Limited Purchase Check

Limited Purchase Check

Users Guide

October 2009

Table of Contents

Overview

The Limited Purchase Check may be used by the department for payments to human subjects up to the limit printed on the face of the check. These checks are prepared by the research department and are delivered (or mailed) to the subject without preparing a requisition or obtaining approval of the Purchasing Department. Persistent improper use of the Limited Purchase Check will result in withdrawal of the privilege to use this payment method, and may result in disciplinary action for fraudulent use.

Acquiring the Check Stock

Limited Purchase Checks are available from Accounts Payable (145 Park). Departments must prepare an original “Request for Limited Purchase Checks” form which is available from Accounts Payable. It is important that the Agreement portion of the document is complete, signed, and provided with each request. The check register for the last batch must accompany each subsequent request for checks. Because we restrict access to the blank check stock, checks may be picked up from Accounts Payable before 11:00AM or after 2:00PM. The person the department sends to pick up the blank checks must have a picture ID available when they show up in Accounts Payable. The following is a brief review of some of the terms on the Agreement:

  • The “Default Chartfield” is the PeopleSoft Chartfield string that we will charge for checks that clear the bank without any corresponding backup, checks that we receive without a chartfield allocation, or checks that are coded with an activity or project that is frozen or that is otherwise inaccessible.
  • The “Check Custodian” is the person in the department who has control over the check stock and “Chk Cust Phone Number” is their telephone number.
  • The “Authorized Signatory” is the person who is the PI, ORG Head, Account Executive or Authorized Alternate on the default chartfield and whose name appears on the signature card in Accounts Payable.
  • Provide the EMail addresses and phone numbers for the custodian and authorized signatory in the spaces provided.
  • The Check Custodian can order and pick up blank LPCs by delivering an original Agreement to Accounts Payable.
    • Each subsequentrequest for Limited Purchase Checks must include:
      • An Agreement with the original signatures of the Check Custodian and Authorized Signatory
      • A check register for previously issued check forms
      • The number of blank checks requested, which should not exceed more than needed in six months
  • All blank stock must be picked up from Accounts Payable.
    • We will not send blank check forms through the mail.
    • The person who picks up the check stock must have a photo ID and sign for the delivery.

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Security and Accountability for the Limited Purchase Checks

Limited Purchase Checks are highly negotiable and should receive the same precautionary measures as cash (see Policy 3-011). Check custodians must retain all unused checks in a secure place, out of sight in the ordinary course of business, and the checks must not be signed until issued. If a check is lost or stolen, the department must notify Accounts Payable immediately. Upon discovering that a blank check or a prepared and signed check is lost or stolen, the custodian should immediately prepare a Stop Payment Request and FAX it to Accounts Payable. The check should be marked as spoil on the Positive Pay system (including a complete description in the check’s “Memo” field).

  • In case of theft, the department should then notify University Police and attach a copy of the police report to the check register.
  • The custodian should forward all documentation for a prepared check to Accounts Payable. A copy of the original documentation is acceptable if the custodian is going to issue a replacement check. The copies must be marked as ‘COPY – see LPC (original check number)’.
  • If the check has been recorded as an issue on the Positive Pay system, the custodian should record the Void on the system and send all of the backup documentation (including a copy of the original documents if the custodian is going to issue a replacement check) to Accounts Payable.

The department should notify Accounts Payable promptly when the custodian for the Limited Purchase Checks is leaving or changing responsibilities. The withdrawing custodian must return the remaining check stock and check register for the issued checks to Accounts Payable. This requires that the new custodian and the authorized signatory attend an orientation, and sign a replacement Agreement form if the department wishes to remain in the Limited Purchase Check program. The check custodian may give a single check for immediate use to another employee within the authorized signatory’s department. At this time, the custodian must make an entry to the check register to record the check number, date, payee, who received the check, and the purpose of the payment. The recipient should promptly return the check copies and original documentation to the custodian. The custodian may not, however, redistribute a supply of checks nor a single check to another employee if the intent is to stockpile the check stock in another location. This removes the check(s) from the custodian’s control and could put their department at risk of losing its privileges under this program. The program requires each employee who needs a working supply of Limited Purchase Checks to complete an Agreement, personally accepting responsibility for the blank check stock that they receive. Every custodian must thoroughly review the User’s Guide with a representative from Accounts Payable. Accountability begins when the custodian receives the checks and ends when they return the remaining check stock and completed check register to Accounts Payable.

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Preparation of Limited Purchase Checks

The check can be used for the following purposes:

  • Payments to Human Subjects up to the limit on the face of the check.
    • Blood donors and study participants. (First payment must include a complete IRS Form W-9.)
    • Refunds and reimbursements to Human Subjects for allowable expenses.

Each check must include the following information:

  • Date
  • Pay (Amount spelled out. For example: Fifty dollars and 36/100—)
  • Amount (Like: 1,000.00)
  • PAY TO THE ORDER OF: Payee Name
  • The original [not stamped or otherwise mechanically reproduced] signature of the account executive, PI, department head, or other authorized representative of the department [for which we have a signature card on file]. If the situation requires the approval of the next higher authority, the backup documentation must be approved, in writing, by the supervising authority.

The check stub must include:

  • The appropriate chartfield(s) to be charged and the amount of the check allocated accordingly. If this information is missing, or if the activity or project balance is not sufficient to cover the allocated amount the default chartfield will be charged for the entire amount of the check.
  • Include the SSN/TIN of the Human Subject for all reportable transactions. Fill out the taxpayer information if the taxpayer identification number does not belong to the Payee.

The copies of the check form should be distributed as follows:

  • The original check and check stub to the vendor. Do not send the top stub because it contains sensitive data related to our accounting system. This structure and information is proprietary to the University information systems and is not generally known. If you need to send confirmation material to the vendor it should be on another form.
  • The Accounts Payable copy should be attached to the original documentation should be forwarded to Accounts Payable, 145 Park, on the same day that the check is issued.
  • The Department copy should be retained by the department.

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Positive Pay Instructions

  • What is Positive Pay?
    • Positive Pay helps to deter fraud by matching items that are in the banking system against checks that we report to bank through the positive pay system.
    • Accounts Payable will resolve differences between items that the bank is trying to clear and similar items that the University has reported in the positive pay system.
    • Checks that are in the bank clearing system, yet have no corresponding University checks are suspicious exceptions.
      • If the check can be validated through the issuing department, the University will instruct the bank to pay the item.
      • Rejected items are returned through the banking system to the original bank where the check was first deposited.
    • If a payee shows up at a Wells Fargo teller window with an LPC that has not been recorded by the buying department, the teller will notify Accounts Payable and we must decide to accept or deny the payment.
    • If the payee is a depositor at Wells, the check will clear as usual if the department has recorded the issue in the positive pay system.
  • The Positive Pay System
    • Reports checks to the bank as theyare issued by the buying departments.
      • All checksmust be entered into the positive pay WEB site on the day that they are issued.
        • An issue is a check that is prepared by the Custodian and is released to the Payee.
        • A check that has been prepared, yet remains in the custody of the Custodian is not an issue.
      • The positive pay WEB sitecan be found on the employee page of the Campus Information System portal under“Administrative Financials.”
        • Under “PROCESSING” select “LPC Positive Pay”
        • Click HERE for a tutorial on how to use this system.

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Recording a Check in the Positive Pay System

When a check is issued an entry must be made to the Positive Pay System. Checks are entered by selecting Enter next to the check number on the “Maintain Checks” page.

  • The “Check Date” defaults to the current date, but can be changed to any date within the last six months or up to one year into the future.
  • The “Payee” name must agree with the name of the Human Subject.
  • The “Amount” of the check cannot exceed the maximum face value of the check.
  • Enter the purpose of the expenditure in the memo field.
  • Click either:
    • next check” to enter another check, or
    • done” to save your work and return to “Maintain Checks”

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Printing the Check Register

A check register is required when a custodian requests a new supply of blank limited purchase checks or when a custodian is returning their checks. This is a simple process found on the Positive Pay system under display checks.
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Prohibitions on use of Limited Purchase Checks

Limited Purchase Checks cannot be used for the following purposes:

  • Preparation, signing, and presenting a Limited Purchase Check for an amount greater than the limit on the face of the check is an improper use of the check and will result in the immediate loss of this privilege.
  • Obligations amounting to more than the limit printed on the face of the check cannot be divided among two or more Limited Purchase Checks. Use a Payment Request instead.
  • Payments to or in behalf of non-resident aliens (IRS 1042 related disbursements).
    • The University of Utah must report all payments made to and in behalf of non-resident aliens to the Internal Revenue Service (IRS). Payments to or in behalf of non-resident aliens will be subject to tax withholding unless exempted pursuant to a tax treaty between their country of residence and the United States or exempted under Internal Revenue provision. The Limited Purchase Check should not be used for payments to or in behalf of non-resident aliens. If you have a question about your alternatives, or about the criteria for determining residency status call the Tax Services (581-5414).

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Procurement Violations

A violation occurs when:

  • Checks are written for an amount greater than the limit on the face of the check. This single violation will result in the immediate loss of this privilege.
  • Checks are not stored in a secure place.
  • Departments do not notify Accounts Payable about lost or stolen checks.
  • A Limited Purchase Check is used for any purpose other than paying Human Subjects.
  • Checks clear the bank but Accounts Payable does not have the check copy and documentation, or the LPC clears the bank for an amount that is different than the Accounts Payable copy.
  • Failure to submit appropriate supporting documents.
  • Any misuse of the Limited Purchase Check violating the University’s policies and procedures.
  • The check is not signed, dated, or does not include an amount.
  • The department mechanically reproduces or forges the signature on the check.
  • The person who signed the check is NOT an authorized signatory for the activity(s) or project(s) being charged. Specimen signatures of persons authorized to sign financial documents according to Policy 3-003 IV are on file in the Accounts Payable offices.
  • The person, who prepares the check, does not allocate the check amount, forcing Accounts Payable to charge the default chartfield.
  • The check custodian distributes blank checks to other employees with the intent to stockpile checks in another location.

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Processing Fees

Accounts Payable will charge a $12.00 processing fee for procurement violations. The fee will be assessed when the Limited Purchase Check fails expenditure review and Accounts Payable has to perform additional tasks to get the documentation into a recordable state. This includes:

  • A check is presented at the bank before it appears on the University’s Positive Pay report to the bank.
  • A check is rejected by the bank because the face amount is different than the amount that appears on the positive pay file.
  • Acquiring appropriate approvals or signatures, original receipts and other required supporting documentation.
  • Correcting unreadable or missing chartfield information. Preparers are encouraged to double check the chart field string for accuracy before sending the Accounts Payable copy.
  • Finishing incomplete checks.
  • Repairing recorded checks that are different from the item that actually cleared the bank.
  • Recording checks against custodial default chartfields when the check clears the bank before Accounts Payable receives a copy.
  • Notifying the department that the check was used for a prohibited purpose.

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Forfeiture of Privileges

Persistent improper use of the Limited Purchase Check will result in the withdrawal of the privilege to use this means of paying Human Subjects. Three violations within any ninety day period means persistent improper use.

Persistent disregard for the Positive Pay requirements of this program will result in the loss of Limited Purchase Check Privileges.

It is very important to recognize that the University’s management has determined the maximum limit on the face of the check. This limit is printed clearly on the “Amount” box. It is the responsibility of the check custodian, and the preparer and signatory on the check to make sure that the amount of the check does not exceed this limit. Preparing, signing, and presenting a Limited Purchase Check with an amount greater than this limit will give cause to immediately forfeit privileges in this program. Fraudulent use of the Limited Purchase Check will result in the loss of this privilege, and may also result in disciplinary action up to and including termination of employment and full restitution to the University for all related sustained losses.
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Spoiling a Check

A check can be “spoiled” when:

  • The check is mutilated
  • Typographically incorrect
  • Has never appeared as an “issue” on the Positive Pay system, and
  • Is in the custodian’s possession.

The check must be marked as spoiled in the Positive Pay system and the reason for the spoil should appear in the check’s memo field. NOTE: All check parts (original, Accounts Payable, and department copies) must be marked as “SPOILED” across the signature block. The original and Accounts Payable copies of the spoiled check should immediately be sent to Accounts Payable (145 Park). The custodian should keep the department copy of the check for their records.
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Void Check Procedure

A check can be Voided when:

  • The check has been recorded in the financial system (PeopleSoft or Positive Pay)
  • The custodian has the original check in their possession
  • The condition of the paper does not matter. The only way to correct a check thathas been reported to the bank as an issue is to record a void on our records. This:
    • Records the void on the Positive Pay system
    • Records the void in the Financial system
    • Lets the bank know to remove the issue from their records. A check cannot clear against a check that does not exist.

NOTE: All voided Limited Purchase Check parts (original, Accounts Payable, and Department copies) must be marked as “VOID” across the signature block. The original and Accounts Payable copies of the voided check should immediately be sent to Accounts Payable (145 Park). Keep the department copy of the check for your records.
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Stop Payment Procedure

From time to time you will have the occasion to request a “Stop Payment Request” from Accounts Payable. This would happen if a blank check is missing, a payee notifies the custodian or department that a check has been lost, stolen, or otherwise cannot be recovered OR if a fully prepared and signed check is lost or stolen before it is released to a payee. A stop payment request is not required if the check or its remains are in the custodian’s possession. The stop payment request should be documented in the memo field for the check in the Positive Pay system. Prepare a Stop Payment Request. A signatory on the activity or project must sign this request and the form should be immediately faxed to Check Distribution in Accounts Payable at (801) 585-6443. The department should not issue a replacement check until notified by Accounts Payable. Without this acknowledgment, the department runs the risk of both checks clearing the bank. A comment that this is a replacement check should appear in the memo field of the check that is being replaced and the replacement check in the Positive Pay system. A copy of the original supporting documentation should accompany the new check to Accounts Payable.
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Other Policies and Procedures

  • The check number should appear on all documentation related to the payment.
  • Fraudulent use of the Limited Purchase Check will result in the loss of this privilege, and may also result in disciplinary action up to and including termination of employment and full restitution to the University for all related sustained losses. Fraudulent use includes:
    • Forging an authorized signature or signing a Limited Purchase Check without authority.
    • Using the Limited Purchase Check for personal purchases.

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How to Get Started on the Program

In order to pick up your first supply of checks, a department executive who has authority to sign on the default account and a designated check custodian must attend an orientation class. Call Clint at 581-7340 to register for an orientation session. After the orientation, you can pick up a fresh supply of checks from Accounts Payable when we receive a completed Agreement.
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