Limited Purchase Check

Users Guide

July 2006

Table of Contents

• Overview
• Acquiring Check Stock
• Security and Accountability for the Limited Purchase Checks
• Check Preparation
  • Positive Pay
  • Recording Checks in Positive Pay
• Prohibited Uses
• Procurement Violations
  • Processing Fees
  • Forfeiture of Privileges
• Spoil Checks
• Void Checks
• Stop Payments
• Other Policies
• How to Get Started on the Program

Overview

The Limited Purchase Check may be used by the department for small purchases up to the limit printed on the face of the check. These checks are prepared by the ordering department and are delivered (or mailed) to the vendor without preparing a requisition or obtaining approval of the Purchasing Department. Persistent improper use of the Limited Purchase Check will result in withdrawal of your privilege to use this means of making small dollar purchases, and may result in disciplinary action for fraudulent use.

Small Dollar Procurement Policies

University policy and procedures prescribe rules for small dollar purchases. You are responsible for following these policies when you purchase supplies with the Limited Purchase Check (LPC). The Purchasing Department maintains contracts with many suppliers for the kinds of merchandise you need. In addition to university contracts, the state has contracts that are available for your use. Using these contracts could mean substantial savings. Please view Purchasing’s web site for additional information or call the Purchasing Department to speak with the appropriate buyer for help with identifying these sources.A part of your purchasing responsibility includes compliance with the University’s policy governing Small, Minority, and Woman-owned Businesses (See Policy 3-100 IV.D.4). A complete listing of Utah Minority and Woman-owned companies is available from the Purchasing Department’s Small Business Liaison (581-8477) or from the Utah Department of Community and Economic Development’s web site. Contact the appropriate buyer in Purchasing for commodity-specific information.We hope that the Limited Purchase Check will make your small dollar procurement more convenient. If you have any questions about the program you may call Accounts Payable (581-6976) or Sandra McCormick (581-5748).

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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 subsequent request 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 invoice or receipt instead of the original documents is acceptable if the custodian is going to issue a replacement check.
• 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 invoice or receipt rather than 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 receipt 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:

• Anything that can be charged on a Limited Purchase Order up to the limit on the face of the check. This also means one invoice or receipt per check. Use a requisition for agreements that include installment payments or multiple deliveries that will generate multiple invoices.
• Business Meals (including snacks, food and beverages for staff meetings). You must provide the following information:
  • Attendees (if less than 10) or name of group and number in attendance.
  • A detailed description of the business purpose of the meeting.
  • The dates of the function.
  • If the purpose of the business meal was entertainment or recruitment then the expenditure needs the approval of the department’s Dean or Director.
• Office supplies.
• Non-employee travel expenses.
• Hotel deposits or pre-registration expenses related to travel on behalf of the University if the Accounts Payable copy of the LPC is accompanied by a copy of an approved Travel Request/Reimbursement form. (See Policy 3-030 V.C)
• Reimburse University employees for local mileage while on University business. (See Policy 3-030 V.B.2 for the current rate.)
• Blood donors and study participants. (First payment must include a complete IRS Form W-9.)
• Utilities (electricity, gas, telephone (including cell phones and pagers), and water). This does not include space rental.
• Freight.
• Refunds and reimbursements. Reimbursements require the written approval of the next higher level of supervision. If the goods or services were charged on a personal charge account, the buyer must provide a detailed receipt showing the items purchased and the total amount of the payment. A charge card receipt is not enough documentation for non-meal related expenditures. The person requesting the reimbursement must also sign the receipt. (See Policy 3-003 IV.B)
• New memberships or renewal membership fees in organizations or associations.
  • New organizational or association memberships paid from university-controlled funds may be procured only if necessary to meet program needs or to secure other benefits for the university, and must be approved by the cognizant dean, director or designee or, for University Hospital personnel, by the Hospital Administrator. (See Policy 3-003 IV.B)
  • Subsequent payments for renewing memberships already approved as described above can be approved in writing by the member’s supervisor.

Each check must include the following information:

• Date
• Pay (Amount spelled out: Fifty dollars and 36/100—)
• Amount (1,000.00)
• PAY TO THE ORDER OF: Payee
• 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 invoice or 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.
• Fill in SSN/TIN as instructed on the back of the check for all reportable transactions.
• A description of the items that are being purchased. If the check is used for business meals, refreshments, recruiting, or entertainment then you need to provide the following information:
  • Attendees (if less than 10) or name of group and number in attendance.
  • A detailed description of the business purpose of the meeting.
  • The dates of the function.
• Fill out the taxpayer information if the taxpayer identification number does not belong to the Payee.
• Fill in the Deliver To information if the department is requesting delivery to the department.
  • The department name.
  • Location.
  • Name and phone number of the check custodian.

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 receipt or paid invoice (no more than one per check) and all related documentation should be forwarded to Accounts Payable, 145 Park, on the same day that the check is issued. If the receipt measures less than 8.5 inches by 2.75 inches, kindly tape the receipt to a plain white sheet of paper.
  • If the check is used for a pre-approved travel related expense, then a copy of the appropriate travel form must be submitted with the Accounts Payable copy.
• 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 they are issued by the buying departments.
    • All checks must 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 site can 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 vendor on the invoice or receipt.
• 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:
  • “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.
• Partial payments toward purchases totaling more than the limit printed on the face of the check.
• Items that cost more than the limit printed on the face of the check cannot be divided among two or more Limited Purchase Checks.
• Payments toward open blanket or general purchase orders. Either cancel the order or do not use the check.
• To pay for more than one invoice or receipt. Use a requisition for agreements that include installment payments or multiple deliveries that will generate multiple invoices.
• Payments to foreign vendors (IRS 1042 related disbursements (Payments to or in behalf of non-resident aliens))
  • 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).
• Restricted purchases or special procurement items such as:
  • Advertisements for personnel recruiting. Ads for recruiting (faculty or staff) must we approved by Human Resources. (See Policy 5-102 V.C.1)
  • Alcoholic beverages using state appropriated funds. Any purchase of alcoholic beverages for entertainment or recruiting purposes requires Dean or Director’s written approval. (See Policy 3-031 III.B.3)
  • Campus purchases. (See Policy 3-193)
  • Capital equipment. (See Policy 3-045)
  • Cash advances for travel. (See Policy 3-030 IV.A.2)
  • Cash Awards. There are IRS rules that apply toward giving gifts to employees. Contact Tax Services before you give cash or gifts (including gift certificates) to employees.
  • Cash Prizes. Contact Tax Services.
  • Cash
  • Consultants. A check request is required. (See Policy 3-111 IV.B.1.a)
  • Controlled items (drugs, narcotics, etc.). A DEA license is required for their purchase. (See Policy 3-192 IV.D.2.b)
  • Donations
  • Fines, parking tickets. (See Policy 3-215 IV.G.1)
  • Foreign purchases. Customs or tariff charges may need to be paid. (See Policy 3-192 IV.D.3.b)
  • Gases, compressed or liquid. All compressed or liquid gases must be procured from stores and receiving. These are shipped to stores and the demurrage on the bottles is charged to them. If the compressed or liquid gases come in a completely disposable container it can be on a check request.
  • Guest lecturers. A check request is required. (See Policy 3-111 IV.B.6 and 3-062)
  • Honorariums. A check request is required. These are payments to an individual or organization in recognition for gratuitous services or outstanding achievement for which neither the University nor the recipient has set a fixed price. The payment of an honorarium may not be made to a person employed by the university. (See Policy 3-062 V.A)
  • Independent contractors. A check request is required. (See Policy 3-111 VI.B.1.a)
  • Live animals. Animal Resources is responsible for recording the purchase of all vertebrate animals. (See Policy 3-192 IV.D.5.a)
  • Loans
  • Non-denatured ethyl alcohol. Reports are filed with the state and purchasing must have an accurate record. (See Policy 3-192.)
  • Personal purchases. (See Policy 3-100 IV.C.1 or 3-192 IV.A.1.)
  • Radioactive isotopes. (See Policy 3-192 IV.D.4.)
  • Recurring payments. These are transactions where the payment is spread over equal installments, usually in monthly intervals for a specific time. A couple examples are payments for a lease agreement or a stipend.
  • Repair or alterations of University physical facilities. (See Policy IV.B.2.f)
  • Scholarships/fellowships. (Must be paid by Accounts Payable. See Policy 3-061 II.B)
  • Services provided by University faculty, staff, or students. (See Policy 5-403.)
  • Stipends. (Must be paid by Accounts Payable. See  Policy 3-061 .)
  • Telephones or other telecommunications service. (See Policy 3-190 IV.A.2.d)
  • Travel Reimbursements for University employees or guests. Local mileage is reimbursable with an LPC. A supervisor must approve a mileage log including date, time, destination, beginning and ending odometer readings, and the purpose of travel before the department can reimburse an employee with an LPC. If mileage expenses are incurred in conjunction with other travel expenses (i.e., airfare, lodging, per diem, etc.), they must be reimbursed on the related Travel Request/Reimbursement form. An LPC can be used for hotel deposits or pre-registration expenses related to travel on behalf of the University if the Accounts Payable copy of the LPC is accompanied by a copy of an approved form. (See Policy 3-030.) When traveling within an area that will allow the traveler to return to work or home the same day, prepaid costs and cost reimbursements for items such as registrations, entertainment and automobile mileage should be submitted for payment on a Check Request through the Accounts Payable Department. (Do not use the LPC for this purpose.) All other travel related reimbursements must be processed through the Travel Department on a Travel Request/Reimbursement form.
  • Vehicle rentals. (See Policy 3-030.)

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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 to purchase or pay for a prohibited purpose.
• 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 original receipts or other 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 department does not reveal business meals, refreshments, recruiting, or entertainment expenses as described in the User’s Guide.
• The check custodian distributes blank checks to other employees with the intent to stockpile checks in another location.
• The check is used to reimburse an employee for out-of-pocket expenses without the written approval of the next higher supervisory authority. See Policy 3-003 IV.B.
• The department pays for travel-related, prepaid expenses without attaching copies of appropriate travel forms to the Accounts Payable copy of the check.
• The check is used to reimburse an employee for travel related expenses except as allowed in the “Prohibitions - Travel Reimbursements for University employees or guests” section.
• A department issues a check in violation of the Travel Policy.

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Processing Fees

Beginning on May 1, 2002 for checks written after April 30, 2002, 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.
• Rectifying 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 your privilege to use this means of making small dollar purchases. 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, and is also on the back of the check. It is the responsibility of the check custodian, and the preparor 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 your 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 that has 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 vendor 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 vendor. 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 wait at least twenty-four (24) hours after the bank confirmation of the notification before re-issuing a replacement check. 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 receipts and other documentation related to the purchase.
• The University, as a state agency, is exempt from Utah sales and use taxes. Do not pay these taxes.
• Keep in mind that these are cash transactions and that some vendors are willing to give discounts for cash. Do not forget to bargain for these discounts.
• Processing Returns and Allowances. Departments and other operating units are accountable for promptly depositing cash refunds into university accounts. This money may not be used to supplement petty cash funds.
• Limited Purchase Checks cannot be used toward upgrading capital equipment.
• 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.
  • Returning goods purchased with the Limited Purchase Check for cash without fully reimbursing the university.
  • Accepting refunds for goods or services purchased with the Limited Purchase Check without fully reimbursing the university.
• If a phone order requires a purchase order number, then use “LC” plus the check number as the purchase order number. If a receipt is not available when placing a phone order, then prepare a memo to file that includes:
  • The date.
  • The vendor’s name, and the name of the person taking the order.
  • The quantity, description, and unit cost of the items purchased.
  • The purpose of the procurement.
  • The written approval of an authorized signatory for the activity or project.
  • Include this memo with the Accounts Payable copy of the LPC.

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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 Sandra at 581-5748 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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