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Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Columbia University Medical Center Training Certification Program For Senior Financial.

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Presentation on theme: "Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Columbia University Medical Center Training Certification Program For Senior Financial."— Presentation transcript:

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2 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Columbia University Medical Center Training Certification Program For Senior Financial Administrators - Session 7

3 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Session 7: A-110, A-133 and the Columbia Procurement/ Payment Cycle Part 1a: OMB Circular A-110 Administrative Requirements Part 1b: OMB Circular A-133 Audit Requirements Part 2: Purchasing Cycle Part 3: Accounts Payable Cycle

4 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 3 Agenda Introduction10Mins Goals and Objectives5 Mins Part 1a: OMB Circular A-110 Administrative Requirements 35 Mins Part 1b: OMB Circular A-133 Audit Requirements 30 Mins BREAK 15 Mins Part 2: Purchasing Cycle65 Mins BREAK15 Mins Part 3: Accounts Payable Cycle 65 Mins TOTAL 240 Mins

5 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 4 Session Objectives –Provide an understanding of the requirements in OMB Circular A-110 –Provide an understanding of the requirements in OMB Circular A-133 –Discuss the purchasing cycle at Columbia –Discuss the accounts payable cycle at Columbia

6 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Part Ia OMB Circular A-110: Uniform Administrative Requirements for Grants and Other Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations

7 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 6 OMB Circular A-110 What Is Circular A-110 –A federal publication issued by the United States Office of Management and Budget. Sets forth standards for obtaining consistency and uniformity among federal agencies in the administration of grants Applied to agreements with institutions of higher education, hospitals, and other non-profit organizations Ensuring sufficient and fair competition in vendor selection Adherence to clear ethical standards to avoid real or apparent conflict of interest by University employees or agents Adherence to clear purchasing procedures Incorporating government specified contract language Consistent documentation of purchases, including record retention for audit and other purposes Making an affirmative, pro-active effort to utilize small businesses, minority-owned firms and women’s business enterprises

8 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 7 OMB Circular A-110 Relationship of a Project to Regulations CU Federally Sponsored Project A-133 A-21 Cost Accounting Standards CU Policies & Procedures Sponsor Terms & Conditions A- 110

9 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 8 OMB Circular A-110 General Highlights –Definitions Sub-recipient - the legal entity to which an award is made Real Property - land, structures Prior approval - written approval by an authorized official –Pre-Award Forms - lists the required forms for applicants Special award conditions - additional requirements for high-risk grantees Certifications and representations - to ensure recipients’ compliance –Post Award Financial and Program Management Property Standards Procurement Standards Reports and Records Termination and Enforcement –After-the-Award Closeout Procedures - specifies responsibilities of the recipients, such as reports required and settlements for adjustments.

10 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 9 OMB Circular A-110 Financial and Program Management Section 21 - Standards for Financial Management Systems –Requires the recipients financial management systems to incorporate the following; Effective control over and accountability for all funds, property and other assets i.e. General Ledger Procedures to minimize the time elapsing between the transfer of funds i.e. Cost Transfer Policy Written procedures for determining the reasonableness, allocability and allowability of costs. i.e. Policies adhere to A-21 guidelines Accounting records supported by source documentation i.e Detailed hotel bill

11 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 10 OMB Circular A-110 Financial and Program Management Section 24 - Program Income is gross income earned that is directly generated by a supported activity or earned as a result of the award. Includes, income from fees for services performed, the sale of commodities or items fabricated under an award, license fees and royalties on patents and copyrights. –Program income earned during the project period shall be retained and shall be used in one or more of the ways: (1) Added to funds committed to the project by the Federal awarding agency and used to further eligible project or program objectives. (2) Used to finance the non-Federal share of the project or program. (3) Deducted from the total project or program allowable cost in determining the net allowable costs on which the Federal share of costs is based.

12 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 11 OMB Circular A-110 Financial and Program Management Section 25 - Budget and Plan Provisions –Recipients are required to report major material deviations from budget and program plans. –Prior approval from awarding agencies is necessary when there is a: Change in the scope or the objective of the project/program Change in a key person specified in the application/award Absence for more than three months, or a 25% reduction in time devoted to the project, by the approved project director or principal investigator. The need for additional Federal funding –Prior approval for minor changes is done internally: i.e. a reallocation of budget from salaries to supplies

13 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 12 OMB Circular A-110 Property Standards Section 34 - Equipment A-110 Capitalization threshold is $5,000 CU Capitalization threshold is $2,000 –Title for equipment acquired with federal funds usually vests with the recipient, subject to conditions outlined in this circular. –Systems shall be in effect to insure adequate safeguards to prevent loss, damage or theft of the equipment. Example: Tagging –Physical equipment inventories: Must be performed at least every two years Must include all equipment Must reconcile inventory results to accounting records

14 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 13 OMB Circular A-110 Procurement Section 42 - Conflict of Interest –No employee shall participate in the selection, award, or administration of a contract supported by Federal funds if a real or apparent conflict of interest would be involved. Employees, and agents of the University shall neither solicit nor accept gratuities, favors, or anything of monetary value from contractors, or parties to sub- agreements. –Example: PI accepting free tickets to a show supplied by a contractor bidding on work for the project.

15 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 14 OMB Circular A-110 Procurement Section 43 - Competition –All procurement transactions shall be conducted in a manner to provide open and free competition. –Awards shall be made to the bidder whose offer is most advantageous in terms of price, quality and other factors considered. –When competition does not exists it must be documented. The supporting documentation should include cost and price analysis as well as justification for lack of competition.

16 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 15 OMB Circular A-110 Procurement Section 45 - Cost and Price Analysis –Cost or price analysis shall be made and documented in the procurement files in connection with every procurement action. –Cost analysis is the review and evaluation of each element of cost to determine reasonableness, allocability and allowability. Cost analysis is normally performed by the Purchasing Department. –Price analysis may be accomplished in various ways: Supplier price quotations Catalog prices and similar indicators, together with discounts. –Price analysis can be performed by the requisitionor or Purchasing.

17 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 16 OMB Circular A-110 Procurement Section 46 - Procurement Records –For purchases over the small dollar threshold ($25,000), the following documentation is required: Basis for contractor selection, competitive analysis Justification for lack of competition when competitive bids were not obtained Basis for price –The Purchasing Office is obligated by federal regulations to maintain a formal procurement system. –Purchasing files are subject to audit by federal agencies and must include proper documentation (i.e. purchase orders, contract negotiations, bid awards, sole source justifications, etc.).

18 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 17 OMB Circular A-110 Financial Reporting –Section 52: Awarding agencies require the University to report the status of funds for projects or programs; The University must submit a Financial Status Report, no later than 90 calendar days after the end of each specified reporting period for annual and final reports. The University must submit a reconciliation of Letters of Credit to expenses no later than 45 days after the end of each specified reporting period for quarterly and semi-annual reports.

19 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 18 OMB Circular A-110 Retention and Access for Records –Section 53: Financial records, supporting documents, statistical records, and all other records pertinent to an award shall be retained for a period of three years from the date of submission of the final expenditure report. –Every transaction must have stand-alone supporting documentation.

20 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Part 1b OMB Circular A-133:Audits of States, Local Governments, and Non- Profit Organizations

21 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 20 OMB Circular A-133 What is A-133? –An Office of Management and Budget (OMB) Circular requiring an annual external audit of non-profits organizations receiving federal funds in excess of $500,000. –Sample of federal awards & their direct cost transactions are selected for audit to determine if expenditures and procedures were appropriate (i.e., in accordance w/ federal policies, sponsor terms/conditions & University policies). –The specific requirements for activities allowed or unallowed are unique to each Federal program and are found in the provisions of grant agreements pertaining to the program.

22 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 21 OMB Circular A-133 Relationship of Project Regulations CU Federally Sponsored Project A- 110 A-133 A-21 Cost Accounting Standards CU Policies & Procedures Sponsor Terms & Conditions

23 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 22 OMB Circular A-133 How Does It Impact CU? –All Federal and increasingly more non-federal sponsors look at A-133 as a ‘report card’ of how we spend their money –Findings are reported to federal government and become public record, distributed to all federal agencies through a clearing house –Each department performing sponsored research is accountable for demonstrating that the reported expenditures are appropriate with the terms and conditions of the award

24 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 23 OMB Circular A-133 What Happens During an Audit? –During an A-133 audit, samples of transactions are selected to determine if expenditures and procedures were appropriate i.e. purchase of equipment for use on a project. –Auditors looks for compliance with general and specific government audit requirements. Covering both financial and non-financial factors such as: Scope of work Efficiency with which resources are used Money spent in compliance with budget

25 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 24 OMB Circular A-133 What Happens During an Audit? –The auditor must also test internal control procedures making sure that adequate policies and procedures are in place for complying with the federal requirements. Example: international air travel must comply with the “Fly America Act” which requires travel aboard U.S. flag carrier. –Principal Investigators and Financial Analysts are responsible for approving and ensuring compliance to policies and procedures. Travel Purchasing

26 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 25 OMB Circular A-133 What Are the Auditors Looking For? –Direct attribution must be established and demonstrated through supporting documentation (linkage between cost and purpose of the project) –A readily identifiable causal-beneficial relationship must exist between costs and the project (example: amino acids used in analysis for a research project) 1. Are the costs allowable? 2. Are they allocable? 3. Are they reasonable? 4. Are they adequately documented?

27 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 26 OMB Circular A-133 Audit Testing 1) Transactions are properly recorded and accounted for to: Permit the preparation of reliable financial statements and Federal reports Maintain accountability over assets Demonstrate compliance with laws, regulations, and other compliance requirements 2) Transactions are executed in compliance with: laws, regulations, and the provisions of award agreements. 3) Requirements by transaction type: Receipts for airfare, hotel bill, restaurant receipts, taxi, etc. Purpose of trip (i.e. meeting agenda) 4) Who is responsible for providing the documentation? Central Administration- Restricted Funds Department as needed

28 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 27 OMB Circular A-133 Audit Testing –Other testing includes: Effort reporting on projects Competitive bids on procurement transactions Cost transfers Subrecipient monitoring –Example of cost transfers testing: Was the cost budgeted for? Was the transfer documented? –Why is this now correct? –Why was it allocated to the project originally? Was the cost transfer done in a timely manner? –90 days

29 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 28 OMB Circular A-133 Types of Findings –Immaterial findings: Generally due to noncompliance with institutional policies and not governmental regulations –Questioned costs: (1) Resulting from a violation or possible violation of a provision of a law, regulation, contract, grant, cooperative agreement, or other agreement. (2) Where the costs, at the time of the audit, are not supported by adequate documentation. (3) Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances.

30 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 29 OMB Circular A-133 Types of Findings –Reportable Conditions are significant internal control deficiencies that could adversely affect the entity’s ability to correctly record, summarize and process financial data: Examples: –No cost transfers were processed for 8 months then processed in the last month of the fiscal year. –Effort reporting was not performed for certain faculty members working on federal grants. –A material weakness is a condition in which an internal control does not adequately guard against error or fraud Examples: –Lack of formal policies or procedures –Absence of approval process and monitoring of costs

31 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 30 OMB Circular A-133 A-133 Reports –Audit reports are typically prepared in draft form and then submitted for review and comment to Restricted Funds. –This gives the management the opportunity to correct misconceptions –Reporting package. The reporting package which is submitted to the Federal Clearinghouse includes the following: Auditor’s opinion statements Financial statements and any footnotes to the statements Schedule of Expenditures of Federal Awards Summary schedule of current year findings Summary schedule of prior audit findings Corrective action plan

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33 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Part 2 Purchasing Cycle

34 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 33 Purchasing Cycle OVERVIEW : The Steps from Buying to Paying ACCOUNTS PAYABLE YOUR DEPARTMENT PAYMENT ISSUED VOUCHER AUDITED VOUCHER RELEASED, HELD OR REJECTED CREATION & APPROVAL OF A REQUISITION (if applicable) INVOICE APPROVED INVOICE RECEIVED YOU ARE HERE (Topics included in this training.) IDENTIFICATION OF A UNIVERSITY NEED GOODS OR SERVICES RECEIVED INVOICE DATA ENTERED INTO APCAR SUBMISSION OF REQUISITION TO PURCHASING (if applicable) PURCHASING REVIEW & CREATION OF PURCHASE ORDER (if applicable)

35 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 34 Purchasing Cycle Overview Breakdown of the University’s Annual Spending –You are not alone in your purchasing habits. As the breakdown of the University’s annual expenditures by commodity category on the following chart suggests, most purchases are not unique. Chances are, if you’re buying it, someone else is too. –By leveraging our collective purchasing power, all University departments, whether large or small, can benefit from the greatest value – as long as we work together.

36 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 35 Purchasing Cycle Overview Breakdown of the University’s Annual Spending Purchasing Power – United We Stand (Total Annual University Purchases = Approx. $900 Million)

37 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 36 Purchasing Cycle Role of The Initiating Department –The purchasing process is a cycle –“From Req. to Check” – in which the initiating department plays a key role. –We’ll take you through the cycle step by step.

38 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 37 Purchasing Cycle Role of The Initiating Department Identification of a University Need –You may recall from the Overview, there are several steps in the Buying to Paying process. –Knowing the specifications of the computer you need to buy does not complete the “Identification of a University Need” step. –You must also confirm and determine the following: 1.Confirm that the purchase complies with University policies. 2.Determine the best source of supply. 3.Should you generate a requisition for submission to Purchasing for issuance of a Central Purchase Order or generate a requisition and issue an EZPO?

39 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 38 Purchasing Cycle Role of The Initiating Department Compliance with University Policies –Does your purchase comply with University Policies? –Why is compliance important? University policies not only mirror and reinforce federal regulations with which the University must comply, but they also represent good business practices and have been drafted to protect the best interests of the University. –Additional information on University purchasing policy can be found at

40 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 39 Purchasing Cycle Role of The Initiating Department Compliance with University Policies –The following are some key elements of the University’s purchasing policy to consider when making a purchase: 1.Conflict of Interest 2.Restricted Commodities 3.Bid/Purchase Order Dollar Thresholds 4.Sole Source Purchase 5.Consultant Policy 6.Signature Authority/Authorization to Purchase 7.Columbia University Fire Code 8.Construction/Facilities Related Purchases 9.Small Business Compliance/Local Initiative –We will discuss these issues in more detail in the Compliance and Purchasing Policies Section of this Training.

41 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 40 Purchasing Cycle Role of The Initiating Department Best Source of Supply Now, your next step – Decide where to buy. –We encourage you to utilize all of the resources Purchasing makes available to determine the best vendor to meet your needs. If you are unsure of the best source or need help getting competitive bids, contact Purchasing. –Purchasing has staff with expertise in all major commodity areas, and has negotiated University-wide Purchasing Agreements with numerous vendors for most commodities, such as: furniture scientific equipment and supplies office supplies computer equipment and supplies

42 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 41 Purchasing Cycle Role of The Initiating Department University-Wide Purchasing Agreements –University-wide Purchasing Agreements are competitively bid or negotiated, with the goal of taking maximum advantage of the University’s buying power. –Through this mechanism, the University obtains the best overall value for repetitively purchased products and services. –By utilizing University-wide Purchasing Agreements, you maximize the University’s ability to leverage its collective buying power – which saves your department time and money.

43 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 42 Purchasing Cycle Role of The Initiating Department Competitive Pricing and Value –If your department’s need cannot be met via an existing University-wide Purchasing Agreement, it is your responsibility to spend the University’s resources wisely by obtaining competitive pricing and value. –It may be useful to ask yourself: what would you do if you were buying the item with your own money? As we all know from our experience as individual consumers, price is not the only thing to consider when you are making a purchase. –For example, just as you probably do in making personal purchases, you should also consider: Quality of Product Customer Service Delivery Terms Prior Performance Insurance Requirements –Again, Purchasing can assist you in identifying, selecting and negotiating terms with a vendor.

44 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 43 Purchasing Cycle Role of The Initiating Department When is a Purchase Order or EZPO Required? –A purchase order is required for purchases of all goods and services with the following limited exceptions: Honoraria Postage Registration fees and membership dues Subscriptions and reprints Printing services Short term rentals Advertisements Food Utility bills

45 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 44 Purchasing Cycle Role of The Initiating Department Departmental Roles in Creating a Requisition –Generally, two Departmental roles are involved in creating a requisition: The creator / initiator The approver –The creator/initiator and the approver should know what is being purchased and apply the appropriate University policies. –Make a best effort to purchase via a University-wide Purchasing Agreement. –Take full advantage of Purchasing Office resources in selecting vendor. –Confirm that the purchase complies with University policies. –Provide all necessary supporting documentation, such as product specification, bid information, cost justification.

46 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 45 Purchasing Cycle Role of The Initiating Department EZPO or PO – When to Use Should you issue an EZPO or request a Purchase Order? –An EZPO is issued for most purchases (including certain approved restricted commodities) under $2,500 and for purchases of up to $10K for many University-wide Purchasing Agreements. Consult the contract listings by clicking the Contracts button at for the relevant EZPO limit. When should you submit a requisition to Purchasing to request issuance of a Purchase Order? –A Central Purchasing Office Purchase Order is issued for all purchases above $2,500 that are not eligible for an EZPO and all requests for consultant services, construction related services, and restricted commodities not eligible for purchase via an EZPO. When you approve an EZPO, you not only authorize the expenditure of funds, you are also making a commitment to the Vendor for the purchase – no additional authorization from the Purchasing Office will be required.

47 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 46 Purchasing Cycle Role of The Initiating Department The Approver (DAF) –The Approver (DAF) should: –Certify that the purchase complies with University policies. –Certify that the purchase meets a legitimate University need. –Certify that all supporting documentation is accurate and complete. –Certify that all purchasing activity has been conducted in a professional, ethical manner. –Certify that the purchase appropriately minimizes risk to the University. Approving a requisition is equivalent to authorizing the expenditure of funds.

48 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 47 Purchasing Cycle Role of The Initiating Department What is a Purchase Order? –A Purchase Order: Is a contractual document, issued by the Purchasing Office in response to a requisition. The Purchase Order protects the University’s interests and clearly defines terms and conditions associated with the purchase.

49 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 48 Purchasing Cycle Role of The Initiating Department DAF Authority –DAF Authority is not equivalent to Contract Signature Authority. –Typically, it is the Purchasing Office’s role to execute both purchase orders and contracts, and only Senior Officers who have been formally and explicitly delegated “Signature Authority” by the University Trustees may sign contracts on behalf of the University. Proposed contracts should be forwarded to Purchasing in conjunction with the requisition. –Purchasing will work with you to obtain approval from General Counsel as required.

50 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 49 Purchasing Cycle Role of The Initiating Department Additional Steps in the Buying to Paying Process –Additional steps in the Buying to Paying Process are……… –The Requesting Department’s responsibility does not end with the issuance of the purchase order. In order to complete the “Req to Check” process, an authorized departmental representative must also: Confirm receipt of goods and services, consistent with terms of the purchase order. Review and approve invoices for payment in accordance with terms of purchase order. GOODS OR SERVICES RECEIVED INVOICE RECEIVED INVOICE APPROVED

51 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 50 Purchasing Cycle Role of The Initiating Department By now, you’re probably wondering what Purchasing can do for you. –Obtain competitive bids –Negotiate University-wide Purchasing Agreements –Guide you through the purchasing process –Support and help you understand your role in compliance The goal of the Purchasing Office is to help end users get the best overall value for the goods and services required to support the University’s academic and research mission.

52 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 51 The following important University Purchasing policies are highlighted in the next several slides: Conflict of Interest Signature Authority / Authorization to Purchase Bid / Purchase Order Dollar Thresholds Consultant Policy Restricted Commodities Columbia University Fire Code Leasing policy Construction Related Purchases Sole Source/ Single Source Purchases Small Business Administration (SBA) Compliance and Local Purchasing Goals Purchasing Cycle Compliance and Purchasing Policies

53 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 52 Conflict of Interest – Purchases from a business in which a University employee has an interest are prohibited. The University does not enter into purchasing contracts with students, staff, faculty or members of their immediate family. DAF Authority is not the same as Signature Authority. Only the Purchasing Office and formally designated Senior Officers are authorized to execute contracts. Purchasing Cycle Conflict of Interest and DAF Authority

54 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 53 Bid / Purchase Order Dollar Thresholds – all purchases require a minimum of 1 to 3 bids depending upon the dollar value of the purchase. –$ 1 – $ 2,500: Minimum of one (1) written bid, quote and / or proposal required. EZPOs are required for most purchases. –$ 2,500 - $ 10,000: All orders not covered by a University-wide Purchasing Agreement require two written, faxed or ed bids, quotes and /or proposals. This is mandatory. Oral bids are not acceptable. Central Purchase Orders are required. –$ 10,000 – & higher: All orders not covered by a University-wide Purchasing Agreement require three written, faxed or ed bids, quotes and/or proposals. Oral bids are not acceptable. Central Purchase Orders are required. Purchasing Cycle Compliance and Purchasing Policies

55 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 54

56 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 55 Consultant Policy – All consultant services require a Central Purchase Order and must be accompanied by a consultant contract that appropriately minimizes University risk. Restricted Commodities – Commodities which require prior approval from oversight departments must be processed via a Central Purchase Order or an EZPO. Restricted Commodities include but are not limited to: ethyl alcohol, refrigeration, animals and animal related products, radioactive materials, narcotics, and upholstered furniture. Fire Safe Furniture – The University mandates compliance with the Boston Fire Code for all upholstered furniture Purchasing Cycle Compliance and Purchasing Policies

57 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 56 Leasing The lease or buy decision can be based on various criteria, including technology obsolescence and budgetary needs. Leases represent external debt to the University and must be managed carefully The University guidelines are: –The equipment must have a useful life of at least 3 years –The equipment must have a minimum value of $25,000 (except copiers) and be leased for at least 2 years –Purchasing and the Office of General Counsel review all leases Lease payments must be made through AP’s automated payment system (direct debit) Purchasing Cycle Compliance and Purchasing Policies

58 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 57 Construction Related Purchases – All purchases for construction, renovation or alteration to physical space at the University require the review and prior approval of Facilities Management. Sole Source Purchases – may be used as justification for vendor selection without competition when there is only one vendor capable, authorized or available to provide the goods or services. Single Source - means the procurement of goods or services without competitive bids or proposals in circumstances in which there might be an alternative source available. It would however not be feasible due to practical or other overall cost considerations to obtain alternative bids or proposals for the specific purchase on hand. It must be established and documented that proceeding with a single source procurement is in the best interests of the University. Purchasing Cycle Compliance and Purchasing Policies

59 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 58 Small Business Compliance and Local Purchasing Goals – The Federal Government mandates that in spending Federal grant funds the University make best efforts to purchase from small business concerns, particularly those owned and controlled by socially and economically disadvantaged individuals or women, and that these business concerns shall have the maximum practicable opportunity to provide goods and services to the University. – It is also the University’s policy to seek to increase the positive effects of employment, construction spending, purchasing and, research and development for the benefit of local neighborhoods in Manhattan north of 110th St and in the South Bronx. Purchasing Cycle Compliance and Purchasing Policies

60 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 59 Small Business Compliance and Local Purchasing Goals – Purchasing is charged with the development and administration of Columbia University's Small Business and Local Purchasing Program. – Federal Contracts (Prime or Sub) that exceed $500,000 over the life of the project or construction contracts > $1 million require an approved Small Business Plan. These plans make provision for using vendors which are registered as a Small Disadvantaged Business (SDB); or operate within a Historically Underutilized Business Zone (HUB). In addition small women owned or veteran businesses may also be included. For more information Purchasing Cycle Compliance and Purchasing Policies

61 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 60 Purchasing Cycle Purchasing Today: Reorganized To Provide Service

62 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 61 Copiers (w/Print Services) Integrated Supply – Maintenance Dell MOU Renegotiation Microsoft Campus Agreement Cellular Telephones Over 30 New or Improved Agreements, More Under Way: Consultant Insurance Construction Bid/Award Communications: P-Card Fax Server Fisher Portal Process Reengineering:  Bottled Water  Transcription Service  Staffing Services  Office Supplies  Physician Answering Service  Rwanda MSPH Lab Purchase For $150K Savings Policy Reengineering: Contract Page Web Redesign Enhancement Group Newsletter Purchasing Cycle What’s Being Accomplished?

63 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 62 10/04 Safety Products Consolidation 11/04 12/0404/0506/05 09/05 Increase Existing UWPA Utilization Medical Imaging Service Consolidation More UWPA Spend via Supply Centers Safety Products Consolidation Negotiate Additional UWPA and Consolidate Spend Purchasing Cycle Lab / Scientific Initiatives

64 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 63 Purchasing Cycle Two Umbrellas, One Program: “P-Card” Procurement Activity Cash Management Ghost Account Strategic vendors P-Card A uthorized users Stored Value Card Human Subjects  Each product group addresses service, control and cost savings  Several card types and accounts can be on one card  Goal: To have the most spending on the fewest cards Department Card Multiple users Travel Card Authorized users Declining Balance Card PIs under grant Stored Value Card Petty Cash Stored Value Card Payroll

65 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 64 P-Card Workflow

66 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 65 We invite you to visit the Purchasing web page for more information such as: 1. Purchasing Guidelines 2. Frequently Asked Questions (FAQ’s) 3. Purchasing Office Staff Listing by Commodity 4. University-wide Purchasing Agreements 5. Vendor Listings, including SBA Vendors and Local Vendors 6. FFE Purchasing Requisition Tutorial 7. How to Order – Step by Step Walk Through of Process Additional information on University purchasing and payment policies and procedures may also be found on the Office of Treasurer and Controller’s web page at and Internal Audit’s web page at Where To Turn For More Information?

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68 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Part 3 Accounts Payable Cycle

69 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 68 Accounts Payable Cycle Accounts Payable: –Monitors University Disbursements –Over 650,000 transactions annually / 1.5 million documents –Ensures compliance with University policy and governmental regulations –Commitment to Service –Issues stop payments and voids –Manages the American Express Corporate Card and Citibank Diners’ Club programs –Reports 1099-MISC payments to the IRS –Reports unclaimed checks to state agencies

70 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 69 Accounts Payable Cycle Accounts Payable –Reviews and disburses payments in a timely & effective manner –Ensures that only valid, appropriate and DAF-approved invoices are paid by the University –Ensures that payments and employee reimbursements are in full compliance with University and governmental regulations –Monitors costs See:

71 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 70 Accounts Payable Cycle AP / CAR: What Is It? How Does It Work? –Accounts Payable/ Controlled Analytical Review –When a vendor submits a valid invoice to a department, the department processor enters invoice data into the AP/CAR system. Now in electronic form, the “invoice” is submitted for approval, then forwarded to AP for review and, if all processes are properly completed, it is released for payment.

72 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 71 Accounts Payable Cycle The Life of a University Expense - Company Invoice Your department purchases a laptop computer and needs to pay for it: Employee submits request for new laptop to Dept. Business Manager Dept. Orders Laptop From Vendor Business Manager processes Requisition, sends to DAF for approval Laptop received Vendor sends Invoice DAF approves Req. Dept. Sends to Purchasing Invoice received Entered into AP CAR Purchasing researches best price Purchasing creates PO# Invoice approved by DAF, Voucher # generated AP receives and reviews Voucher Voucher released, held or rejected Upon release, Payment Issued To Vendor Charge appears on Dept. FAS Statement

73 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 72 Accounts Payable Cycle Expense Approval Guidelines –Valid as a University expense –Availability of funds –Compliance with University policy including purchasing guidelines See: Proper departmental processing and approvals by correct “Designated Approver Form” (DAF) –All invoices must be approved electronically by the DAF

74 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 73 Accounts Payable Cycle Reminder: Approving an invoice is equivalent to signing a check.

75 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 74 Accounts Payable Cycle The Role & Responsibilities of the Designated Approver –Availability of funding –Completeness of documentation and accuracy of accounting –Segregation of “unallowable” expenses –Compliance with funding agency regulations –Absence of a conflict of interest (Employees have a duty and responsibility to conduct business matters solely for the benefit of the University) –Under no circumstances may an individual approve his or her own Expense Report or that of a person to whom he or she reports.

76 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 75 Accounts Payable Cycle Departmental Responsibilities: Ensure the accuracy of the invoice: Goods or services were received as ordered Pricing agrees with purchase order (if applicable) Ensure that all invoices and reimbursements are processed in a timely and accurate manner

77 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 76 Accounts Payable Cycle Compliance w/University Guidelines - General Requirements AP requires that a payment request: –Includes a valid business reason and that the expense is “necessary & reasonable” –Has proper authorization –Includes no taxes from which Columbia is exempt (except if on a TBER) –Is in compliance with Purchasing guidelines –Has all necessary documentation

78 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 77 Accounts Payable Cycle Compliance w/Federal Regulations - Tax Reporting: –A gift to an employee that exceeds a cost of $25 is considered taxable income. –IRS regulations and University policies require reporting of various additional or miscellaneous disbursements to individuals, such as gifts, awards, honorariums, etc.

79 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 78 Accounts Payable Cycle Compliance w/Federal Regulations - Cash Awards: –Cash prizes and awards given by a department to an employee maybe taxable Exception: service and safety achievement awards from a non-qualified plan, which are excludable up to $400

80 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 79 Accounts Payable Cycle Compliance w/Federal Regulations - Non-Resident Aliens: –IRS regulations and University policies limit the type of payments that can be made to a non-resident alien depending upon his or her visa status. –Honorarium payments to non-resident aliens must be processed by the Payroll Department –To determine a non-resident’s eligibility for payments refer to the table “Eligibility for Payments/Salary by Columbia U.”:

81 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 80 Accounts Payable Cycle Invoices What to look for: –Only pay “CURRENT ACTIVITY” –Only pay from an ORIGINAL INVOICE –Make sure payment goes to the CORRECT ADDRESS –Is the BILLING ADDRESS on the invoice, in fact, “Columbia University”? –If not, why are we paying for it? Document the reason.

82 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 81 Accounts Payable Cycle Urge Vendors to Sign Up for DIRECT DEPOSIT Payments –Provides faster access to funds –Eliminates need for “Check Pick Up” –Payments can’t get “lost in the mail” –Easy tracking of payments via “Direct Deposit Remittance Advice” website (wwwa.ais.columbia.edu/apr/vend_acct_nums_form.html) –To sign up, vendors submit a completed “Direct Deposit Form”

83 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 82 Accounts Payable Cycle Check Requests When To Use: –Subscriptions and Memberships –Honorarium –Non-Employee Business Expense –Petty Cash

84 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 83 Accounts Payable Cycle Consultants: –If paying an individual for a service, might the IRS categorize this person as an “Employee” that must be paid through Payroll? If not an “Employee”, does the University consider this individual a “Consultant”, requiring a Purchase Order before payment can be made? –Consultants should be paid via an invoice. –Familiarize yourself with the “Consultant Policies” on Purchasing’s website – See:

85 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 84 Accounts Payable Cycle Petty Cash Documentation: Specific Requirements –Receipts for expenses over $50 –Receipt required by AP for an expense over $25 for “in-office” food for a business meeting when the expense is necessary and reasonable, and when the maximum total expense is less than $75. (Though your department is encouraged to require and file receipts for ALL expenses.) –Expense for more than $75 should be processed on a Travel and Business Expense Report.

86 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 85 Accounts Payable Cycle Petty Cash: Limitations –Petty Cash cannot be used to pay for honoraria, equipment, travel or salary advances, registration fees, business meals outside of the office, personal loans, subscriptions, consultant fees and any other type of service payments, debit/credit card reimbursements, or the cashing of personal checks.

87 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 86 Accounts Payable Cycle Travel and Business Expense Reports –A way to reimburse and account for legitimate university and business expenses –Subordinates cannot approve supervisor’s report –Expenses left unreported for six months or longer will no longer be reimbursed –Be diligent about obtaining lowest rates and fares –Provide a detailed explanation of the emergency circumstances for supplies, equipment and business expenditures that would normally be billed directly to Columbia. –Remember, employees may submit a “Direct Deposit Form” to Accounts Payable for faster reimbursements

88 May 2005 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle Page 87 Accounts Payable Cycle Other Initiatives……. –Policy reviews –Customer service –Electronic batch approval –Scheduled payments (e.g. leases)

89 Session 7 - A-110, A-133 and the CU Procurement/ Payment Cycle COURSE EVALUATION Please complete course evaluation form. Session 7


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