WHY PURCHASE ORDERS ARE NECESSARY
A purchase order assists budget management. Following Business Office procedures assists in spending your department’s budget most effectively. Purchase orders also create a budgetary commitment, which helps to prevent an unexpected shortage of funds at the end of the fiscal year. A purchase order also is necessary to track orders.
Following business office procedures generally results in faster delivery times and prompt payment of your orders because a purchase order is the only way business office and your department can track the order. Additional workload is created when an order is placed without following the Business procedures and can result in a delay in payment. A purchase order, or check request are the only authorized methods of purchasing goods or services for the University.
Do not make any commitments of MHU funds yourself by placing an order or signing a contract without following Business Office procedures. You could be held legally liable and responsible for payment of unauthorized purchases. Note that an “after-the-fact” purchase order cannot be issued after placing an order with a vendor. Purchase orders are not required for purchases under $200. Attempts to circumvent the purchasing process may be subject to disciplinary action. Items purchased under contract often have associated installation, training or maintenance costs. Purchasers should exercise care to ensure that sufficient funding is available to offset those costs both at the point of acquisition and on an ongoing basis.
The President and the VP of Finance & Facilities Management will determine whether the documentation is satisfactory for bidding, proposals or negotiation and whether the documents are sufficient to create an adequate contract document. Legal review is often necessary. If the contract is part of an externally sponsored grant or contract, the grant manager should review and confirm for specific grant stipulations. Contracts will be signed by the President and/or the VP Finance & Facilities Management. All contracts will need approved purchase order to track the encumbrance in the accounting system.
REQUISITION APPROVAL TURNAROUND TIME
Business office approves a requisition by confirming that adequate information, specifications, and backup information are included. Business office with email the approved purchase order to the requestor. The business office may contact the requestor if additional information is necessary. Please allow up to 10 business days from the start of submission of the requisition through receiving the approved purchase orders.
PURCHASE REQUISITIONS PROCESS
A Purchase Requisition is the form that is utilized to prepare a Purchase Order.
1. Requestor enters the requisition information into the Purchase Requisition form.
2. Requestor prints the form and submits to an approver.
3. Approver signs the form.
4. Requestor submits approved requisition form and supporting documents to the Business Office (Purchase Request/Purchase Order).
5. Business office reviews, processes the request, and creates a Purchase Order if needed.
6. Business office distributes the PO to the requestor and requisitioning department.
After receiving the approved purchase order, the appropriate buyer may place the order as per the approved amount. Any deviation for from the original purchase order is prohibited with exception to a 10% allowance in total amount. If circumstances arise that a modification to the original purchase order need to be made, a new purchase requisition should be submitted with the updated information for approval.
Purchase Orders provide authorization to outside vendors to deliver the goods or services to the ordering department. Use of the Purchase Order provides the necessary accounting trail, receipt documentation and authorization to pay invoices.
If submitting a purchase order for approval but plan to be reimbursed via an expense report, submit your name in the vendor section with the name of the company purchased from in the description section.
The purchase order should include:
- Appropriate approval signatures
- The appropriate accounting data (department and object code)
- Project name and number, if applicable
- Project coordinator name and phone number
- Address and person the invoices should be directed to
- A message to the contractor stating that invoices must include Purchase Order #/Contract #, and Project #
Departments/Budget managers are not authorized to:
1. Instruct the consultant, contractor, or service technician to start work before the agreement is fully executed and the purchase order issued.
2. Change the scope of the agreement without following the formal purchase document amendment process.
3. Direct the consultant, contractor, or service technician to perform work that is not specifically described in and funded by the agreement.
4. Extend the time period of the agreement without execution of an approved amendment or purchase order revision.
5. Allow the consultant, contractor, or service technician to incur any additional costs over the limit set by the agreement.
6. Sign an agreement unless explicitly authorized by the President.
Purchase Order Changes Requests
If there is a need for cancellation or modification of Purchase Orders must be submitted to firstname.lastname@example.org in writing (email is acceptable) by an authorized department representative stating the reason for the change, as well as, referring to the Purchase Order number and the supplier involved. This policy particularly applies to those circumstances where increase in the dollar amount of the order is required. Written approval for increases in PO amounts must be from the budget manager and must be approved the President for items totaling over $1,000. No changes to the Purchase Order amounts will be made without this documentation. If you need to made a change to a vendor after an approved purchase order is received you will need to cancel that purchase order and submit a new purchase requisition.
Small Purchases (< $1,000)
Purchases under $1,000 require little formal documentation; they are likely to be purchases, with prices that are readily available from many vendors. A copy of prices checked from a catalog, internet or sales rep should be attached to the purchase requisition. Conduct all business transactions in a manner that maximizes opportunities, increases quality (if a factor), and reduces the cost of the purchase.
Medium/Small Purchases ($1,000 to $5,000)
Purchases from $1,000 to $5,000 should have written quotations and simple purchase or performance descriptions. Inquire in the open market to ensure an advantageous price and quality. The purchase requisitions should document the inquiries made and offers received from at least three sources.
Medium/Large Purchases ($10,000 to $150,000) – Up to the “Simplified Acquisition Threshold” (currently $100,000)
Purchases from $10,000 to $150,000 should be treated more formally, though the acquisition procedures can still be somewhat streamlined. Purchases over $10,000 require greater documentation of cost allowability, review, and the vendor selection.
Request competitive quotes, in writing, from at least three different sources. The file shall document each invitation made and offer received. Document Prices: Maintain files on all quotations solicited and offers or bids received and any criteria for selection. In all instances in which the lowest bid is not awarded in the contract, justification for the selection must be contained in the file.
Multiple Vendor Quote Exceptions
There are some circumstances where competition is not needed or is not appropriate. These include ongoing, multi‐year professional services agreements and situations where there is only a single or sole source for the product or service.
- Multi‐year agreements
Certain agreements for professional services that typically span multiple years such as legal, audit, investment management, food services, health service, etc. do not need to be re‐ competed on a recurring basis. These arrangements are, however, still subject to periodic review and competition where and when appropriate.
- Sole source provider
A sole source provider is one who is the only practical option for a good or service to be used by the University.
Examples of legitimate sole source vendors include:
a. Only a particular brand or "make" is compatible with existing equipment or inventory.
b. Only one supplier is capable of providing the required goods or service.
c. An emergency condition exists which makes soliciting three bids impractical.
d. Warranty provisions demand parts or interfacing items offered by a particular manufacturer.
e. A specific source is mandated by law, regulation, donor specification or terms of a grant. Use of a sole source provider must be specified with the purchase request along with a written justification.
The Business office is responsible for establishing account and department numbers. Department numbers represent the source of funds by department. Account numbers represent the type of revenue or expense to be transacted to each department. Each department is assigned an account/department number(s) in order to detail and control expenditure activity for their area(s) of responsibility. All Purchase Requisitions must carry the complete 15 digit account number to be charged in order that required approvals may be obtained prior to its receipt in the business office for proper encumbrance and payment once the procurement process is complete.
After good/services are received, submit a signed invoice to document approval for payment. If Business procedures are followed, Accounts Payable pays for the order within MHU University’s payment terms. Accounts Payable will question all bills that cannot be associated with an authorized purchase order. They also will question any expense reports that include the purchase of equipment, software, or other goods and services that would normally require a purchase order. Additional documentation may result in a delayed payment.
Checks are processed on Friday for pick-up. An email will be sent if you have requested to pick up the check. Due to the volume of transactions, off-cycle processing of checks will not be accommodated.