaction on behalf of departments. Scans payment documents into Imaging, data entry of payment documents, resolve matching discrepancies and provide other services in support of the procurement process.
- Departments
- Ensure that the University is only paying for goods and services ordered, contracted and received, at agreed upon prices, with proper authorization. Ensure expenditures are compliant with all applicable policies and procedures, allowable and properly recorded to the correct object codes. Submitting accurate and complete Vendor Authorization Forms for vendor set up. Payment of all fines, penalties, and interest incurred from non-compliance with Internal Revenue Service or Minnesota State Revenue codes.
- Functions and tasks that are within the Department’s responsibility:
- Choosing the correct, most appropriate Procurement and Payment method.
- Choosing the correct vendor numbers for processing requisitions and payment documents.
- Verifying and confirming the receipt of goods or services purchased.
- Accurate accounting.
- Disbursement Services
- Maintains the vendor file, administers travel advances, issues emergency (same day) checks, and expedite payments to foreign addresses. Initiates payments for withholding to the State and the reporting of IRS 1099 Miscellaneous Income payments. Complete state and federal new hire reporting. Remit sales tax for those who file annually. Answers questions regarding payment status, processing problems and assist with corrections. Administer Purchasing Card Program. Process Stop Payments on checks and issue replacements checks. Image Expense Reports and Procurement Card documentation. Provides customer service to the University community.
- Financial Systems Support (FSS)
- The FSS Help Line, answers general questions regarding payment status, processing problems and assist with corrections. Directs Customer calls to the appropriate subject matter experts.
- Purchasing Services
- Coordinate and assist in related purchasing activities. Establishes purchasing policy and procedures.
There are no Frequently Asked Questions for this policy.
- Amended:
- June 2008 - Policy completely revised to address the Enterprise Financial System rollout. Procedures are partially developed and will be added as they become available.
- Amended:
- Added new Job Aid to Appendices section: Payment to a Foreign Vendor.
- Amended:
- December 2005 - Conflict of Interest, Purchasing is superceded by Policy 2.1.16 - Implementing the Individual Business or Financial Conflict of Interest Regents Policy in Related Information.
- Amended:
- December 2003 - Clarified that steps taken in the Transaction Justification/Documentation Standards Job Aid are required, not optional.
- Amended:
- November 2003 - Added the Job Aid: Transaction Justification/Documentation Standards For All Non-Sponsored and Sponsored Transactions to the Appendices section.
- Effective:
- November 2002
- Supercedes:
- Accounts Payable Policy
-
To obtain a copy of a historical policy,
e-mail the U Policy Librarian at policy@umn.edu or call 612-624-4372.
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