1	Accounts Payable & Disbursements Training ________________________________________________________ DAY ONE Paying for Common Goods & Services, Reimbursements _________________________________________________________ Asger Pedersen Accounting Services & Controls
2	Agenda DAY ONE (today) Paying for Common Goods & Services/Reimbursements Invoice Processing in Response to Purchase Authorizations Sales/Use Tax General Disbursements Issues Reimbursements and Policy Restricted Payments
3	Agenda DAY TWO (to be announced) Taxable Payments Made through the Vendor System Review: General Disbursement Issues Independent Personal Services Payments Tax Implications of Non-Payroll Payments
4	Class Focus AWARENESS of relevant policies and procedures PROCESSES meeting the needs and requirements of stakeholders TOOLS providing users with processing functionality Ask Questions!
5	Invoice Processing in Response to Purchase Authorizations Accounting looks for evidence of both Authorization and Approval No payment transaction should lack appropriate authorization, approval and substantiating documentation
6	Invoice Processing in Response to Purchase Authorizations All payment requests must evidence Authorization — a commitment (P.I., buyers) - By an authorized individual - In form of a requisition, purchase order, contract, agreement or letter of understanding Approval — an acknowledgement (departments) - By an individual with relevant knowledge and authorized to approve transactions for payment
7	Invoice Processing in Response to Purchase Authorizations Understanding Purchasing’s Role Has authority to make purchase commitments Provides procurement services Assures purchase meets policies Negotiates appropriate price/quality mix Link to their web site at http://www.busserv.ucsb.edu/purchasing/purchasing.htm
8	Invoice Processing in Response to Purchase Authorizations Invoice–a vendor’s request for payment in response to a Purchase Authorization issued by - Campus Department with LVPA delegation Low Value (LV 999999-XXXXXX) - Purchasing Department buyers High Value (SB) or Vendor Blanket (VB) To learn more about these Purchase Authorizations, take the “Purchasing 101” class—sign up at http://www.busserv.ucsb.edu/purchasing/purchasing.htm
9	Invoice Processing in Response to Purchase Authorizations Low Value (LV) usage and limits: Common Goods & Services: not to exceed $2,500 per transaction (larger orders not to be artificially divided to circumvent limit) Equipment: not to exceed $1,500 (if over use SB) Request for Delivery form: Optional form for documenting LV requisitions http://www.busserv.ucsb.edu/Forms/RequestforDelivery.pdf
10	Invoice Processing in Response to Purchase Authorizations When NOT to use LVPA Prohibited values and items Over the Low Value dollar limit On the Low Value Restricted Items List http://www.busserv.ucsb.edu/purchasing/goods_services/purchasesunder2500.htm#restricted Vendor Blanket required for - Scheduled purchases from same vendor
11	Invoice Processing in Response to Purchase Authorizations INVOICE: Who – From a Vendor to UCSB What – List of Goods or Services When – Date Provided/Delivered Where – Place Shipped or Preformed Why – An Appropriate Purpose/Authorization
12	Invoice Processing in Response to Purchase Authorizations A/P Verifies Invoices Comparison to purchase order Quantity, unit price, extensions, totals Freight, FOB, taxes, discounts Verification of vendor name, address Arithmetical accuracy
13	Invoice Processing in Response to Purchase Authorizations A/P Obtains Approval from Departments Confirmation of receipt and acceptance of goods and services Certification that transaction is acceptable and conforms to purchase order
14	Invoice Processing in Response to Purchase Authorizations Discrepancies Between Invoice and PO as Seen from Accounting’s Perspective Unit price: Use the lower of the invoice or PO Quantity: Resulting in costing and/or item counts of less than 20% may be ignored by Accounting FOB, shipping, and special handling: discrepancies will be referred to Purchasing - Over $500, need documentation
15	Invoice Processing in Response to Purchase Authorizations Special Method Invoice Processing Mode — A/P Initiates Invoices from Regular Vendors ($2500 or less) Processed first in Accounting to pay in 14 days or according to terms if longer Copy of invoice with green label sent to department indicating date processed, date to be paid, and who to contact if there is a problem
16	Invoice Processing in Response to Purchase Authorizations Special Method Invoice Processing Mode — Department Responds Promptly notifies Accounting of any problems http://www.accounting.ucsb.edu/pdf/ap_invoice_correction.pdf Individual authorized for the budget to be charged should sign invoice File invoice in accordance with prescribed record retention schedules Department is office of record for these invoices
17	Invoice Processing in Response to Purchase Authorizations Approval Pending Invoice Processing Mode — A/P Initiates Processed first in Accounting then sent to department for written approval Exceeds $2,500 limit for Special Method processing Original invoice with yellow label sent to department indicating signature required, date processed and who to contact
18	Invoice Processing in Response to Purchase Authorizations Approval Pending Invoice Processing Mode — Department Responds Individual authorized for budget signs as approver and returns original to Accounting Invoice does not pay until returned Department retains a copy for own purposes Accounting is office of record
19	Invoice Processing in Response to Purchase Authorizations Pre-Approved Invoice Processing Mode — Department Initiates Processed and approved first in department Sent “payment-ready” to Accounting for final payment processing This category includes vendor invoices, Form-5 Payment Requests
20	Invoice Processing in Response to Purchase Authorizations Direct Payments (Direct Charges) Payments with NO Purchase Authorization - Utilities, telephone* , reimbursement for supplies, shipping, postage, petty cash reimbursements, memberships, honoraria & entertainment See Accounting Manual chapter D-371-16 Disbursements: Approvals, or the summary chart at http://www.accounting.ucsb.edu/pdf/AP_summary_of_auths_for_payment.pdf * Cell phone service needs a VB authorization
21	Invoice Processing in Response to Purchase Authorizations Questions
22	Sales & Use Tax Sales Tax: Imposed on retailers for the privilege of making retail sales of tangible personal property in California. Collected by the retailer Use Tax: California imposes use tax on every person who stores, uses, or consumes in the state tangible personal property purchased from an out-of-state retailer. Self-assessed
23	Sales & Use Tax Overview University as a Seller Collects Sales Tax University Departments: Bookstore, food services, medical center, student health services, library services, registrar, etc.
24	Sales & Use Tax Rate The combined Sales and Use Tax Rate includes the following components: State 6.00% County .25% Local (City) 1.00% _____ Combined Statewide Sales and Use Tax Rate* 7.25% District Transaction and Use Tax 0.0 to 1.50% (Generally, the applicable district tax is based on taxes imposed in the district where the property is first used) Total Combined Sales and Use Tax Rate 7.25 to 8.50% * The combined statewide tax rate (7.25%) applies to all sales or purchases in CA
25	Sales & Use Tax District Taxes In general, the rate of district tax is determined based on the district where retailer’s place of business is located or where the property is first delivered (shipped by retailer). As a purchaser, the University is responsible for the payment of the district taxes if adjustments are needed because of rate differences. Remove “foreign” district tax by adjusting invoice down to 7.25% sales tax. Accrue .5% Santa Barbara district rate as a financial journal transaction.
26	Sales & Use Tax—Definitions A Sale or Purchase, not otherwise exempt, must include the following elements to be subject to sales or use tax: Sales Tax Sale Sale of Tangible Personal Property At Retail For consideration Sale by a Retailer Take possession in California Use Tax Purchase Purchase of Tangible Personal Property At Retail For consideration Purchase from a Retailer Take possession out of state, but used in California
27	Sales & Use Tax—Definitions A retailer is defined as every seller who makes any retail sale. A seller includes every person engaged in the business of selling tangible personal property. A person (and indirectly a retailer) includes the following: - Individuals, various types of business organizations - Trusts, estates and social organizations - California State government agencies - US government is an exempt “person” A non-person on whom California imposes no Sales or Use Tax includes the following: - Non-Californian State governments and their institutions - Foreign governments/provinces and their institutions
28	Sales & Use Tax Using a Resale Certificate Property purchased by the University for resale is exempt from sales and use tax. Purchases must be properly documented. The University may provide a resale certificate to support the exemption. The University prefers to provide the resale certification on the purchase order. Contact Accounting or Purchasing for guidance
29	Sales & Use Tax Specific Purchases Labor Charges Installation: Exempt Repair: Exempt Fabrication: Taxable Assembly: Taxable Maintenance Contracts Mandatory: Taxable Optional: Exempt, if separately stated
30	Sales & Use Tax Canned Software “100% taxable” if involving transfer of tangible personal property Purchases of “canned” software including charges for license fees, site licensing and other end user fees Mandatory maintenance contracts including consulting services purchased with “canned” software take on characteristic of original purchase “50% taxable” with tangible personal property Optional maintenance contracts for “canned” software
31	Sales & Use Tax “Canned Software” Exempt—no transfer of tangible personal property involved Purchases of “canned software” transferred by remote telecommunications to the purchaser’s computer. Purchases of “canned software” transferred by vendor via “load and leave”. Purchases of OPTIONAL maintenance contracts, unbundled telephone support, updates, etc. Mandatory maintenance contracts including consulting services purchased with “canned” software take on characteristic of original purchase
32	Sales & Use Tax Custom Software Custom Software Software created and tailored specifically for a particular customer application. Includes modification of “canned” software at a charge of 50% or more of its purchase price. Exempt: Purchase of custom software Optional maintenance contract Mandatory maintenance contract Separately stated modification charge
33	Sales & Use Tax Printed Sales Messages The University may avoid sales or use tax on purchases of catalogs, letter, circulars, brochures and pamphlets provided that such “printed sales messages” meet all of the following requirements: Printed for the primary purpose of advertising. Printed to the special order of the University. Mailed or delivered by the seller, the seller’s agent, or a mailing house acting as the agent for the University, through the United States Postal Service or by common carrier. Received by any other person, other than the University, at no cost to that person.
34	Sales & Use Tax University as a Seller California holds sellers responsible for sales tax. Tax applies to all sales tangible personal property student organization fund raising (sale of lab notebooks, candy-filled coffee mugs) Maintain proper records Deposit tax collected into proper liability account Contact Accounting for guidance Exemptions for “convienience” & “occasional sales” Contact Accounting for guidance
35	Sales & Use Tax Audits AUDIT FINDINGS Total BOE audit assessments $198,538 Largest departmental recharge Failure to self-assess use tax $62,907 Total “recovery” audit findings $126,183 Largest departmental refunds Exempt database services $6,355 Exempt software installation, travel and training $6,755
36	Sales & Use Tax Recovery Audits Most Common Tax Accrual Overpayments By dollar amount: Invoice with tax Goods used/shipped outside CA Services Medicines Construction contracts By frequency Freight Medicines Invoice with tax Services Goods used/shipped outside CA
37	Sales & Use Tax Recovery Audits Other Common Tax Accrual Overpayments Tax paid by vendor in audit Accrual & tax calculation errors Software, Maintenance/service agreements Repair, installation & training labor Qualified periodicals, Mailing lists For a discussion of local audit findings link to Sales/Use Tax Audit Findings and Issues at http://www.accounting.ucsb.edu/pdf/su-audit-finding.pdf Source: Deloitte audit data from four campuses
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39	Sales and Use Tax Where to go for help? Accounting Manual chapter on Sales/Use Tax http://www.ucop.edu/ucophome/policies/acctman/t-182-73.pdf UC Sales & Use Tax Manual http://www.ucop.edu/ucophome/policies/sutm/ Call Asger Pedersen, x3919 asger.pedersen@accounting.ucsb.edu
40	Questions
41	General Disbursement Issues A variety of payments do not follow the purchase order/vendor invoice model Authority is derived from various other policies and procedural directives No payment transaction should lack appropriate, authorization, approvals and documentation See Payment Processing at UCSB—Overview http://www.accounting.ucsb.edu/pdf/ap_overview.pdf
42	General Disbursement Issues Using the Form-5 Payment Request Form Common transactions: employee reimbursements, cash advances honoraria, entertainment, memberships payments for independent personal services Forms and Instructions on the web can be filled out using Acrobat Reader Links to Three Forms-5 & Instructions http://www.accounting.ucsb.edu/forms/form5.shtml http://www.accounting.ucsb.edu/forms/entertainment.shtml http://www.accounting.ucsb.edu/forms/membership.shtml
43	General Disbursement Issues Compliance Issues Addressed by Forms-5 Policy restrictions and income taxation require additional disclosures and substantiation Payee’s relationship to the University Payee’s residency for tax purposes Payee’s business entity type Payee’s taxpayer id and home address Location where services were performed Payments may be subject to income tax withholding Payments are subject to income tax reporting
44	General Disbursement Issues Use Petty Cash Reimbursement Requests Restricted items list same as for Low Value Required forms and substantiation http://www.accounting.ucsb.edu/pdf/cashreimbursement.pdf Use Campus Centralized Buying Units Software Depot http://software-depot.ic.ucsb.edu/ Central Stores http://ucsbuxa.ucsb.edu/business-services/stores/storehouse.htm
45	General Disbursement Issues Cash Advances: Use Appropriate Form-5 Entertainment/Program Costs, Payments on Catering Contracts, Human Subjects, Special Orders, Subscriptions Advance payments should be avoided whenever possible Reconciliation with supporting documentation is necessary Appropriate approvals must be obtained before cash is advanced Payee is responsible for any loss of funds CALL BERNICE YOST, ext 4288
46	General Disbursement Issues Disbursement Check Controls - per policy Check distribution should be directly to the payee A signed check may not be mailed or otherwise given to any person other than the payee. Checks should be released to the department initiating the request on an exceptional basis. Designated and authorized department employee must sign for checks. A check may not be given to a university employee who approved or caused its issuance. - Separation of duties, internal control
47	General Disbursement Issues Cancellations/Stop Payments Lost or stolen checks: immediately call ext 2945 or Bernice Yost at ext 4288 Immediately return checks which cannot be forwarded to the payee Check cancellation returns funds to the budget charged and reduces chances of fraud Re-issuance of a stop payment check requires a sworn statement from the payee http://www.accounting.ucsb.edu/pdf/AP_declaration_of_lost_check.pdf
48	General Disbursement Issues Controller’s Guidelines Office of the Controller sets standards for Internal controls/accountability Sound financial management/ethical behavior See Guidelines for Financial Management on Controller’s web site for discussions on Accounts Payable, Purchasing Entertainment, Honorarium http://controller.ucsb.edu/pdf/guidelines.pdf
49	General Disbursement Issues Coding the FAU (“Full Accounting Unit”) Location, Account, Fund, Sub Object Code, see list on web at http://www.accounting.ucsb.edu/pdf/ObjectCodes.pdf Optional Departmental Codes: Cost Center, Cost Type, Project ID Linked to Purchase Orders and Low values Post-payment corrections are done on UFIN 120 http://www.accounting.ucsb.edu/pdf/ufin120.pdf
50	General Disbursement Issues The Apex Reference Number APEx—Accounts Payable Express, UCSB’s system for processing payments The APEX Reference Number On various labels affixed to invoices In the GL060 Appropriation (Reference) column A column in the gl_detail table of the DataWarehouse 2003 04 BKS 06 0007, for example: 200304—year and month processed in APEX BKS—processor’s initials or source of transactions, in this case the UCEN Bookstore 06 0007—processed on the 6^th day of the month, the 7^th transaction of this particular BKS batch
51	General Disbursement Issues Reporting Disbursements Transaction Reported in period in which paid Campus departments can query APEX online ALLN01 using mainframe COMPLETE facility Instructions can be found at: http://www.accounting.ucsb.edu/pdf/ap_alln01_check_queries_and_information.pdf IS&C or Department Security Administrators connect users Disbursements reported to campus several ways Copies of invoices—green and yellow labeled invoices GL060—monthly ledger reports to campus Data Warehouse—includes APEX detail not in GL060
52	General Disbursement Issues Vendor Relations Call A/P staff for help with Establishing credit, opening accounts, W-9 certification, credit-holds Past due invoices, statements Terms, discounts, rebates Credit memos, refunds, off-sets Billing errors, adjustments http://www.accounting.ucsb.edu/disbursement/contacts.shtml
53	General Disbursement Issues Disbursement vehicles/mechanisms Checks , direct deposit, (ACH / “Sure-pay”) US dollar wires (domestic and international) Foreign currency wires and drafts Departmental petty cash funds Petty cash vouchers refundable at Cashier’s Office Procurement cards, corporate travel cards EDI—Electronic Data Interchange *Not currently implemented at UCSB
54	Questions
55	Reimbursements & Policy Restricted Payments Reimbursement for Purchases with Cash, Personal Funds If purchases total under $150 the Petty Cash Reimbursement form may be used Preferred alternative for small transaction amounts Payee or designated employee receives cash at Cashiers Office Low Value rules and restricted items list apply Do not use for entertainment expense
56	Reimbursements & Policy Restricted Payments Reimbursements and Payments under Other Policy Provisions Travel—See the Travel Office home page http://www.accounting.ucsb.edu/travel/forms.shtml Entertainment http://www.accounting.ucsb.edu/pdf/entertainment/instruction.pdf Membership in Organizations http://www.ucop.edu/ucophome/policies/bfb/g43.pdf Employee Non-Cash Awards http://www.ucop.edu/ucophome/policies/bfb/g41.pdf Gifts to Non-Employees http://www.ucop.edu/ucophome/policies/bfb/g42.pdf
57	Reimbursements & Policy Restricted Payments Entertainment Issues Early planning should anticipate required authorizations and approvals Know your control point’s procedures, restrictions Blanket Prior Approval form useful for approving multi-payment events Be aware of exceptional items and exceptional approval requirements Study the various forms and their uses—some are optional
58	Reimbursements & Policy Restricted Payments Signatures Required on Form U5-8E: Approving authority for entertainment expense Approving authority for exceptional entertainment expense, if applicable When above signatures are obtained on prior or blanket approval forms, a non-entertainment approver may sign the “Approved by” box and attach a copy of signed forms Certification of the Official Host—must sign the actual payment request, Form U5-8E
59	Reimbursements & Policy Restricted Payments Entertainment Payment Processing under Business and Finance Bulletin (BFB) BUS-79 Authority to approve delegated to individuals with specific titles/functions. Covers all activities and expenses associated with University sponsored events, such as receptions, conferences and program activities. Use U5-8E (Payment Request:Business Meeting and Entertainment) Form to request reimbursement Link to the Business Meeting and Entertainment Expense web page for forms and instructions http://www.accounting.ucsb.edu/forms/entertainment.shtml
60	Reimbursements & Policy Restricted Payments Employee Non-Cash Awards (BFB G-41) Conditions and prohibitions: Must be work-related, non-discriminatory, infrequent, nonnegotiable Approval authority delegated to department heads Process with object code 7751, reference BFB G-41 State funds allowed for work-related awards, not for sympathy gifts Prohibited items: season tickets, recreational memberships, day off with pay (see list in policy statement) Limits on allowable awards Employee recognition: minimal value tangible personal property of $75—if in excess exception approval required from control point Length of service/Retirement gift cannot exceed $400 Sympathy gift cannot exceed $75
61	Reimbursements & Policy Restricted Payments Gift to Non-Employees (BFB G-42) Conditions and Prohibitions: Not to employees and their relatives, elected officials, candidates and campaigns Business purpose must be documented Process with object code 7751, reference BFB G-42 Cash gifts not permitted. State and Fed funds not permitted Limits on allowable gift categories Promotional/goodwill (logo) items—$75 Appreciation/recognition of service to University items—$250 (tickets, meals, nonnegotiable gift certificate, plaque, watch, etc.) Expression of sympathy gifts—$75
62	Reimbursements & Policy Restricted Payments University Memberships in Organizations (BFB G-43) Authority to approve within certain limits is delegated to specific titles/functions. Faculty Club membership dues are exempt — processed under Entertainment Link to Form U5-8MEM, Payment Request: Memberships and related information http://www.accounting.ucsb.edu/forms/membership.shtml
63	Reimbursements & Policy Restricted Payments Miscellaneous Reimbursements: Program Participants, Human Subjects, Survey Incentives Funding source must support the particular use of funds and expenses must be documented Appropriate reviews must be in place and documented, such as any applicable Human Subjects Protocol from Office of Research Tax implications must be anticipated—prizes are tax reportable and may be subject to withholding.
64	Reimbursements & Policy Restricted Payments Questions