Accounts Payable: Paying Non-Payroll Expenses
Last Update: August 2012
Responsible University Officer:
- University Controller
- Director of Disbursement Services
- Updated: August 2012
- Primary Contact : LaCretia Bell
Printed on: . Please go to http://policy.umn.edu for the most current version of the Policy or related document.
The University will make payments for allowable non-payroll obligations that are authorized, approved, and 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;
- is paid within the University’s standard payment terms or takes advantage of cash discounts when offered;
- avoids penalties; and
- is charged to an appropriate University chartstring.
- Supports all tax exemptions or requirements where appropriate.
Units must pay employees, vendors and other payees by the most appropriate payment and purchasing method, per University policy and procedures..
Units making payments to other internal University units must process accounting entries in EFS to record these transactions, check/cash payments are not allowed.
Separation of Duties
Effective internal controls and proper separation of duties supporting these processes are essential and required at every level. Units must give careful consideration to the staffing of each role involved in the process; person(s) initiating procurement transactions, the requisitioner, the receiver, the invoice/payment preparer and the approver to support separation of duties. The same employee must not place an order, receive it, approve it and process the associated payment.
Authorized approvers of University business transactions cannot approve their own transactions nor transactions payable to their immediate supervisor, the supervisor's business or the supervisor’s immediate family (spouse, parents or children); to avoid any compromise of financial controls or the appearance of a conflict of interest.
Employees, vendors and other payees will be paid in accordance with the terms set by the University or contractual agreement. Disbursement Services normally establishes default payment terms of Net 30 days, calculated from the vendor’s invoice date. In cases where the amount billed is in question or being disputed, a deviation from standard payment terms maybe warranted and in the best interest of the University. Employees will be reimbursed for business-related expenses after their reimbursement request is processed, approved and posted in the Enterprise Financial System (EFS).
Individuals processing vendor payments must ensure that all payments are supported by documentation (invoice or check request) that includes payee name and address, items being paid, the amount, the chartfield string being charged and the business justification for the payment.
Units must use valid EFS vendor numbers for all payments except as allowed under the "Making Payments Using Single Payment Vendor Numbers and "Utilizing University of Minnesota Bank Accounts". When a new Vendor number is needed, units must complete a Vendor Authorization Form UM1679 along with an IRS W9 or W8. An Independent Contractor Checklist form UM1650 is required for all Individuals or Sole Proprietor requests. Disbursement Services will centrally verify vendor requests to ensure compliance with Federal and State reporting requirements.
Nonresident Alien Contractors/Payees
International scholars and visitors who receive any of the payments listed below are generally subject to 30% federal tax withholding, unless the amounts are either exempt under the terms of a tax treaty, subject to a lower, or reduced tax rate under the treaty, or exempt from tax under the Internal Revenue Code.
- Flat payments for living expenses
- Live performances
- Participation in scientific, educational, professional or business conventions, conferences or seminars
- Other services on a short-term, contract basis
- Reimbursement of lost income and other payments
- Business expense reimbursements
For more details see the topic entitled Paying Nonresident Alien Contractors/Payees and Tax Treaty Eligibility for Nonresident Alien Independent Contractors.
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, Purchases made with the University procurement card or payments made with a University-issued check satisfy the State’s requirement for use of the Minnesota Certificate of Exemption. In the rare instance when an individual pays for goods or services with his or her own funds (cash, check, credit card), they must pay the associated sales tax and may not use the Certificate (i.e., may not claim a sales tax exemption). Individuals improperly using the University’s tax exemption may be subject to a fine from the State of Minnesota in the amount of $100 per transaction.
Federal Excise Tax Exemption
The University of Minnesota is exempt from Federal excise taxes on the purchase of communications services (telephone) and gasoline. A Federal excise tax exemption certificate for communications services must be filed with the vendor (one time only). An exemption certificate for gasoline should be filed annually (or whenever requested) with the vendor.
REASON FOR POLICY
This policy and related procedures establish the payment process in which University faculty and staff must use to ensure compliance with Board of Regents policies, accounting standards, IRS regulations and financial control measures.
This policy communicates and sets 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 any laws, statutes and all University policies and procedures. It also specifies the University’s payables methods, which help ensure consistency, accuracy of financial reporting, enhance administrative efficiency, provide financial controls, and minimize costs.
- Requesting a New Vendor or Changing an Existing Vendor
- Depositing Vendor Checks (sponsored and non-sponsored accounts) and Depositing Refunds of Sponsored Employee Expense Overpayments
- Making Payments Using Single Payment Vendor Numbers
- UM 1659: Check Request Form (CRF) (XLSX)
- UM 1659i: Check Request Form Instructions (PDF)
- UM 1679: Vendor Authorization Form (PDF)
- UM 1679i: Vendor Authorization Form Instructions (PDF)
- UM 1650: Independent Contractor Authorization Form (PDF)
- IRS W9: Request for Taxpayer identification Number and Certification (PDF)
- IRS W8: Certificate of Foreign Status of Benefiicial Owner for United States Tax Withholding (PDF)
- Payment Methods
- Payment Types
- Single Payment Vendor Entry Standards
- Single Payment Vendor Payment Types Allowed (PDF)
- Single Payment Vendor Review of Daily Entries (PDF)
- Invoice Numbering Guidelines (Appendix B) in the Vendor Payments Training Manual
- Transaction Justification/Documentation Standards For All Non-Sponsored and Sponsored Transactions Job Aid
FREQUENTLY ASKED QUESTIONS
There is no FAQ for this policy.
- Automated Clearing House (ACH)
- The electronic payment process used to transfer funds for approved payments for direct deposit to the recipient’s bank account.
- Electronic Funds Transfer (EFT)
- A commercial card program that allows funds to be transferred electronically to the vendor account or allows the vendor to pull the funds directly from the processor.
- Invoice Approval
- Vendor’s invoices must be matched against a Purchase Order (when applicable) and 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 of goods or services, legal obligations, taxes collected, judgments rendered, or refunds due. This excludes payments made to employees for wages earned.
- Non-Purchase Order Payment
- Payments that do not require a purchase order (see: Non Purchase Order Related Payments) and may be paid via an invoice, Procurement Card or Check Request.
- Purchase Order (PO)
- 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.
- Payment Terms
- The timeframe within which the University will issue payment for vendor invoices or employee business-related reimbursements.
- Reconcile budget records for the unit, ensure payments are booked to the correct chartstring, identify and resolve discrepancies.
- Ensure overall accuracy, compliance and validity of payments. Certified Approvers approve payments to Sponsored Accounts. Principal Investigator reviews, dates and signs each invoice related to sponsored sub-awards and forwards approved invoice to the Office of Sponsored Projects Administration.
- Clusters (Service Centers)
- Process account payables related transactions on behalf of departments. Scan payment documents into Imaging, data entry of payment documents, resolve matching discrepancies and provide other services in support of the payables process.
- Enterprise Financial System (EFS) Customer Support (Financial HelpLine)
- Answer general questions regarding payment status, processing problems and assist with corrections. Direct customer calls to the appropriate subject matter experts.
- 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 chart strings. Submit accurate and complete Vendor Authorization Forms for vendor set up. Departments will bear the cost of all fines, penalties, and interest incurred, resulting from their non-compliance with Internal Revenue Service or Minnesota State Revenue codes or late payments.
- Functions and tasks that are within the Department’s responsibility:
- Choosing the correct, most appropriate Procurement and Payment method.
- Choosing the correct vendor numbers and remit to address 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 (wires/drafts) to foreign vendors. Initiate payments for withholding to the State and the reporting of IRS 1099 Miscellaneous Income payments. Complete state and federal new hire reporting. Answer questions regarding payment status, processing problems and assist with corrections. Process Stop Payments on checks and issue replacement checks. Image expense reports and procurement card documentation. Provide customer service to the University community.
- Purchasing Services
- Coordinate and assist in related purchasing activities. Establish purchasing policy and procedures. Administer the Procurement Card program. Provide oversight for these processes.
- Board of Regents Policy: Purchasing
- Board of Regents Policy: Targeted Business, Urban Community Economic Development, and Small Business Programs
- Administrative Policy: Acquiring and Disposing of University Real Estate
- Administrative Policy: Building Reserves for Capital Equipment Replacement
- Administrative Policy: Individual Conflicts of Interest
- Administrative Policy: Hospitality, Alcoholic Beverages and Other Special Expenses
- Administrative Policy: Managing University Records and Information
- Administrative Policy: Paying Human Subjects and Maintaining Confidentiality and 1099 Reporting
- Administrative Policy: Purchasing a Professional Service
- Administrative Policy: Purchasing from Targeted Group Businesses
- Administrative Policy: Purchasing Goods and Services
- Administrative Policy: Relocating Employees
- Administrative Policy: Traveling on University Business
- Administrative Policy: Using Vehicles for University Business
- Administrative Policy: Using the University Corporate Travel Card
- Administrative Policy: Using University Telephone Services
- Administrative Policy: Using the University Procurement Card
- August 2012 - Comprehensive Review, Minor Revision.The revision primarily adds clarity for the end users and additional information where needed. This provides more guidance for the process, especially where there was confusion or recurring questions. Two new appendices added and procedures revised.
- June 2009 - Added new procedure: Making Payments Using Single Payment Numbers, and three supporting appendices for this procedure.
- June 2008 - Policy completely revised to address the Enterprise Financial System rollout. Procedures are partially developed and will be added as they become available.
- Added new Job Aid to Appendices section: Payment to a Foreign Vendor.
- December 2005 - Conflict of Interest, Purchasing is superceded by Administrative Policy: Implementing the Individual Business or Financial Conflict of Interest Regents Policy in Related Information.
- December 2003 - Clarified that steps taken in the Transaction Justification/Documentation Standards Job Aid are required, not optional.
- November 2003 - Added the Job Aid: Transaction Justification/Documentation Standards For All Non-Sponsored and Sponsored Transactions to the Appendices section.
- November 2002
- Accounts Payable Policy