Disbursements: Advance Payments
UC Accounting Manual
VI. Accounts Payable Operations
D-371-11 (TL 39, 11/01/83)
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DISBURSEMENTS: ADVANCE PAYMENTS
I. INTRODUCTION
A. SCOPE
This chapter sets forth the University guidelines for
advance payments on procurements, and is intended
primarily as a practical guide for the disbursing
sections of the accounting offices.
B. LISTING OF ADVANCE PAYMENTS
Advance payments to which the procedures described in
Section II.B. below may be applied according to the
magnitude of the amounts involved included, but are not
limited to, those listed below which are the most
common types of advance payments. If, however, the
procedures outlined in Section II.B. (transaction may
be treated as in Section I.C. below), are not applied,
it will be advisable that supporting documentation be
required in order to assure that there is appropriate
evidence of receipt of goods or services paid for.
1) Foreign orders of low value--under $500 (those in
excess of this amount should be procured through a
commercial letter of credit. (See Accounting
Manual Chapter C-555-42, Commercial Letters of
Credit.)
2) Government and Library of Congress publications
purchased from U.S. Superintendent of Documents the
cost of which warrants special treatment in the
judgment of the accounting officer. [In some cases
campus departments which are volume users have
established prepayment draw-accounts against which
they place orders.]
3) Items manufactured to order or to meet special
tolerances (require purchase order)--advance
payment may be made based on the terms of the
purchase order.
4) Library materials--advanced payment may be made
when required by dealer or publisher.
5) Payment for collection of specimen, etc., in the
field.
6) Payment [partial or full] to individuals for
caterers for food and beverage service for official
functions such as commencement exercises,
administrative meetings, and student-faculty
programs.
7) Research expeditions--charters for boats and
reservations for other transportation and for
expenses.
8) Special order items for trade and professional
publications.
9) Subjects in research where a large number of people
are paid small amounts. Check for entire amount is
paid to investigator or experiment controller.
10) Vendors who offer substantial prepayment
discounts.
11) Vendors who require prepayment if order is less
than a certain minimum amount.
12) When a purchase order requires a unique product
or service and the vendor is the only
distributor or source, advance payment may be
made if approved by the campus material manager.
13) Travel advances.
** 14) Removal or moving advances.
C. LOW EXPENDITURE OUTLAY
Because of the low expenditure outlay per transaction
in relation to the costs of accounting for each
transaction, the following types of advance payments
are ordinarily excluded from the policy contained in
this chapter. However, where in the opinion of the
accounting officer and/or the campus materiel manager
the expenditure outlay per transaction is considered to
be material, the procedures described in Section II.B.
below may be applied.
1) Subscriptions.
2) Honoraria--sometimes requested in advance of
lecture or program.
3) Memberships dues.
4) Performing artists--where contract requires payment
before performance begins.
5) Seminars and colloquia registration fees.
6) Other like transactions where in the judgement of
the accounting officer and/or campus materiel
manager the costs of accounting (as described in
Section II.B. below) and/or handling are
excessively high in com- parison to the expenditure
outlay for the transaction.
II. POLICY AND PROCEDURES
A. POLICY
1. Avoidance of Advance Payments
Advance payments or prepayments are to be avoided
whenever possible for three primary reasons:
a) It is prudent business practice (The University
Terms and Conditions of Purchase provides (Article
VI.), "Seller shall be paid, upon submission of
acceptable invoices, for materials and supplies
delivered and accepted or services performed and
accepted.") not to pay for goods or services until
they have been received in good order or rendered
satisfactorily;
b) The certifications on forms U FIN 161 (State Claim
for Reimbursement) and U FIN 162 (No Warrant State
Claim) prescribe that the signer, under penalty of
perjury, certify that goods and/or services
mentioned in the claim have in part been received
or rendered in accordance with the contract
(Purchase Order, etc.) and law; and
c) The loss of interest on funds used to make advance
payments, especially if delivery of materials or
performance of services ordered is to take place at
some distant future date.
NOTE: Ordinarily, University [current] funds are
invested by the Treasurer of The Regents in short-
term notes, etc. Monies drawn from these funds and
used to make advance payments therefore lose
interest they would have otherwise earned.
2. Approval Authority
Where advance payments are required (unavoidable),
approval authority for advance payments will be
effected as follows:
a. Purchase Orders
Where purchase orders are prepared, advance
payments requested by vendors and accepted
(approved) by the campus materiel manager (or
the campus librarian) are to be entered on the
purchase order as one of the terms of the
purchase. It may be requested that the vendors
send invoices directly to the ordering
departments.
b. Direct Charges
When an advance payment is required for a direct
charge transaction, the individual processing
the direct charge must obtain the approval of
the Vice Chancellor--Business and Finance/
Administration or his/her designee. Such
approval will be effected by an appropriate
approval signature on Form U FIN 5 (Check
Request).
c. Low-Value Procurements
Advance payments are not authorized under the
Low-Value Purchase Authorization Program unless
approved by the campus materiel manager.
B. PROCEDURES
1. Accounting for Cash Advances
a. Account Recordation
An appropriate cash advance account (for
example, account number 112XXX, Receivable--
Other) is to be charged. The fund block or
purchase order block may be used to project the
date the invoice is expected to be received
(this date control procedure will enable the
disbursement section of the accounting office to
follow-up on each cash advance). When the
advance payment is recorded in the receivable
account, a lien may be placed against the
expense or other account to which the charge
eventually will be made.
b. Invoice Processing
The invoice is double-tagged with a credit to
the receivable account and a debit to the
expense or other account; the lien, if any, is
concurrently removed from the account previously
charged.
III. RESPONSIBILITIES
A. CAMPUS MATERIEL MANAGERS, ETC.
Campus materiel managers (or campus librarians) are
responsible for the preparation and processing of
purchase orders where they are required.
B. CAMPUS ACCOUNTING OFFICERS
Accounting officers are responsible for processing
Forms UFIN 5 initiated by campus departments, for
issuing checks, and for processing invoices for
payment.
IV. REFERENCES
Accounting Manual Chapters:
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.
Business and Finance Bulletins:
BUS-43 Materiel Management.
A-53 Official Documentation Required in Support of
University Financial Transactions.
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Historical note: Original Accounting Manual Chapter first
Published 07/01/80; analyst--Quint Doroquez.
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