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Purchasing and Accounts Payable. Procure to Pay. Presenters: John Watkins, Chris Leichty, & Karen Housel. Introductions and Expectations Purchasing and the Purchase Order Process Basic Procedures for the PReq Process

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purchasing and accounts payable
Purchasing and Accounts Payable

Procure to Pay

Presenters: John Watkins, Chris Leichty, & Karen Housel

agenda

Introductions and Expectations

  • Purchasing and the Purchase Order Process
    • Basic Procedures for the PReq Process
    • Special Purchase Order types for higher dollar purchases: Blanket Orders, Competitive Bidding, Sole Source Purchases, Trade-in Equipment
  • Accounts Payable and the Payment Process
    • Purchase Order Invoices
    • Voucher Payment Types: Assumed Receipt, Capital Equipment, Electronic Invoice, Adjustments
    • Department Responsibilities
    • Prepayments
    • Miscellaneous Accounts Payable Processes
    • The Payment Process
Agenda
purchasing accounts payable travel

Purchasing Department

Administers the procurement of goods and services for all University departments by the authority delegated through the President by the State Board of Regents

Accounts Payable & Travel Departments

Responsible for auditing and processing accurate and timely payments to vendors and individuals.

Purchasing, Accounts Payable & Travel
procurement tools

PReq (Purchase Requisition) – Initiates a Purchase OrderRequired for the purchase of goods & services

eBuy– Web-based shopping

Catalog Orders – Inventory products that are sourced from:

Procurement Tools
purchasing check with them first to save money

Assists with Locating Products and Best Pricing

Negotiates and obtains price agreements and contracts with vendors

Searches for new products and vendors

Approves requisitions ≥$5K to create Purchase Orders

Sends Purchase Orders to the Vendors

Makes changes to Purchase Orders

Maintains Vendor, Requester Code, Ship-to Code Databases

Ensures purchases comply with Regent, State, and Federal policies and procedures

Purchasing – Check with them first to save money
purchasing department

The Purchasing Department administers the procurement of goods and services for all University departments by the authority delegated through the President by the State Board of Regents.

Purchasing Business Rules

Authority for Procurement

Competitive Bid Thresholds

Contract Signature Authority

Conflict of Interest

Anti-Kick Back Law

Iowa Gift Law - $3 or less

Targeted Small Business

Purchasing Department
purchase requisitions less than 5k

The Department is solely responsible for the approval of these requisitions

    • Exception – Capital Equipment, Blanket Orders, and New Vendors
  • Initiator plus one or more needed for approvals
  • PO Number is assigned after the last departmental approval in Workflow
  • If PCard not accepted or vendor not on eBuy ~ Use a Purchase Order
  • Approved Conflict of Interest Vendors $2K and over may require bids or sole source justification
    • See Purchasing website approved vendors list
Purchase Requisitions - Less Than $5K
purchase requisitions 5k or greater

PReqs $25K or greater require:

    • competitive bid
    • Director of Purchasing approval
  • PO number is assigned after the last Purchasing Department approval in Workflow
Purchase Requisitions – $5K or greater
blanket orders low dollar

Intended for low dollar, regularly purchased goods and/or services under $3K per transaction

  • Maximum of $10K per fiscal year 
  • Generally not supported by a price contract, competitive bid or sole source 
    • Line description should read “Low Dollar Blanket Order for [specific description of items]”
    • List of items to be purchased must be included in the line item description
    • Only the goods or services listed on blanket order may be purchased
    • Equipment shall not be purchased
  • PO must be replaced every 2 years or sooner if there is a change in MFK, department head or spend is greater than $10K per year
  • Funds are encumbered monthly but the amount remaining is removed at the end of the fiscal year
  • Minimum Requirements for a Low Dollar Blanket Order
    • Twelve vouchers/invoices or
    • Spend of $3,001 or more per year 
    • 2 fiscal years only
    • One MFK
    • Give estimated annual usage
Blanket Orders – Low Dollar
blanket orders contract

Intended for multiple, repetitive purchases of goods and services that have been competitively bid or are under contract 

  • Purchase order will remain open for the contract period
    • Line description should read “Contract for [specific description of items]” followed by the dates of the contract period
  • Funds are encumbered monthly but amount remaining removed at the end of the fiscal year
  • Minimum Requirements for a Contract Order
    • One MFK
    • Give estimate of annual usage
  • Departments are responsible for reviewing and verifying the items received closely and diligently
Blanket Orders – Contract
blanket order disadvantages

Loss of accountability

Purchases cannot be tracked easily

Could be paying higher prices on goods/services that the University may have a contract

Blanket Order Disadvantages
professional services

Payments for services over $5K per year require a Professional Services Agreement

Professional Services contract form available on the eforms page

Cover unique technical and/or infrequent functions performed by an independent contractor qualified by education, experience and/or technical ability

Services are of a specific project nature and are not continuing or ongoing

Examples:

Excluded: Architectural, Design, Engineering and Consulting Services (related to the planning) - Engineering and Construction of Facilities must be retained through the University's Facilities Services Group

Contact Human Resources to determine if it is a University employee versus an independent contractor.

Greater than $25K must be selected through a competitive bid or sole source process.

Contact Collin Davis – 335-2192

Professional Services
competitive bidding

Required for purchases of Goods and Services as well as Professional Services $25K or greater

  • Moveable Equipment Orders $250K or greater must first be approved by the Board of Regents
  • Orders one million or greater go on Board of Regents Docket and require 60 days advance notice
    • Increased savings
    • Exact communication of wants and needs
    • Equal and fair access to all qualified vendors
    • Compliance with University, Regent, State and Federal acquisition regulations and laws
    • Improved information provided by vendors
    • Objective evaluation for awards
    • Services of an experienced purchasing professional
    • An established contract under which the vendor is legally obligated to perform
Competitive Bidding
sole source purchases

A Sole Source is a method of purchasing a product or service with an estimated value greater than $25K without issuing a formal RFQ or RFP. The Sole Source Form is available through the PReq system.

  • A Sole Source justification must address one or more of the following criteria:
    • Research continuity
    • Product upgrade
    • Competition not available
    • Critical service/support requirements
Sole Source Purchases
ebuy orders

eBuy creates an entirely electronic process from procurement to payment to our primary suppliers

Helps you get what you want, when you need it….faster & easier at UI’s contract price

Eighteen of UI’s largest supplier catalogs

Access online catalogs through central site with single login

Guaranteed UI contract pricing

Streamlined ordering and approval process

Sole Source/supporting docs not required for >$10K

Fewer ordering errors

Real-time data access for budget reporting

Paperless

Appropriate account allocation at POS – no need for CV’s

Real time product availability

Order tracking

Electronic PO delivery 24/7

eBuy Orders
best practices for separation of duties

The following roles in procuring a good or service should be handled by different individuals whenever possible:

Best Practices for Separation of Duties

Emma –

End User

Robert –

Requester

April –

Approver

Rick –

Receiver

Vera –

Verifier

At a minimum, as departments are of varying sizes, the requester,

approver and receiver must be different individuals.

approver responsibilities

As an individual involved approving of financial transactions you are responsible for confirm that the transaction is in accordance with University policies and procedures. The following guidelines should be used as a tool to help ensure a thorough review.

  • Appropriate – the transaction directly relate to achieving the mission of the University
  • Valid – the transaction is allowed by policy, law, contractual agreement, and/or professional standard
  • Reasonable – a fair amount is recorded as being paid, received or adjusted for
  • Funded – there is sufficient funding to cover expenses or the results of an expenditure adjustment
  • Accurately recorded –the amount is consistent with value received, provided, or adjusted for; and is free from accounting coding or arithmetic errors
  • Supportable – the amount of goods or services received or provided, or the justification for adjustment is consistent with supporting documentation, standard, situation, or practice
  • Timely recorded –the transaction date is accurate
Approver responsibilities
approver analysis

As an individual involved in the process of approving financial transactions the questions that follow will help justify your transaction review.

  • Why is this transaction occurring?
  • Has the initiator attached all appropriate documentation including receipts and proof of payment when necessary?
  • Is the transaction allowed by University specific policies and procedures?
  • Does the transaction seem reasonable and appropriate?
  • Are any personal expenses included in this transaction?
  • Does the purchase require a competitive bid?
  • If asked, could I explain what the reimbursement, purchase, etc. is for?
  • Does the business justification provide sufficient details to describe what was purchased/reimbursed and why it was needed?
  • Is the requested purchase being made with University contracted suppliers?
  • Are the appropriate funding and expense codes been used?
  • Are vendor reward points or rebates given for any of the transactions?
  • Has sales tax been charged on any transaction?
  • Does this transaction require additional review or approvals?
Approver Analysis
capital equipment

What is a Capital Asset?

The University's definition of equipment has established a capitalization level of $5K and a useful life (to The University) of more than one year (including fabricated equipment, purchased computer software, and computer software developed internally) for all departments.

Capital Equipment
capital equipment1

What IACT determines that it becomes listed as a Capital Asset?

  • 6730 for moveable capital assets
  • 6740 for computer software

Items to consider when filling out a Requisition:

    • Does it meet the threshold criteria per item?
    • Is it part of an existing asset? Have I included that tag number for PMO?
    • Is there a trade-in asset for the purchase of new asset? Have I listed the trade-in?
    • Tag numbers?
    • Is the custodian and location of the asset listed?
    • Is the description and quantity clear?

Equipment is defined as an item of non-expendable, tangible personal property, having a useful life of more than one year and of $5K University Accounts and for Hospital Accounts (as of July 1st, 2008).

Capital Equipment
fiduciary responsibility

Signature Authority For Contracts

    • The President has further delegated contracting authority to the Director of Purchasing for purchase orders or purchase contracts. Purchasing commitments made by employees who do not have contracting authority are void-able.
  • Approver Policies
    • Employees must understand that accepting a fiduciary responsibility to comply with all applicable institutional policies, including:
      • Purchasing - Part V, Chapter 11, of U of I Operations Manual
      • Travel - Part V, Chapter 22, of U of I Operations Manual
      • U of I Procurement Card Policy Manual
      • University Travel Guidelines

Any and all other applicable laws, regulations, and University policies not specifically delineated above.

Fiduciary Responsibility
contract law

Definition:

    • An agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law; or
    • A promise or set of promises, for breach of which the law gives a remedy
  • Elements of a Contract
    • Offer
    • Acceptance
    • Consideration
Contract Law
contract law1

Oral vs. Written Contracts

    • Oral contracts enforceable?
      • Contracts must be in writing
    • When is the University bound?
      • Contracts signed by authorized persons
  • Personal vs. University Contracts
    • Following the proper process
    • Signatory Authority
    • Scope of Employment
Contract Law
signatory authority

As a general rule, you do not have the authority to sign a contract

    • Delegation required
    • Deans, DEOs, VPs, Managers, etc. need express delegation letter from the President
    • Power of sub-delegation must be express
  • Past practice does not create valid signatory authority
Signatory Authority
contract disputes

You should contact Purchasing if you believe a vendor has not provided the right product or service

The OGC (Office of General Counsel) can provide legal advice regarding how to move forward with a contract dispute

You should contact the OGC whenever you receive notice of a contract dispute or legal proceeding

Contract Disputes
accounts payable department

Accounts Payable Business Rules

  • Purchase Order Invoices and Services
    • Needs itemized invoice and must say billed to the U of Iowa
  • Receiving
    • Receiving records are to be maintained for 3 years.
Accounts Payable Department
accounts payable department1

Invoicing and Payment

An invoice is a billing document that provides itemized descriptions and prices for the goods and/or services a vendor has provided - Unless otherwise stipulated on the purchase order or contract, all invoices should be sent to Accounts Payable

When invoices are received in Accounts Payable the invoice is compared and verified against the Purchase Order and vouchers are created

An e-mail notification is sent the next day to the requestor listed on the Purchase Order or their designee

Accounts Payable Department
accounts payable responsibilities

Preparing and distribution of checks and processes ACH payments to Vendors

  • Daily payment processes
    • Checks issued Wednesdays and Fridays
    • ACH payments made daily
  • Creates payment vouchers for purchase orders
  • Match process run to verify PO price to voucher price and to ensure receipts in system when required
  • Audit PCard, Travel expenses, and e-Voucher transactions
  • Reconciling vendor statements
  • Application of credit memos
  • Depositing of refund checks from vendors
Accounts Payable - Responsibilities
department responsibilities

Compare voucher reports and invoices with receiving records and purchase orders for accuracy

Review voucher reports promptly to ensure that any cash discounts are processed within the voucher payment terms

Enter a receipt into the PReqs system for PO’s requiring receiving

Notify Accounts Payable (acntpay@uiowa.edu) to hold the voucher, request credit and/or short pay if problems occur

Contact the vendor for authorization to return, for returned merchandise,

Notify Purchasing for all purchase order changes, additions and deletions

Department Responsibilities
receiving and voucher reports

The voucher report provides departments information on

invoices which have been received by Accounts Payable

and entered into the AP/PO System

If Vouchers are entered for:

  • Non Equipment Purchases and
  • The Purchase Order is less than $10K
    • E-mail notifications are sent to the Requestor or their designee the day after the voucher is created
    • Payments are automatically made within payment terms, the earliest of the discount due date or the scheduled due date

NOTE: If payment is to be held or you have questions please contact Accounts Payable at acntpay@uiowa.edu

Receiving and Voucher Reports
receiving and voucher reports1

If Vouchers are entered for:

  • Purchase Orders $10K or greater or
  • Purchases where the IACT is 6730 or 6740 (capital equipment)or
  • Purchase Orders for Professional Service Agreements $5K and greater where the IACT is between 6200-6235
    • An e-mail notification is sent to the requestor or their designee and the receiver
    • The department must enter an electronic receipt directly into the PReq system and provide the equipment information when appropriate
    • Payments will not be made until a receipt has been entered
  • Electronic Invoice created from some eBuy Vendors (OfficeMax, CDWG, WW Grainger, Dell, VWR)
    • Provides detailed information and are automatically paid
Receiving and Voucher Reports
problems

Short shipments or Damages/Returns

    • Department should contact the vendor for a return authorization number.
    • See e-form, Return Goods Authorization
  • Partial payments

For any of these problems, notify AP: acntpay@uiowa.edu

Problems
credit memos

Entered in PeopleSoft and scheduled to be used when voucher is paid

When credit memo cancels an unpaid invoice, the invoice/voucher is reversed

If the invoice has already been paid, the credit is entered and used with next payment

If the invoice was short paid, the credit is scanned and attached to the original voucher

Payments to vendors will be held if we have a credit balance

Credit Memos