Accounts Payable

1
Accounts Payable Disbursements Training

• __________________________________________________
  ______
• DAY ONE
• Paying for Common Goods Services,
• Reimbursements
• __________________________________________________
  _______
• Asger Pedersen
• Accounting Services Controls

2
Agenda

• DAY ONE (today)
• Paying for Common Goods Services/Reimbursements
• Invoice Processing in Response to Purchase
  Authorizations
• Sales/Use Tax
• General Disbursements Issues
• Reimbursements and Policy Restricted Payments

3
Agenda

• DAY TWO
• (to be announced)
• Taxable Payments Made through the Vendor System
• Review General Disbursement Issues
• Independent Personal Services Payments
• Tax Implications of Non-Payroll Payments

4
Class Focus

• AWARENESS of relevant policies and procedures
• PROCESSES meeting the needs and requirements of
  stakeholders
• TOOLS providing users with processing
  functionality
• Ask Questions!

5
Invoice Processing in Response to Purchase
Authorizations

• Accounting looks for evidence of both
  Authorization and Approval
• No payment transaction should lack appropriate
  authorization, approval and substantiating
  documentation

6
Invoice Processing in Response to Purchase
Authorizations

• All payment requests must evidence
• Authorization a commitment (P.I., buyers)
• - By an authorized individual
• - In form of a requisition, purchase order,
  contract, agreement or letter of understanding
• Approval an acknowledgement (departments)
• - By an individual with relevant knowledge
• and authorized to approve transactions for
  payment

7
Invoice Processing in Response to Purchase
Authorizations

• Understanding Purchasings Role
• Has authority to make purchase
  commitments
• Provides procurement services
• Assures purchase meets policies
• Negotiates appropriate price/quality mix
• Link to their web site at
• http//www.busserv.ucsb.edu/purchasing/purchasing.
  htm

8
Invoice Processing in Response to Purchase
Authorizations

• Invoicea vendors request for payment in
  response to a Purchase Authorization issued by
• - Campus Department with LVPA delegation
• Low Value (LV 999999-XXXXXX)
• - Purchasing Department buyers
• High Value (SB) or
• Vendor Blanket (VB)
• To learn more about these Purchase
  Authorizations, take the Purchasing 101
  classsign up at
• http//www.busserv.ucsb.edu/purchasing/purchasing.
  htm

9
Invoice Processing in Response to Purchase
Authorizations

• Low Value (LV) usage and limits
• Common Goods Services
• not to exceed 2,500 per transaction (larger
  orders not to be artificially divided to
  circumvent limit)
• Equipment
• not to exceed 1,500 (if over use SB)
• Request for Delivery form Optional form for
  documenting LV requisitions
• http//www.busserv.ucsb.edu/Forms/RequestforDelive
  ry.pdf

10
Invoice Processing in Response to Purchase
Authorizations

• When NOT to use LVPA
• Prohibited values and items
• Over the Low Value dollar limit
• On the Low Value Restricted Items List
• http//www.busserv.ucsb.edu/purchasing/goods_servi
  ces/purchasesunder2500.htmrestricted
• Vendor Blanket required for
• - Scheduled purchases from same vendor

11
Invoice Processing in Response to Purchase
Authorizations

• INVOICE
• Who From a Vendor to UCSB
• What List of Goods or Services
• When Date Provided/Delivered
• Where Place Shipped or Preformed
• Why An Appropriate
  Purpose/Authorization

12
Invoice Processing in Response to Purchase
Authorizations

• A/P Verifies Invoices
• Comparison to purchase order
• Quantity, unit price, extensions, totals
• Freight, FOB, taxes, discounts
• Verification of vendor name, address
• Arithmetical accuracy

13
Invoice Processing in Response to Purchase
Authorizations

• A/P Obtains Approval from Departments
• Confirmation of receipt and acceptance of goods
  and services
• Certification that transaction is acceptable and
  conforms to purchase order

14
Invoice Processing in Response to Purchase
Authorizations

• Discrepancies Between Invoice and PO as Seen from
  Accountings Perspective
• Unit price Use the lower of the invoice or PO
• Quantity Resulting in costing and/or item
  counts of less than 20 may be ignored by
  Accounting
• FOB, shipping, and special handling
  discrepancies will be referred to Purchasing
• - Over 500, need documentation

15
Invoice Processing in Response to Purchase
Authorizations

• Special Method Invoice Processing Mode A/P
  Initiates
• Invoices from Regular Vendors (2500 or less)
• Processed first in Accounting to pay in 14 days
  or according to terms if longer
• Copy of invoice with green label sent to
  department indicating date processed, date to be
  paid, and who to contact if there is a problem

16
Invoice Processing in Response to Purchase
Authorizations

• Special Method Invoice Processing Mode
  Department Responds
• Promptly notifies Accounting of any problems
• http//www.accounting.ucsb.edu/pdf/ap_invoice_corr
  ection.pdf
• Individual authorized for the budget to be
  charged should sign invoice
• File invoice in accordance with prescribed record
  retention schedules
• Department is office of record for these invoices

17
Invoice Processing in Response to Purchase
Authorizations

• Approval Pending Invoice Processing Mode A/P
  Initiates
• Processed first in Accounting then sent to
  department for written approval
• Exceeds 2,500 limit for Special Method
  processing
• Original invoice with yellow label sent to
  department indicating signature required, date
  processed and who to contact

18
Invoice Processing in Response to Purchase
Authorizations

• Approval Pending Invoice Processing Mode
  Department Responds
• Individual authorized for budget signs as
  approver and returns original to Accounting
• Invoice does not pay until returned
• Department retains a copy for own purposes
• Accounting is office of record

19
Invoice Processing in Response to Purchase
Authorizations

• Pre-Approved Invoice Processing Mode
  Department Initiates
• Processed and approved first in department
• Sent payment-ready to Accounting for final
  payment processing
• This category includes vendor invoices, Form-5
  Payment Requests

20
Invoice Processing in Response to Purchase
Authorizations

• Direct Payments (Direct Charges)
• Payments with NO Purchase Authorization
• - Utilities, telephone , reimbursement for
  supplies, shipping, postage, petty cash
  reimbursements, memberships, honoraria
  entertainment
• See Accounting Manual chapter D-371-16
  Disbursements Approvals, or the summary chart at
  
• http//www.accounting.ucsb.edu/pdf/AP_summary_of_a
  uths_for_payment.pdf
• Cell phone service needs a VB authorization

21
Invoice Processing in Response to Purchase
Authorizations Questions
22
Sales Use Tax

• Sales Tax Imposed on retailers for the privilege
  of making retail sales of tangible personal
  property in California.
• Collected by the retailer
• Use Tax California imposes use tax on every
  person who stores, uses, or consumes in the state
  tangible personal property purchased from an
  out-of-state retailer.
• Self-assessed

23
Sales Use Tax Overview

• University as a Seller
• Collects Sales Tax
• University Departments
• Bookstore, food services,
• medical center, student
• health services, library
• services, registrar, etc.

Universitys Supplier
The University
University as a Purchaser Pays Sales Tax or
Self-Assesses Use Tax University
Departments Accounts payable, purchasing,
procurement, medical center, cafeteria, etc.
Universitys Customer
Indicates the flow of tangible personal property
24
Sales Use Tax Rate

• The combined Sales and Use Tax Rate includes the
  following components
• State 6.00
• County .25
• Local (City) 1.00
• _____
• Combined Statewide Sales and Use Tax Rate
  7.25
• District Transaction and Use Tax 0.0 to
  1.50
• (Generally, the applicable district tax is based
  on taxes imposed in the district
• where the property is first used)
• Total Combined Sales and Use Tax Rate 7.25
  to 8.50
• The combined statewide tax rate (7.25) applies
  to all sales or purchases in CA

25
Sales Use Tax

• District Taxes
• In general, the rate of district tax is
  determined based on the district where retailers
  place of business is located or where the
  property is first delivered (shipped by
  retailer).
• As a purchaser, the University is responsible
  for the payment of the district taxes if
  adjustments are needed because of rate
  differences.
• Remove foreign district tax by adjusting
  invoice down to 7.25 sales tax.
• Accrue .5 Santa Barbara district rate as a
  financial journal transaction.

26
Sales Use TaxDefinitionsA Sale or Purchase,
not otherwise exempt, must include the following
elements to be subject to sales or use tax

• Use Tax
• Purchase
• Purchase of Tangible Personal Property
• At Retail
• For consideration
• Purchase from a Retailer
• Take possession out of state, but used in
  California

• Sales Tax
• Sale
• Sale of Tangible Personal Property
• At Retail
• For consideration
• Sale by a Retailer
• Take possession in California

27
Sales Use TaxDefinitions

• A retailer is defined as every seller who makes
  any retail sale. A seller includes every person
  engaged in the business of selling tangible
  personal property.
• A person (and indirectly a retailer) includes
  the following
• - Individuals, various types of business
  organizations
• - Trusts, estates and social organizations
• - California State government agencies
• - US government is an exempt person
• A non-person on whom California imposes no Sales
  or Use Tax includes the following
• - Non-Californian State governments and their
  institutions
• - Foreign governments/provinces and their
  institutions

28
Sales Use TaxUsing a Resale Certificate

• Property purchased by the University for resale
  is exempt from sales and use tax.
• Purchases must be properly documented.
• The University may provide a resale certificate
  to support the exemption.
• The University prefers to provide the resale
  certification on the purchase order.
• Contact Accounting or Purchasing for guidance

29
Sales Use TaxSpecific Purchases

• Labor Charges
• Installation Exempt
• Repair Exempt
• Fabrication Taxable
• Assembly Taxable
• Maintenance Contracts
• Mandatory Taxable
• Optional Exempt, if separately stated

30
Sales Use TaxCanned Software

• 100 taxable if involving transfer of tangible
  personal property
• Purchases of canned software including charges
  for license fees, site licensing and other end
  user fees
• Mandatory maintenance contracts including
  consulting services purchased with canned
  software take on characteristic of original
  purchase
• 50 taxable with tangible personal property
• Optional maintenance contracts for canned
  software

31
Sales Use TaxCanned Software

• Exemptno transfer of tangible personal property
  involved
• Purchases of canned software transferred by
  remote telecommunications to the purchasers
  computer.
• Purchases of canned software transferred by
  vendor via load and leave.
• Purchases of OPTIONAL maintenance contracts,
  unbundled telephone support, updates, etc.
• Mandatory maintenance contracts including
  consulting services purchased with canned
  software take on characteristic of original
  purchase

32
Sales Use TaxCustom Software

• Custom Software
• Software created and tailored specifically for a
  particular customer application.
• Includes modification of canned software at a
  charge of 50 or more of its purchase price.
• Exempt
• Purchase of custom software
• Optional maintenance contract
• Mandatory maintenance contract
• Separately stated modification charge

33
Sales Use TaxPrinted Sales Messages

• The University may avoid sales or use tax on
  purchases of catalogs, letter, circulars,
  brochures and pamphlets provided that such
  printed sales messages meet all of the
  following requirements
• Printed for the primary purpose of advertising.
• Printed to the special order of the University.
• Mailed or delivered by the seller, the sellers
  agent, or a mailing house acting as the agent for
  the University, through the United States Postal
  Service or by common carrier.
• Received by any other person, other than the
  University, at no cost to that person.

34
Sales Use TaxUniversity as a Seller

• California holds sellers responsible for sales
  tax.
• Tax applies to all sales tangible personal
  property
• student organization fund raising (sale of lab
  notebooks, candy-filled coffee mugs)
• Maintain proper records
• Deposit tax collected into proper liability
  account
• Contact Accounting for guidance
• Exemptions for convienience occasional
  sales
• Contact Accounting for guidance

35
Sales Use Tax Audits

• AUDIT FINDINGS
• Total BOE audit assessments 198,538
• Largest departmental recharge
• Failure to self-assess use tax 62,907
• Total recovery audit findings 126,183
• Largest departmental refunds
• Exempt database services 6,355
• Exempt software installation, travel and
  training 6,755

36
Sales Use Tax Recovery AuditsMost Common Tax
Accrual Overpayments

• By dollar amount
• Invoice with tax
• Goods used/shipped outside CA
• Services
• Medicines
• Construction contracts

• By frequency
• Freight
• Medicines
• Invoice with tax
• Services
• Goods used/shipped outside CA

Source Deloitte audit data from four campuses
37
Sales Use Tax Recovery AuditsOther Common Tax
Accrual Overpayments

• Tax paid by vendor in audit
• Accrual tax calculation errors
• Software, Maintenance/service agreements
• Repair, installation training labor
• Qualified periodicals, Mailing lists
• For a discussion of local audit findings link to
  Sales/Use Tax Audit Findings and Issues at
• http//www.accounting.ucsb.edu/pdf/su-audit-findin
  g.pdf
• Source Deloitte audit data from four campuses

38
The University of CaliforniaSales/Use Tax
Decision Chart for Purchases
On computer hardware - exempt. (if optional) On
computer software - generally taxable.
Tangible personal property (TPP)?
NO
Maintenance agreement?
YES
Construction contractor is responsible for tax if
lump sum or time and material.
Construction contract?
YES
Labor is taxable if for new assembly or
fabrication of TPP. Exempt if repair,
installation, or consulting unrelated to the
purchase of TPP.
Labor or consulting?
YES
YES
YES
For resale?
Issue a resale certificate or resale P.O. to your
vendor.
NO
Accrue sales tax and report on sales and use
return in the period of purchase.
YES
Purchased from a California seller for the
Universitys use with delivery and title
transferring in California?
Has a resale certificate been issued to the
seller?
YES
Do not issue a resale certificate or accrue use
tax. Seller is responsible for collection and
payment of state tax.
NO
NO
Purchased from out-of-state vendor?
YES
YES
Has seller charged California tax?
Was the correct California tax rate charged?
Remit tax with payment to the vendor.Retain
invoice as a receipt for tax paid.
YES
NO
Remit tax billed with payment to the
vendor.Accrue difference and report use tax on
return in the period of purchase (calendar
quarter).
NO
Do not remit the tax billed on the invoice and
accrue use tax and report on sales and use tax
return
YES
Has seller charged another states tax?
NO
Items to exclude from the measure of tax 1.
Common carrier freight charges to the
University. 2. Repair and installation labor. 3.
Services not related to the purchase of TPP.
Items to include from the measure of tax 1.
Handling charges. 2. Freight-in to sellers
location.
Note TPP Tangible personal property.
Accrue and pay use tax on SBE return in the
period of purchase.
39
Sales and Use Tax

• Where to go for help?
• Accounting Manual chapter on Sales/Use Tax
• http//www.ucop.edu/ucophome/policies/acctman/t-18
  2-73.pdf
• UC Sales Use Tax Manual
• http//www.ucop.edu/ucophome/policies/sutm/
• Call Asger Pedersen, x3919
• asger.pedersen_at_accounting.ucsb.edu

40
Questions
Sales Use Tax
41
General Disbursement Issues

• A variety of payments do not follow the purchase
  order/vendor invoice model
• Authority is derived from various other policies
  and procedural directives
• No payment transaction should lack appropriate,
  authorization, approvals and documentation
• See Payment Processing at UCSBOverview
• http//www.accounting.ucsb.edu/pdf/ap_overview.pdf

42
General Disbursement Issues

• Using the Form-5 Payment Request Form
• Common transactions
• employee reimbursements, cash advances
• honoraria, entertainment, memberships
• payments for independent personal services
• Forms and Instructions on the web can be filled
  out using Acrobat Reader
• Links to Three Forms-5 Instructions
• http//www.accounting.ucsb.edu/forms/form5.shtml
• http//www.accounting.ucsb.edu/forms/entertainment
  .shtml
• http//www.accounting.ucsb.edu/forms/membership.sh
  tml

43
General Disbursement Issues

• Compliance Issues Addressed by Forms-5
• Policy restrictions and income taxation require
  additional disclosures and substantiation
• Payees relationship to the University
• Payees residency for tax purposes
• Payees business entity type
• Payees taxpayer id and home address
• Location where services were performed
• Payments may be subject to income tax
  withholding
• Payments are subject to income tax reporting

44
General Disbursement Issues

• Use Petty Cash Reimbursement Requests
• Restricted items list same as for Low Value
• Required forms and substantiation
• http//www.accounting.ucsb.edu/pdf/cashreimburseme
  nt.pdf
• Use Campus Centralized Buying Units
• Software Depot
• http//software-depot.ic.ucsb.edu/
• Central Stores
• http//ucsbuxa.ucsb.edu/business-services/stores/s
  torehouse.htm

45
General Disbursement Issues

• Cash Advances Use Appropriate Form-5
• Entertainment/Program Costs, Payments on Catering
  Contracts, Human Subjects, Special Orders,
  Subscriptions
• Advance payments should be avoided whenever
  possible
• Reconciliation with supporting documentation is
  necessary
• Appropriate approvals must be obtained before
  cash is advanced
• Payee is responsible for any loss of funds
• CALL BERNICE YOST, ext 4288

46
General Disbursement Issues

• Disbursement Check Controls - per policy
• Check distribution should be directly to the
  payee
• A signed check may not be mailed or otherwise
  given to any person other than the payee.
• Checks should be released to the department
  initiating the request on an exceptional basis.
• Designated and authorized department employee
  must sign for checks.
• A check may not be given to a university employee
  who approved or caused its issuance.
• - Separation of duties, internal control

47
General Disbursement Issues

• Cancellations/Stop Payments
• Lost or stolen checks immediately call ext 2945
  or Bernice Yost at ext 4288
• Immediately return checks which cannot be
  forwarded to the payee
• Check cancellation returns funds to the budget
  charged and reduces chances of fraud
• Re-issuance of a stop payment check requires a
  sworn statement from the payee
• http//www.accounting.ucsb.edu/pdf/AP_declaration_
  of_lost_check.pdf

48
General Disbursement Issues

• Controllers Guidelines
• Office of the Controller sets standards for
• Internal controls/accountability
• Sound financial management/ethical behavior
• See Guidelines for Financial Management on
  Controllers web site for discussions on
• Accounts Payable, Purchasing
• Entertainment, Honorarium
• http//controller.ucsb.edu/pdf/guidelines.pdf

49
General Disbursement Issues

• Coding the FAU (Full Accounting Unit)
• Location, Account, Fund, Sub
• Object Code, see list on web at
• http//www.accounting.ucsb.edu/pdf/ObjectCodes.pdf
  
• Optional Departmental Codes Cost Center, Cost
  Type, Project ID
• Linked to Purchase Orders and Low values
• Post-payment corrections are done on UFIN 120
• http//www.accounting.ucsb.edu/pdf/ufin120.pdf

50
General Disbursement Issues

• The Apex Reference Number
• APExAccounts Payable Express, UCSBs system for
  processing payments
• The APEX Reference Number
• On various labels affixed to invoices
• In the GL060 Appropriation (Reference) column
• A column in the gl_detail table of the
  DataWarehouse
• 2003 04 BKS 06 0007, for example
• 200304year and month processed in APEX
• BKSprocessors initials or source of
  transactions, in this case the UCEN Bookstore
• 06 0007processed on the 6th day of the month,
  the 7th transaction of this particular BKS batch

51
General Disbursement Issues

• Reporting Disbursements Transaction
• Reported in period in which paid
• Campus departments can query APEX online
• ALLN01 using mainframe COMPLETE facility
• Instructions can be found at
• http//www.accounting.ucsb.edu/pdf/ap_alln01_check
  _queries_and_information.pdf
• ISC or Department Security Administrators
  connect users
• Disbursements reported to campus several ways
• Copies of invoicesgreen and yellow labeled
  invoices
• GL060monthly ledger reports to campus
• Data Warehouseincludes APEX detail not in GL060

52
General Disbursement Issues

• Vendor Relations
• Call A/P staff for help with
• Establishing credit, opening accounts, W-9
  certification, credit-holds
• Past due invoices, statements
• Terms, discounts, rebates
• Credit memos, refunds, off-sets
• Billing errors, adjustments
• http//www.accounting.ucsb.edu/disbursement/contac
  ts.shtml

53
General Disbursement Issues

• Disbursement vehicles/mechanisms
• Checks , direct deposit, (ACH / Sure-pay)
• US dollar wires (domestic and international)
• Foreign currency wires and drafts
• Departmental petty cash funds
• Petty cash vouchers refundable at Cashiers
  Office
• Procurement cards, corporate travel cards
• EDIElectronic Data Interchange
• Not currently implemented at UCSB

54
Questions
General Disbursement Issues
55
Reimbursements Policy Restricted Payments

• Reimbursement for Purchases with Cash, Personal
  Funds
• If purchases total under 150 the Petty Cash
  Reimbursement form may be used
• Preferred alternative for small transaction
  amounts
• Payee or designated employee receives cash at
  Cashiers Office
• Low Value rules and restricted items list apply
• Do not use for entertainment expense

56
Reimbursements Policy Restricted Payments

• Reimbursements and Payments under Other Policy
  Provisions
• TravelSee the Travel Office home page
• http//www.accounting.ucsb.edu/travel/forms.shtml
• Entertainment
• http//www.accounting.ucsb.edu/pdf/entertainment/i
  nstruction.pdf
• Membership in Organizations
• http//www.ucop.edu/ucophome/policies/bfb/g43.pdf
• Employee Non-Cash Awards
• http//www.ucop.edu/ucophome/policies/bfb/g41.pdf
• Gifts to Non-Employees
• http//www.ucop.edu/ucophome/policies/bfb/g42.pdf

57
Reimbursements Policy Restricted Payments

• Entertainment Issues
• Early planning should anticipate required
  authorizations and approvals
• Know your control points procedures,
  restrictions
• Blanket Prior Approval form useful for approving
  multi-payment events
• Be aware of exceptional items and exceptional
  approval requirements
• Study the various forms and their usessome are
  optional

58
Reimbursements Policy Restricted Payments

• Signatures Required on Form U5-8E
• Approving authority for entertainment expense
• Approving authority for exceptional entertainment
  expense, if applicable
• When above signatures are obtained on prior or
  blanket approval forms, a non-entertainment
  approver may sign the Approved by box and
  attach a copy of signed forms
• Certification of the Official Hostmust sign the
  actual payment request, Form U5-8E

59
Reimbursements Policy Restricted Payments

• Entertainment Payment Processing under Business
  and Finance Bulletin (BFB) BUS-79
• Authority to approve delegated to individuals
  with specific titles/functions.
• Covers all activities and expenses associated
  with University sponsored events, such as
  receptions, conferences and program activities.
• Use U5-8E (Payment RequestBusiness Meeting and
  Entertainment) Form to request reimbursement
• Link to the Business Meeting and Entertainment
  Expense web page for forms and instructions
• http//www.accounting.ucsb.edu/forms/entertainment
  .shtml

60
Reimbursements Policy Restricted Payments

• Employee Non-Cash Awards (BFB G-41)
• Conditions and prohibitions
• Must be work-related, non-discriminatory,
  infrequent, nonnegotiable
• Approval authority delegated to department heads
• Process with object code 7751, reference BFB G-41
• State funds allowed for work-related awards, not
  for sympathy gifts
• Prohibited items season tickets, recreational
  memberships, day off with pay (see list in policy
  statement)
• Limits on allowable awards
• Employee recognition minimal value tangible
  personal property of 75if in excess exception
  approval required from control point
• Length of service/Retirement gift cannot exceed
  400
• Sympathy gift cannot exceed 75

61
Reimbursements Policy Restricted Payments

• Gift to Non-Employees (BFB G-42)
• Conditions and Prohibitions
• Not to employees and their relatives, elected
  officials, candidates and campaigns
• Business purpose must be documented
• Process with object code 7751, reference BFB G-42
• Cash gifts not permitted. State and Fed funds not
  permitted
• Limits on allowable gift categories
• Promotional/goodwill (logo) items75
• Appreciation/recognition of service to
  University items250 (tickets, meals,
  nonnegotiable gift certificate, plaque, watch,
  etc.)
• Expression of sympathy gifts75

62
Reimbursements Policy Restricted Payments

• University Memberships in Organizations (BFB
  G-43)
• Authority to approve within certain limits is
  delegated to specific titles/functions.
• Faculty Club membership dues are exempt
  processed under Entertainment
• Link to Form U5-8MEM, Payment Request
  Memberships and related information
• http//www.accounting.ucsb.edu/forms/membership.sh
  tml

63
Reimbursements Policy Restricted Payments

• Miscellaneous Reimbursements Program
  Participants, Human Subjects, Survey Incentives
• Funding source must support the particular use of
  funds and expenses must be documented
• Appropriate reviews must be in place and
  documented, such as any applicable Human Subjects
  Protocol from Office of Research
• Tax implications must be anticipatedprizes are
  tax reportable and may be subject to withholding.

64
Reimbursements Policy Restricted Payments
Questions