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;
- is charged to an appropriate University chartstring; and
- supports all tax exemptions or requirements where appropriate.
Units must pay suppliers, reimburse employees 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 the Enterprise Financial System (EFS) to record these transactions, check or 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 to ensure separation of duties. The roles include:
- the requisitioner – the person initiating procurement transactions
- the receiver – the person receiving the merchandise
- the invoice/payment preparer,- the person entering the invoice into EFS, and
- the approver- the person approving the invoice and/or voucher (includes approving paper copy or approving in EFS)
The same employee is permitted to only perform one of the following activities for an individual transaction:
- place an order
- approve it, or
- process the associated payment.
Authorized approvers of University business transactions are prohibited from approving 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 order to avoid any compromise of financial controls or the appearance of a conflict of interest.
Employees, suppliers and other payees will be paid in accordance with the terms set by the University or contractual agreement. Accounting Services establishes default payment terms of Net 30 days. Terms are calculated from the supplier’s invoice date. In cases where the amount billed is in question or being disputed, a deviation from standard payment terms may be 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 EFS.
The University follows a standard process for distributing checks to vendors. A daily pay-cycle is generated that sends a file to Printing Services to print and mail all checks.
Special handling is a process that requires checks to be excluded from the University’s business process for check payments and are retained for departmental pickup or sent to the department for additional handling. Special handling is a costly process for the University and increases the risk of fraud or lost payments.
Units may, infrequently or in unique situations, request special handling of a check. Departments must complete Form UM1680 Check Handling Request, including the reason that this check cannot be included with the University’s business process used for standard check payments.
Accounting Services will review the request. Only checks with unique circumstances where the University’s business process for check processing is not feasible will receive approval for special handling.
Units who have had their request for special handling denied must follow the University’s business process for check payments.
Individuals processing supplier 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. Refer to Administrative Policy: Processing, Documenting, and Approving Financial and Accounting Transactions.
Units must use valid EFS supplier numbers for all payments except as allowed under the "Making Payments Using Single Payment Supplier Numbers” and "Utilizing University of Minnesota Bank Accounts". Refer to Administrative Policy: Purchasing Goods and Services for additional information related to suppliers.
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 refer to 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 personally pays for goods or services (cash, check, credit card), the individual must pay the associated sales tax and must not use the Certificate of Exemption to claim a sales tax exemption. Individuals improperly using the University’s tax exemption certificate 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 supplier (one time only). An exemption certificate for gasoline should be filed annually (or whenever requested) with the supplier.
Reason for Policy
This policy and related procedures establish the payment process that 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 the 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
This policy also specifies the University’s payables methods, which help ensure consistency, accuracy of financial reporting, enhance administrative efficiency, provide financial controls, and minimize costs.