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Advance Payments for Vendors: ACG0006
Effective Date: May 7, 1997

Advance Payments for Vendors

(Policy ACG0006)

I. Purpose of the Policy

Generally, goods and services provided to the University are paid for after receipt.
On occasion, it may be necessary to provide a known and reputable vendor with an
advance payment (prepayment). This policy describes (A) general provisions
regarding advance payments, (B) requirement for Purchase Order notation, (C)
submission of invoice, (D) accounting reconciliation, (E) receiving and
documentation, and (F) needed approvals.

II. Detailed Policy Statement

A. General Provisions

1. Advance payments or prepayments shall be avoided whenever possible. It
    is prudent business practice not to pay for goods or services until they have
    been received in good order or rendered satisfactorily. Also, the
    University may suffer loss of interest on funds used to make advance
    payments, especially if delivery of materials or performance of services is
    to take place at some future date.

2. Exceptions to the policy may include:

· foreign orders

· high-cost equipment manufactured to meet functional specifications

· books, periodicals and newspapers, including special order items
  for trade and professional publications

· collection of research specimens in the field

· caterers for food and beverage service for large official functions
   where caterer requires a deposit

· charges for research expeditions; including deposits and/or
  reservations for other group transportation and/or expenses

· principal investigators and other research personnel who conduct
  research using human subjects and pay the subjects a small
  amount (check for entire amount is paid to the investigator or
  experiment controller)

· vendors who offer substantial prepayment discounts

· maintenance service contracts

· honoraria; see UCSC Policy ACG0007: Honoraria, Fellowships,
  Scholarships and Other Unsupported Check Requests

· membership dues; see UCSC Policy ACG0008: University
  Sponsored Memberships in Organizations

· seminar and colloquia registration fees; see UCSC Policy
  TRE0001: Travel Expense Payments and Reimbursements

· performing artists, when contract requires payment before
  performance begins; see UCSC Policy MM0004: Purchasing
  Personal and Professional Services

· products for resale by UCSC Bookstore

· low value items (under $2,500 total value)

B. Purchase Order

The total amount of the purchase order shall include the value of the
advance payment and a full description of the refund policy.

C. Invoice

Companies to whom an advanced payment is to be issued must provide
an invoice (or written confirmation of total cost, including tax, freight,
handling) for the full amount of the advance payment prior to the
issuance of the advance payment. Advance payments issued to
individuals must be supported by documentation indicating the need for
the advance payment.

D. Accounting Reconciliation

Advance payments issued to companies are charged directly to the unit’s
expenditure account. Advance payments issued to individuals are
charged to an advance account. The unit’s expenditure account will be
charged upon submission of receipts or other supporting documentation.

E. Receiving and Documentation

Units are responsible for receiving the goods/services associated with the
advance payment and for collecting and processing all supporting
documentation. This supporting documentation must be forwarded to the
General Accounts Payable Office (a sub-unit of Accounting Services in
the Financial Affairs unit) when the advance payment is issued to an
individual. Upon receipt of the documentation, the unit’s expenditure
account will be charged. When the payment is issued to a company, the
documentation is retained in the unit.

F. Approval

1. Unit personnel who have been delegated purchasing authority may
    approve acceptable advance payments listed in II.A.2. above.

2. The Purchasing and Accounting departments will review, and the
    Director of Materiel Management must approve requests for advance
    payments that are outside the scope of those listed in II.A.2. above.

III. Definitions

Advance payment/prepayment: Full or partial payment for goods and services
before they are received by the University in good order or rendered

IV. Getting Help

The campus Director of Materiel Management provides training and assistance to
campus units (including help with completing forms, carrying out procedures, or
interpreting policy).

If you need help with... Contact ...
...purchase order Central Purchasing, x92311.
...vendor payment  General Accounts Payable, x92909.
...exceptions to policy Central Purchasing, x92311.

V. Applicability and Authority

This policy on Advance Payments for Vendors applies to all UCSC departments.
It is a new policy and thus supersedes any campus practices in existence prior to
its effective date.
Central Purchasing is the campus authority on advance payments related to
purchase orders. General Accounts Payable is the campus authority for advance
payments not related to purchase orders. This policy was reviewed and approved
by the Chancellor on May 7, 1997. Next review date is January 1999.

VI. Related Policies/References for More Information

Related Policies and Procedures

UCSC Policy ACG0007: Honoraria, Fellowships, Scholarships and Other
   Unsupported Check Requests

UCSC Policy ACG0008: University Sponsored Memberships in

UCSC Policy MM0001: Purchasing Common Goods and Services

UCSC Policy MM0004: Purchasing Personal and Professional Services

UCSC Policy TRE0001: Travel Expense Payments and Reimbursements


UC Accounting Manual Chapters

  D-371-11, Disbursements: Advance Payments
  D-371-16, Disbursements: Approvals Required
  D-371-23; Disbursements: Discount Terminology
  D-371-28, Disbursements: Freight
  D-371-35, Disbursements: Honorarium Payments
  D-371-36; Disbursements: Invoice Processing
  A-53, Official Documentation In Support of University Financial

Business and Finance Bulletin

  BUS-43 - Materiel Management
  BUS-28 - Travel

UC Santa Cruz Policy

Accounts Payable                                                                                              ; (408) 459-4368