AdvancePaymentstoSuppliers(Prepayments)

Purpose

Generally,goodsandservicesprovidedtotheInstitutearepaidforafterreceipt.Onoccasion,itmaybe necessaryordesirabletoprovideaknownandreputablesupplierwithanadvancepayment(prepayment) topayforgoodsorservicesbeforedelivery.ThisPolicydescribesthegeneralprovisionsregardingadvance paymentsincludingtherequirementforPurchaseOrdernotation,thesubmissionofinvoice,accounting reconciliation,receivinganddocumentation,andrequiredapprovals.

ApplicabilityandAuthority

ThisPolicyappliestoallsuppliersofgoodsorservicestotheInstitute ThisPolicyappliestoallCaltechdepartmentsandsupersedesanypracticesinexistencepriortoits effectivedate ProcurementServicesistheauthorityonadvancepaymentsrelatedtoPurchaseOrders PaymentServicesistheauthorityforadvancepaymentsfornonPOrelatedpurchases

Definitions

Advancepayment/prepayment:Fullorpartialpaymentforgoodsandservicesbeforetheyarereceivedby theInstituteingoodorderorrenderedsatisfactorily.

Procedure

GeneralProvisions Advancepaymentsorprepaymentsshallbeavoidedwheneverpossible.Itisaprudentbusinesspractice nottopayforgoodsorservicesuntiltheyhavebeenreceivedingoodorderorrenderedsatisfactorily.The Institutemaysufferlossofinterestonfundsusedtomakeadvancepayments,especiallyifdeliveryof materialsorperformanceofservicesistotakeplaceatsomefuturedate.

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ExceptionstothisPolicymaybewarrantedfor: Books,periodicalsandnewspapers,includingspecialorderitemsfortradeandprofessional publications Caterersforfoodandbeverageservicesforfunctionsrequiringadeposit Foreignorders Highcostequipmentmanufacturedtomeetfunctionalspecifications Honoraria Maintenanceandserviceagreements Membershipdues Performingartists,whencontractrequirespaymentbeforeperformancebegins Principalinvestigatorsandotherresearchpersonnelwhoconductresearchusinghumansubjects andpaythesubjectsaminimalamount Rentandleasesforrealestateandleasesforequipmentwhenpaymentsarenomorethanone monthinadvance Reservationsforgrouptransportationand/orexpenses Seminarsandregistrationfees Supplierswhooffersubstantialprepaymentdiscounts CoordinationofPoliciesandAdherencetoStandardOperatingProcedures AswithanyotherpaymentissuedbytheInstitute,standardoperatingproceduresapplytoalladvance payments.Forexample,whenstandardoperatingproceduresrequireapurchaseorderberenderedfor thepurchaseofgoodsorservicesoveracertainfinanciallimit,theproceduremustbefollowedwithinthe guidelinessetforthbyProcurement.Allprocedures,coordinationandapprovalsarerequiredtotakeplace inordertocomplywithsetpolicies.StandardoperatingproceduresoftheInstitutecannotbe circumventedmerelybecausethemethodisanadvancepayment. PurchaseOrders ThetotalamountofthePurchaseOrdershallincludethevalueoftheadvancepaymentandafull descriptionoftherefundPolicyofferedbythesupplier.Inthecaseofprepayments,thesupplier,by acceptingthePurchaseOrder,signifiesthisasacceptanceofthecontractandagreestoperformin accordancewiththetermsandconditionsoftheorder. Invoice AppropriateinvoicesmustberenderedtotheInstitutebythesupplier: AdvancedPaymentinFull Supplierstowhichafulladvancedpaymentisissuedmustprovideacompleteandfinalinvoice(or Proformainvoice)forthefullamountoftheadvancepaymentpriortotheissuanceofpayment. Theinvoicemustcontaintheconfirmationoftotalcost,includingtax,freight,handling,etc. SuppliersarediscouragedfromprovidingaProformaasanestimateandlaterbillingtheInstitute infull.PaymentServiceswillconsidersuchsubsequentinvoicesasduplicatesandnotrender additionalpaymenttothesupplier.
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 Deposits,Partial,ProgressandDownPayments Supplierstowhichapartialadvancedpaymentisissued(i.e.downpayments,progresspayments, deposits,etc.)mustprovideacompleteinvoice(orProformainvoice)fortheamountequaltothe fractionalportionoftheorder,includingtheproportionalamountofsalestaxand shipping/freight/handlingpriortotheissuanceofthepartialadvancepayment.Salestaxshould notbeheldbackandbilledatthefinalpayment,butshouldbeincludedoneachprogressorpartial invoicefortheappropriateamountdueatthetimeofbilling. ExpenseDistribution AdvancepaymentsissuedtosupplierswillbechargeddirectlytothePTAorGLstringindicatedinthe requisitionorpaymentrequestform.ThePTAorGLwillbechargeduponsubmissionofarequestfor advancepaymenttoPaymentServices.Expenseswillbebookedatthetimetherequestissubmittedand thusarereportedasexpensesforthatperiod.Thisisanacceptableaccountingpracticeifthegoodsand servicesarereceivedinthefiscalperiodinwhichpaymentismade. Inaccordancewithgenerallyacceptedaccountingprinciples,however,amountspaidforservicesorgoods tobereceivedinafuturefiscalperiodshouldberecordedasprepaidexpenditures.Whereadvance paymentscannotbeavoidedduringtheyearendfiscalclose,yearendadjustmentscanbemadetothe accounts,i.e.forsignificantadvancepayments.However,itispreferabletolimitadvancepaymentsto goodsandserviceswhichwillbereceivedorrecoveriesofexpendituresincurredbeforetheendofthe fiscalyearendclose. Advancedpaymentsgreaterthan$50,000madeatthetimeoffiscalyearend,orwhenpaymentand receiptofgoodsfallsbetweentwoseparatefiscalperiods,mustbereviewedbyFinance,Purchasing ServicesandPaymentServices.Thisreviewistodetermineifanyaccrualorallocationasaprepaid expenditureisnecessary. Advancepaymentswithrespecttolowdollaritems,suchasperiodicalsubscriptionswhichmaycover severalfiscalperiodsaregenerallynotofconcernfromanaccountingperspectivebecausetheamountsare notmaterial. ReceivingandDocumentation PreReceiptofPOforPaymentProcessing InorderfortheProformainvoiceoradvancepaymenttobeprocessed,theadvancemustbe submittedthroughastandardpurchaserequisitiontoProcurementServices,orprovidedinthe formofagoodsreceiptplacedagainstthePOlineiteminquestion.Whiletechnically,nogoods havebeenreceivedasyet,theprereceiptofgoodsagainstthePOisnecessaryforthosedivisions usingthereceiptfunctionalityinOracle.Otherwise,therequisitionsubmittedtotheBuyerwill sufficeasproperauthorization.
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PhysicalReceiptofGoodsandServices Therequesterisresponsibleforverifyingtheactualreceiptofthegoods/servicesassociatedwith theadvancepayment.Requestersshouldcollectallsupportingdocumentationtosubstantiatethe deliveryandacceptanceofgoods/servicesintheeventofanaudit.Upondeliveryofthegoods/ services,therequestermustensurethatthesupplierhassatisfiedtheorderandthatthe goods/servicesmeetwiththespecificationsofthecontract.Verificationincludestheinspectionof goodstoensurethattheyhavebeendeliveredtimelyandinacceptablecondition. Itistheresponsibilityoftherequestertoverifytheactualreceiptofgoods/servicesandthatthe goods/servicesprovidedbythesuppliermeetqualityexpectations.

BuyerReview Buyerswillreviewadvancepaymentrequestsforreasonablenessandensurethattherequestfollowsthis Policyandallstandardoperatingprocedures.Uponreceiptofthedulyapprovedrequisitionandthe Proformainvoicefromthesupplier,theBuyershallsubmitthemtoPaymentServicesforpayment processing. SupplierPerformance Whenaprepaymentinadvanceofperformanceordeliveryisissuedtoasupplier,thentherightofthe InstitutetoobtainsuchserviceorpropertyonbehalfoforintheserviceoftheInstituteshallconstitutea claimagainstthesuppliertosatisfactorilyprovidesaidgoods/services.Failureofthesuppliertoperform willconstituteadefaultonthecontract.Ifasupplierfailstoperformaccordingtothespecificationsorthe timeframeprovidedforinthePurchaseOrderorcontract,theBuyerorrequisitioningdepartmenthead willcontactthesupplier.Ifthereisacontinuedlackofperformancefromthesupplier,theInstitutemay declarethesupplierindefaultandmayexerciseappropriatelegalremedies. ProcessFlow RequestorshallsubmitaPurchaseRequisitiontotheProcurementDepartmentforprocessing TheBuyermayattempttosourcethegoodsorservicesfromaprovidernotrequiringpaymentin advanceandwillingtoextendtermstotheInstitute WhentheBuyerhasnoalternativebuttoissueanadvancedpaymenttoasupplier,theBuyerwill generatethePOasoutlinedinstandardoperatingprocedures TheBuyershallobtainaProformainvoicefromthesupplierwhichspecifiesthetotalamountdue, includingtaxesandfreightcharges TheBuyerwillsubmittheProformainvoicetothePaymentServicesDepartmentforprocessing AprereceiptofgoodsshallbeplacedagainstthePOlineitembeingprepaidifthedivisionis utilizingthegoodsreceiptfunctionalityinOracle.Otherwise,thePurchaseRequisitionsubmitted permitstheBuyertoapproveandsubmittherequesttoPaymentServicesforprocessing.
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 ThedepartmentresponsiblefortheoriginalPurchaseRequisitionwillmonitorthedeliveryofthe goodsorservicestoensurethedeliverytakesplacetimelyandthatthegoods/servicescomplywith theirrequirements Whenpaymentandreceiptofgoodscrossfiscalperiodsandwhenthatpaymentamountexceeds $50,000,PaymentServiceswillcoordinateareviewoftheinvoiceandreceiptofgoodswiththe Financegroup. Disbursementswillgenerateandsubmitpaymenttothesupplier Oncetheinvoiceisapproved,theAccountsPayableRepresentativewillentertheinvoice,expense theaccountingprovidedandschedulepaymenttothesupplier

Exceptions

AnyexceptionsorrequirementthatrequiresadeviationfromthisPolicyshallbereviewedandapprovedby theDirectorofProcurementServices.

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