Accounts Payable: Paying Non-Payroll Expenses
- Director of Purchasing Services
- Beth Tapp
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 University procedure: Documenting Financial / 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 University 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.
|Primary Contact(s)||University Financial Helplineemail@example.com|
|Secondary Contact||Luis Lozadafirstname.lastname@example.org|
|General Questions||Financial Helplineemail@example.com|
|Supplier Maintenance||Luis Lozadafirstname.lastname@example.org|
|Lost/Stolen Check||Luis Lozadaemail@example.com|
|Emergency Check||Luis Lozadafirstname.lastname@example.org|
- 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)
- The electronic transfer of money from one bank to another, EFTs include wire transfers, direct deposit, Automated clearing house (ACH) and payment cards.
- 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 supplier invoices or employee business-related reimbursements
- Virtual Credit Card
- A commercial credit card program that allows funds to be transferred electronically to the supplier account or allows the supplier to pull the funds directly from the processor
- Voucher Specialist
- Enters invoices into PeopleSoft that creates a voucher that allows for the paying of internal or external suppliers of merchandise or services.
- Accounting Services
- Process daily payments via checks, ACH, EFT, Foreign Wires, or Foreign Drafts,
- Issue emergency (same day) checks, and expedited payments (wires/drafts) to foreign suppliers.
- Initiate payments for State Tax withholding
- Preparing and reporting of IRS 1099 Miscellaneous Income payments.
- Answer questions regarding payment status, processing problems and assist with corrections.
- Process stop payments on checks and issue replacement checks.
- Provide customer service to the University community.
- Ensure overall accuracy, compliance and validity of payments.
- Ensure allowability and compliance of to Sponsored Accounts.
- Review, date and sign each invoice related to sponsored sub-awards and forward approved invoices to the Office of Sponsored Projects Administration.
- Clusters (Service Centers)
- Process accounts payable related transactions on behalf of departments
- Scan payment documents into Perceptive Content
- Data entry of payment documents,
- Resolve matching discrepancies, and
- Provide other services in support of the payables process.
- Departmental Accountant
- Reconcile budget records for the unit,
- Ensure payments are booked to the correct chartstring, and
- Identify and resolve discrepancies.
- 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,
- Ensure expenses are allowable and properly recorded to the correct chartstrings
- Submit accurate and complete Supplier Authorization Forms for supplier set up
- Incur the cost of all fines, penalties, and interest charges, resulting from non-compliance with payment terms, the Internal Revenue Service or Minnesota State Revenue codes
- Ensure documents are correct by:
- Selecting the correct Procurement and Payment method
- Selecting the correct supplier number and remit to address for processing requisitions and payment documents
- Verifying and confirming the receipt of goods or services purchased, and
- Ensuring the chartfield string is correct.
- 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.
- Purchasing Services
- Establish purchasing policy and procedures.
- Administer and provide oversight for the Procurement Card program.
- Administer and provide oversight for the Travel Card program
- Administer and provide oversight for travel advances.
- Maintain and provide oversight for supplier setup and maintenance
- 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: Individual Conflicts of Interest and Standards Governing Relationships with Business Entities
- Administrative Policy: Hospitality 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 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 the University Procurement Card
- April 2018 - Comprehensive Review, Minor Revisions. Policy and procedure changes include:
- Updated owners, contacts and terminology to reflect the current version of the enterprise financial system (EFS 9.2 vs. EFS 8.9)
- Replacement of the word “should” with “must” when appropriate to provide more direction
- Added definitions where applicable
- Included language to better define existing processes
- Updated payment methods to include new payment processes
- 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