TIPS FOR HANDLING DEPARTMENT PURCHASES AND PAYMENT REQUESTS PRESENTED BY BONNIE SAMSEL COORDINATOR, PAYABLE ACCOUNTING AGENDA Introduction General Guidelines Payments to Non-Resident Aliens (NRAs) Payments to Independent Contractors Form W-9 for 1099 Reporting Tips For Purchase Order (PO) Processing Tips For Non-Purchase Order (NPO) Processing Payable Accounting Staff Directory NEW – FAQs On Web Page! INTRODUCTION Payable Accounting is responsible for processing a variety of payment requests, such as: purchases of equipment/supplies, professional fees, independent contractor services, non-employee/student expense reimbursements, prizes and awards, membership dues, subscriptions, refunds, utilities, etc. Our primary goal: Process all payment requests timely, accurately, and in accordance with University policies and procedures and state and federal (IRS) regulations. The University has several purchasing/payment options, depending on the type and dollar amount of the purchase. These options include Purchase Orders, Non-Purchase Order invoice vouchers, the CMU Business Card and, in some cases, employee reimbursement. Payment requests processed from receipt of a valid PO invoice, NPO invoice voucher and/or vendor invoice. Typically, purchases (non-service related) of less than $500 are to be made using your CMU Business Card. The purpose of this training is to provide information that will assist you in handling all your departmental purchasing & payment needs. GENERAL GUIDELINES Follow University Policy & Procedures for making purchases by using a PO, NPO, CMU Business Card, or employee reimbursement where appropriate. Check out the following resources: Contracting & Purchasing Services’ web site at www.purchasing.cmich.edu, or call 3118. Payables web site at www.purchasing.cmich.edu, select Payables, or call 3523. Controller’s web site at www.controller.cmich.edu, select Credit Cards, then go to CMU Business Credit Card and Related Information, or call 3525. Refer to the University Expenditure Policy for the appropriate purchasing methods. (Available on Payables web site at www.purchasing.cmich.edu, then select Payables tab). Provide the appropriate paperwork, with required signature(s)-of-approval, in a timely manner. Allow 10 business days, from the date the paperwork is received in Payable Accounting, for processing (this is IF paperwork is complete). Plan your payment requests around our 10-day turn-around time AND the Payables Tuesday & Thursday check run schedule. A calendar of check run dates is available on the Payables web page. PAYMENTS TO NON-RESIDENT ALIENS (NRAs) When planning to make a payment or reimbursement to a Non-U.S. citizen (a.k.a. non-resident alien (NRA)), contact Human Resources (HR) at 3753, first to determine if the NRA is eligible to receive a payment from CMU. Only certain (NRA) visa statuses are eligible to receive payment for services or honoraria. Even if the NRA is eligible to receive payment from CMU, we may be required to withhold Federal (30%) and state (4.35%) taxes from the payment. Only certain (NRA) visa statuses may be reimbursed travel expenses. (Exception-Canadian citizens may be reimbursed travel expenses without a visa). The travel expenses must be business related, and original receipts must be provided (as required by CMU’s Accountable Plan), or the reimbursement would be taxable. Additional documentation and review is required to determine if CMU can “legally” pay a NRA, so you must get prior approval from HR before making arrangements/signing a contract with the NRA. Department information pertaining to payments to NRAs is available on Payroll’s web page at the following link: http://www.controller.cmich.edu/payroll/nonresalien.htm. Guidelines for paying a NRA individual also apply to paying a foreign company, foreign group, foreign organization, etc. PAYMENTS TO INDEPENDENT CONTRACTORS Know University policy/procedures for determining independent contractor (IC) status before making a payment for services being provided to your department . Determination is made by Human Resources! Individuals performing services for the University, for which they will be compensated, are presumed to be employees unless he/she meets the criteria of independent contractor status. Submit the on-line IC Questionnaire to Human Resources (HR) for approval before services are provided. Anyone currently employed by CMU (i.e., faculty, staff, student, graduate assistant or temporary) who performs additional services (outside regular job description) for compensation will be classified as an employee and should be paid Supplemental Assignment Pay. Work with the appropriate employment office (HR or Faculty Personnel Services) to review/approve the request and process payments. See “Paying Individuals to Perform a Service” on Payroll’s webpage at: www.controller.cmich.edu. See Independent Contractor Policy at: http://www.cmich.edu/gencounsel/manual/p04012.pdf. The IC Policy covers individuals and businesses (i.e., sole proprietorship, partnership, corporation). For independent contractor questions, contact HR/Staff- Employment Services section, at 3753. The IC Questionnaire and Long & Short Form Contracts are located on Human Resources’ web page at: www.hrs.cmich.edu, under Forms - OR on Contracting & Purchasing Services’ web page at: www.purchasing.cmich.edu, under Independent Contractor. SUBSTITUTE FORM W-9 / IRS FORM W-9 (Request for Taxpayer ID Number and Certification) Assist the University in complying with Internal Revenue Service (IRS) regulations for 1099 reporting. Obtain a completed Substitute Form W-9 from all NEW vendors who will be providing any type of service to the department, or who will be receiving any other 1099-reportable type payment, such as rent, lodging, transportation, royalty/copyright fee, conference fee, membership fee, etc. The W-9 Form is used to determine the vendors tax status, to obtain the taxpayer identification number, and to certify that the vendor is a U.S. person or U.S. resident alien. A W-9 Form should NOT be requested from a foreign person, foreign business, foreign organization, etc., they would be required to complete the appropriate W-8 Form. Forward the completed W-9 Form to Payable Accounting with your payment request. The Substitute Form W-9, Attachment, and Instructions are available on the Payables web page at: www.purchasing.cmich.edu, under Forms. The vendor/payee may provide you with the IRS Form W-9, however, it MUST be the current version, which has a revision date of October 2007. A link to the IRS Form W-9 is also available on our web page under Forms. TIPS FOR PURCHASE ORDERS (POs) You may submit an on-line purchase requisition for a PO, for purchases of services and other items, if total purchase will be $500 or more. Use a PO, regardless of the dollar amount, for computers, software (requiring signed agreement) and maintenance agreements. EXCEPTION: If you are paying for the professional services of an individual, which involves a binding contract, this would be an independent contractor issue handled through Human Resources. (Do not pay using CMU Business Card OR personal credit card!) Allow sufficient time when requesting a pre-payment or deposit be made to a vendor. Pre- payment/deposits are not automatically handled as “rush” payments, so plan accordingly. Have all PO purchases delivered directly to Central Receiving for proper handling (i.e, on-line receiving of goods against the PO, damaged goods, etc). TIPS FOR PO’s (CONTINUED) If PO merchandise is delivered directly to the department, then submit the on-line Direct Delivery Form to Central Receiving so Payable Accounting can process the invoice for payment. (See Attachment 1a) The Direct Delivery Form and Direct Delivery Instructions are available on Contracting & Purchasing Services’ web site at: www.purchasing.cmich.edu. (Select Receiving tab). Verify accuracy of data before submitting (e.g., correct line items?, correct quantity received?, etc.). You will get on-line confirmation if submission is successful. If an invoice is received and the goods have not been “received” against the PO (in reasonable length of time), the department will receive e-mail notification from Payable Accounting. The department must respond within seven (7) days or the invoice will be processed for payment. Contracting & Purchasing Services’ should be contacted anytime it is necessary to return or exchange merchandise purchased on a PO or Blanket PO. Work with the Buyer who created the PO or BPO. NOTE: Anytime a return or exchange takes place, a credit memo or refund should be issued by the vendor, AND Payable Accounting should receive a copy of the Merchandise Return Memos. Procedures for Returning/Exchanging Merchandise are now available on Contracting & Purchasing Services’ web site at: www.purchasing.cmich.edu (Select Purchasing tab). For questions call 3917. TIPS FOR PO’s (CONTINUED) Instruct vendors to send ALL invoices, credit memos, or refund checks, which must include PO number, directly to: Central Michigan University, Payable Accounting, Drawer 1000, Mt. Pleasant, MI 48859 If the department receives the invoice, credit memo, or refund check - forward original document to Payable Accounting for processing. Vendors may e-mail invoices to Payable Accounting at: email@example.com. Invoices for “blanket” POs are forwarded to the department for review and approval to pay. The “approval to pay”, along with full signature of authorized department personnel and date, should be noted directly on the invoice and the invoice returned for processing ASAP. Monitor purchases made against your blanket PO. If the PO “amount “Still to be invoiced” is approaching zero (0) send a request to Contracting & Purchasing Services to add funds to it before making additional purchases. (See Attachment 2) ATTACHMENT 2 When this amount approaches zero (0), contact C&PS to add funds to PO to cover future invoices TIPS FOR PO’s (CONTINUED) When making changes to an existing PO, contact the Buyer listed on the PO, via e-mail, so changes can be processed in SAP. This would include changes such as: Increasing or decreasing the quantity OR dollar amount of a line item Canceling a line item Canceling or closing a PO Adding a new line item for additional goods being purchased that were not on the original purchase requisition Adding funds to a blanket purchase order (BPO), etc. A PO creates an encumbrance (committed expense) against your department budget. It is important to monitor your PO – making sure all entries are accurate (e.g., goods received, returns, changes, cancellations, etc.), and that the encumbrance is cleared from your budget when the PO is completed. If a PO invoice should not be paid, contact Tammy Campbell, at 7371, immediately. If there are questions or problems, Tammy or the buyer on the PO will contact you. For general purchase requisition or PO questions, see FAQ’s on Contracting & Purchasing Services’ web page at: http://www.purchasing.cmich.edu/frametemp/purch_main.html TIPS FOR NON-PURCHASE ORDERS (NPO’s) BEFORE sending an invoice voucher or vendor invoice to Payable Accounting for processing, make sure the purchase is allowable as a non-purchase order. The following items do NOT require a PO, however, the CMU Business Card is to be used if less than $500 unless otherwise noted: Professional membership dues Chamber of Commerce membership dues approved by President’s Office Subscriptions and orders for books, magazines, pamphlets, etc. Stipends, non-employee prizes/awards **NPO ONLY* Refunds **NPO ONLY** Registration fees for conferences, workshops, seminars Utilities for which competitive pricing doesn’t exist (e.g., water, sewage, electricity, local telephone service) TIPS FOR NPO’s (CONTINUED) Items Not Requiring a PO – continued: Copyright fees & royalty payments **NPO Cable TV services ONLY** (NOTE: Pmts may be reportable on a Advertising (requires contract & must be Form 1099-MISC - W-9 Form is needed from paid NPO with exception of job postings) the vendor) State, local or federal permits/licenses Contracted services, where both parties have signed a contract. (contracted services Reimbursements of non-employee/student w/individual must go through HR) **NPO business and travel related expenses with proper ONLY** substantiation and appropriate departmental approval **NPO ONLY** Dining Services for food purchases (or contracted Dining Services vendors) Metered “postage” for the University Stores Central Mailroom CMU Printing Services & Bookstore for supplies & materials purchased for “resale” Building lease agreements (i.e., rental of space for CMU business) – lease/rental agreements do Commercial travel – Charlevoix and Beaver require appropriate contracting authority Island (air & boat) signature **NPO ONLY** TIPS FOR NPO’s (CONTINUED) Complete all required information on the invoice voucher, obtain the necessary signature(s), and attach appropriate backup for the payment request, before sending to Payable Accounting for processing. (See Attachment 3) When sending multiple invoices to be paid for the same vendor, submit a separate voucher for each invoice, as each invoice must be processed separately. OR submit the original invoices for processing and include the following information on each invoice: (See Attachment 4) appropriate “approval-to-pay” signature(s) (full signature – not initials) cost center, GL account, and internal order number (if applicable) to be charged date invoice is being approved for payment Obtain the appropriate contracting authority signature on all invoice vouchers for payments involving a binding contract, and include copy of contract as backup. A Contracting Authority Search is available at www.purchasing.cmich.edu, click on the Purchasing tab and then on Contracting Authority. TIPS FOR NPO’s (CONTINUED) When paying an individual (non-employee) to provide your department with services, a copy of the approved Independent Contractor (IC) Questionnaire (when applicable) and contract must be submitted to Payables with your payment request. As previously noted, the IC Questionnaire and contracts are available on both the Human Resource and Contracting & Purchasing Services’ web sites FYI- when accessing the on-line IC Questionnaire you are instructed to contact HR, at 3753, prior to initiating a contract or having the services provided, if the individual is a non-resident alien (NRA). Individuals performing the following types of service will not need to be reviewed by HR to determine independent contractor status provided the individual meets the following requirements: (1) is not currently a CMU employee, (2) is at least 18 years of age, (3) is eligible to work in the U.S., (4) is eligible to be employed by CMU, and (5) is not an on-campus student. Sporting Officials for Intercollegiate Athletic Events Announcers and Commentators for Athletic Events TIPS FOR NPO’s (CONTINUED) Professional Athletes Persons Paid to Provide Entertainment at an Event (includes disc jockeys) Guest Speakers (who are clearly not teaching a course and are providing services for less than 5 consecutive days) Academic Program Review Consultants (including accreditation team members) Interpreters Caterers Tailors/seamstresses The hiring departments must still work with the service providers listed above to develop a contract. The contract must be reviewed by appropriate person/area before being signed by a person with contracting authority and the independent contractor. Refer to the University’s Contract Review Process at the following link: http://www.cmich.edu/gencounsel/manual/Contract_Review_Process.pdf. For assistance with contracts departments may contact Contracting & Purchasing Services, Human Resources, and University Events. For assistance with determining what documentation is required for Independent Contractor payments, see the Independent Contractor Pmt Reference Chart on our web page at: www.purchasing.cmich.edu, (Select Payables tab). TIPS FOR NPO’s (CONTINUED) Contracting with a business to provide your department with services also constitutes “independent contractor” services, and the department is required to execute a contract with the vendor before the services are performed. Refer to the University’s Independent Contract Policy & Procedure. Reminder: When hiring a vendor (individual or business) to provide services to your department have the vendor complete a Substitute Form W-9 (See Attachment 5a – 5c) In order to comply with the Internal Revenue Service (IRS) 1099 Information Reporting regulations, CMU must determine the type of business entity (i.e., sole-proprietor, corporation, partnership, tax-exempt, etc.) in order to determine if our payments to the vendor would be taxable and reportable on a Form 1099-MISC. The W-9 Form also assists us in setting the vendor account up appropriately for 1099 reporting (i.e., 1099 must be issued in the “legal” name of the business). IF payment will be made to a foreign business, and it is considered a “1099-reportable” type payment by the IRS, CMU is responsible for obtaining a valid Form W-8 from the vendor. If vendor completes the Form W-8 BUT does not have a U.S. taxpayer ID number, CMU is required to withhold federal and state taxes from the payment. CMU is also required to report payments to NRA’s on FORM 1042-S. TIPS FOR NPO’s (CONTINUED) To expedite payment processing, the department should obtain a W-9 Form whenever initiating a transaction with a new vendor that could be a 1099 reportable payment. Following are examples of 1099-reportable payments (IF the vendor is NOT incorporated or tax-exempt): Outside services AND all materials incidental to the service provided Repairs and maintenance (including contracted services) Professional fees (includes payments to individuals and businesses, not employees of CMU, for professional services such as auditing, consulting, engineering, etc.) Membership fees/dues Printing/copying/reproduction services Prizes and awards NOTE: The NPO invoice voucher may not be a valid purchasing method for every 1099 reportable payment covered in this section (i.e., some may require a PO) TIPS FOR NPO’s (CONTINUED) Examples of 1099-Reportable Payments (Continued) - Outside printing and mailing services -Transportation (e.g., taxi, bus, motor coach, boat/ferry, etc.) - Rental fees (equipment, real estate, games, lodging, banquet rooms, booth space, etc.) - Advertising = where ads are “created” by the vendor (e.g., display ads, billboards, etc.) - Copyright and royalty fees - Reimbursement of non-employee/student - Catering business/travel expenses where original receipts are -Registration fees for conferences, workshops & not provided seminars - Legal services – even if incorporated -Honorariums, Speaker fees, Professional - Medical/health care services – even if incorporated Entertainer fees, etc. (includes dental, eye care, etc.) If you are not sure if a payment would be taxable & reportable, please do not hesitate to call Payable Accounting at 7369! TIPS FOR NPO’s (CONTINUED) When returning or exchanging merchandise paid via NPO, 1.) notify Payable Accounting, 2) follow vendor’s return policy, and 3) request a credit memo or refund check from the vendor (see revised Returning/Exchanging Merchandise procedure). Vendors that CMU makes frequent purchases from may issue a credit memo Vendors that CMU does not use on a regular basis and vendors that will not be used again, must issue CMU a refund check for returned merchandise If a credit memo is issued, department must place order(s) to use credit within six-months of issue. If credit cannot be used within six-months, request refund or credit memo will be charged back to department cost center Send a copy of the “Return Merchandise Authorization” (RMA) memos to Payable Accounting immediately upon initiating the return/exchange. Instruct vendor to send credit memo or refund check (which must reference original invoice and RMA number) directly to Payable Accounting. If department receives the credit memo or refund check, forward to Payable Accounting for processing in SAP so there is an audit trail of the transaction. The “Return Merchandise Procedure” and Forms are available on Contracting & Purchasing Services web site at: www.purchasing.cmich.edu, (Select Purchasing tab). PAYABLE ACCOUNTING STAFF DIRECTORY Bonnie Samsel - 7369 Day-to-day Payables operations & compliance Coordinator 1099-MISC Reporting New Hire Reporting for Independent Contractors Elaine Card - 3523 Vendor Table Maintenance Senior Specialist Clerk OneNet (stop payments, check inquiries/photocopies) Escheat checks Change Funds (setup and reconciliation) Tammy Campbell - 7371 Purchase Order (PO) payments (all vendors) Senior Specialist Clerk GR/IR & PO invoice problem resolution Non Purchase Order (NPO) payments (all vendors) Charlet Sanders - 7372 Senior Specialist Clerk Non-employee/Student Expense Reimbursements Warriner Hall Mailroom MSU Laundry Payments Bookstore Returns/Credits processing and reconciliation We are happy to help you….please call us with your questions !! SAMPLE “FAQ’S” NOW AVAILABLE ON OUR WEB PAGE ! http://www.purchasing.cmich.edu/frametemp/payables_main.html Non-Purchase Order and General Payables Processing: I received a check back from a vendor stating it was a duplicate payment, what should I do with the check? How can I tell if a check we issued to a vendor has been cashed yet? Purchase Orders: Whom do I contact if I do not want a Purchase Order invoice to be paid? How do I look at my department’s purchase order in SAP? Payments to Independent Contractors: Does the term “independent contractor” only apply to individuals? What are some examples of service providers who meet the criteria of independent contractor? Payments to Non-Resident Alien Persons (i.e., Foreign Individual/Business/Organization, etc.): Are payments to all international visitors handled the same way? Can a non-resident alien (NRA) avoid U.S. income tax withholding on taxable payments received from CMU? If have questions regarding any of the information covered in today‟s training session, please call Payable Accounting at 3523 for assistance. If you have questions regarding the „return to vendor‟ process, or the Direct Delivery Form, call University Stores at 3917 or Central Receiving at 6535 for assistance. THANK YOU !!