Certified Approvers Continuing Education Payments to Individuals December 16, 2004 1:00 3:00pm

1
Certified Approvers Continuing
Education Payments to Individuals December
16, 2004 100 300pm
2
I. Overview of Discussion

• A. Overview
• B. Documents/Theories Covered
• C. Purpose of Training

3
A. Overview

• 1. Presenters and their Perspectives
• Kevin McKoskey, SPA
• Jerry Taintor, Purchasing
• Karen Klein, Payroll and Tax
• 2. Format
• First Hour Presentation
• Second Hour Roundtable and Questions

4
B. Documents/Theories Covered

• 1. Panel to cover WHY fields are relevant vs.
  HOW to prepare document
• 2. Contract for Professional Services (CPS)
• 2. Payment Voucher (PVC)
• 3. Panel not covering Employee Payments (EP)
  which were covered under the Travel session on
  10/12/04

5
C. Purpose of Training

• 1. Responsibilities
• Key areas to review before approving documents
• Who to call with questions
• 2. Issues/Concern Areas
• Consultant vs Subcontract
• Employee vs Consultant
• Description of Services
• Basis for Price Assurance of Reasonable Price

6
SPAs Perspective Kevin McKoskeySr. Grant
Manager

• Sponsored Projects Administration
• Phone [phone]
• Fax [phone]
• Email kevin_at_umn.edu

7
Whats the Difference

• Between a Subcontract
• and a Contract for
• Professional
• Services?

8
Definitions

• Consultants Professional Services
• - contractual agreement for
• - short-term
• - expert advice or
• - specialized services
• - with no responsibility for a portion of
• work scope on a sponsored project
• - is not an employee

9
Definitions

• Sub-award (Subcontract)
• - contractual agreement that is includes
• terms and conditions of the prime award that
  makes the
• - Sub-awardee responsible for a portion of work
  scope
• - time intensive (usually coincides with some
  or all of the budget periods)

10
Proposal Budget

• Consultant Professional services
• - included in the sponsored project budget
• - examples
• advisory/oversight board members
• software programmers
• editors
• other technical experts
• - costs include
• fees
• expenses such as travel
• justification of need for consultant is
• necessary

11
Proposal Budget

• Sub-award/subcontract
• - included in sponsored project budget
• - provided by sub-recipient with
• - PI statement of intent
• - sub-recipients institutional approval
• - sub-award/subcontract budget consists of
• direct costs
• FA (indirect) costs (approved rates)
• prime award budget applies FA on first
• 25,000 of project period
• justify use of the sub-awardee or
• subcontractor in the "research plan"

12
Negotiation and Execution

• Consulting/Professional Services
• use electronic Contract for Professional
• Services form two parts
• internal Info/approval process via FN
• contract signed by vendor, authorized
• signer Purchasing (if applicable)
• Sub-award/subcontract
• PI provides workscope/budget/info
• SPA negotiates and executes
• specific agreement that includes terms
• conditions of the prime award

13
Payment Approvals

• Contract for Professional Services
• approval by PI or anyone who can
• evaluate performance under the contract
• certified approvers approve payments
• gt 1000

14
Purchasings Perspective Jerry TaintorBuyer

• Purchasing Services
• Phone [phone]
• Fax [phone]
• Email taint001_at_umn.edu

15
Financial Forms Nirvana (FFN) Contracts for
Professional Services (CPS)Note paper contracts
follow old process/ approvals new bid threshold
applies to all contracts)

• http//purchasing.umn.edu/forms/cfps.php
• CPS Form, CPS (FFN) Policy, CPS Terms and
  Conditions, CPS Attachment Travel Reimbursement
  for Contractors, Administering Contracts,
  Amending Contracts, MN New Hire Form,
  Professional Service Worksheet, CPS Data
  Collection Sheet, Imaging and Exception to
  Purchasing Policy for Professional Services.

16
POLICY January 1, 2004

• Contracts under 10,000
• Contracts between 10,000 and 49,999
• Bid Threshold - 50,000 and greater
• Competitive Process through Purchasing Services
  RFP Template
• http//purchasing.umn.edu/docs/RFPModelCFPS.doc

17
Regents Reporting Requirements

• Contracts at 250,000 and greater (or contracts
  amended to 250,000 or greater)
• http//purchasing.umn.edu/need/docket.php

18
Bidding/Exceptions Requirements

• Note All exceptions are reviewed and
  approved/denied in Purchasing Services
• http//purchasing.umn.edu/docs/DeptCFSExcep.doc

19
FFN CPS

• Payments Expense Payments Grid
• Reminder - FFN encumbers all funds
• http//purchasing.umn.edu/docs/ExpensePayGrid.pdf

20
QUALITY OF INFORMATION PROVIDED IN THE CPS

• Description of Services
• Vendor Qualifications
• Basis for Price
• Assurance of Reasonable Price

21
Description of Services

• Include a complete description of the expected
  service, duties, milestones, contractor and
  University responsibilities, reporting
  requirements, work products, and any other
  deliverables.
•  The more detail the better!

22
Vendor Qualifications

• Vendor qualifications and background, or basis
  for vendor selection
• Provide information about degrees,
  certifications, professional development
  activity, past work experience with other public
  institutions, state or governmental entities.

23
Basis for Price

• Basis for price (250 characters max) Describe
  the vendors basis for the total price breakdown
  of tasks with hourly rates, percentage of first
  years salary (for search firms), published price
  schedule, etc.
• E.g., If an hourly rate will be paid, provide a
  list of tasks and estimated hours per task. This
  amount should support the contract total.

24
Assurance of Reasonable Price

• Assurance of reasonable price (250 characters
  max) If you did not use a competitive process
  that would have allowed a price comparison among
  various vendors, you must describe how you know
  the price to be reasonable.
•  Providing a comparison between two or three
  different contractors who perform similar work is
  the next best reply. E.g., Vendor A charges
  50/hr., Vendor B charges 75/hr., this vendor
  charges 55/hr.
• Or, Our vendor charges 55/hr. which is well
  below the industry average rate of 65 - 85 per
  hour.

25
Payroll/ Taxs Perspective Karen Klein Payroll
Tax Consultant

• HRMS/Payroll
• Phone [phone]
• Fax [phone]
• Email k-klei_at_umn.edu

26
Employee vs. Contractor

• Worksheet Questions Guidelines
• Prior Employees
• Work automatically considered employee
  compensation by IRS
• Individual vs. Sole Proprietor

27
Tax Issues

• Foreign Nationals
• Minnesota Nonresidents
• IRS Reporting

28
E vs C - Worksheet Questions

• Guide for Worksheet for Consulting and
  Professional Services
• http//www1.umn.edu/ohr/payroll/CFPSworksheetguide
  .pdf
• Providing Training
• Personal Investment in facilities doesnt
  always mean a building or office space
  equipment
• Telecommuting
• Profit or Loss

29
E vs C - Prior Employees

• When can my terminated employee come back to
  work as a contractor? I was told
• Type of Work same job, finish project
• Contract
• IRS Primary and Secondary Factors

30
E vs C Always Employees Per IRS

• As a result of IRS Audit, University required to
  treat certain duties as always performed by
  employees.
• Seven jobs listed, including Project Interviewer
  and Program Coordinator
• Per IRS Equivalent duties not just job title

31
E vs C - Individual or Sole Proprietor

• Differences
• Free Lance
• Has employees
• DBA
• SSN/EIN

32
Tax Issues Foreign Nationals

• IRS Reg. 1.441-1 Actual Knowledge
• Sourcing Income
• Visa Status
• http//www1.umn.edu/ohr/payroll/NRAcontractor03.pd
  f
• B1/WB Rules and Certification
• http//www.isss.umn.edu/forms/pdf/bwb/reimbursemen
  t.pdf
• ITIN Must ASK for TIN
• Expense Payments Accountable Plan Rules
• What do you forward to Payroll?
• B1/WB Honoraria Expense Form
• Copies of Expense Reimbursement substantiation
• ITIN and Tax Treaty related Documents

33
Tax Issues MN Nonresidents

• http//www.fpd.finop.umn.edu/groups/ppd/documents/
  appendix/MNTax371.cfm
• Entertainer Tax 2
• Minnesota Withholding Tax
• Nonresident rules
• 6.25 of payments equal to or more than 7,700
• For Questions, contact Disbursement Services

34
Tax Issues IRS Reporting

• Form 1099-Misc.
• Annual payments of 600 or more
• Any appropriate taxes withheld
• 2 Entertainer Tax
• MN Nonresident Tax 6.25
• Federal Back-up Withholding 28
• Form 1042-S
• Issued to Foreign Nationals to report US source
  income and any taxes withheld
• 30 withholding on payments and unsubstantiated
  expense reimbursements

35
Thank You

• Questions???
• Panel Members
• Karen Klein, Payroll/Tax, 612-625-7549,
  k-klei_at_umn.edu
• Kevin McKoskey, SPA, 612-624-5066, kevin_at_umn.edu
  
• Jerry Taintor, Purchasing, 612-624-5762,
  s-sher_at_umn.edu

36
V. Roundtable

• Please feel free to ask questions to any of the
  panel members. When you ask the question, please
  use the microphone so that outstate participants
  can hear the discussion.