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Handbook of Business Procedures

Date published: 
Last revised: 
Issued by: 

Aug. 12, 2011
Aug. 12, 2011
Accounts Payable

 

Part 9. Expenditure Procedures - Table of Contents


9.1.4. PREPAYMENTS

A. Introduction

The subsections of this section define The University of Texas Austin’s procedure for processing prepayments directly to suppliers and do not pertain to reimbursements for individuals such as employees, students, and independent contractors. For procedures for individual reimbursements, refer to 9.1.2 Other Reimbursements, 9.1.1 Entertainment and Official Occasions Expenses, and 11.Travel.

B. Allowable Prepayments

As a general rule, the university is prohibited from paying for goods or services prior to receiving them from a supplier. However, prepayment is appropriate for the following products and services:

  • books
  • initial purchase or renewal of subscriptions
  • initial purchase or renewal of professional memberships
  • registration fees
  • rental of cylinders
  • lease payment
  • maintenance agreements
  • software
  • publications such as pamphlets, brochures, or reprints
  • classified advertising
  • postage
  • exhibit booth fees
  • accreditation fees
  • exam fees

C. Prepayment Requirements

Most prepayments for products and services require that a purchase order be approved on a *DEFINE PB3 or PB4 document. The following items may be purchased on a Procard or by processing a *DEFINE VP2 document, and do not require a purchase order for prepayment:

  • books
  • initial or renewal of subscriptions
  • initial or renewal of professional memberships
  • registration fees
  • rental, such as for copiers, cylinders, or space
  • classified advertising
  • postage
  • exhibit booth fees
  • accreditation fees
  • exam fees

D. Prepayment Approval

Prepayment terms for the purchase of goods are considered an alternative to the normal method of payment after the goods are received. They require prior approval by the assistant vice president and director of procurement and payment services and must be clearly identified in either a purchase order (POINT Plus PB3 or PB4 document) or a contract. Suppliers may be required to document business issues or hardships to support their requests for prepayments or progress payments.

E. Deposits

A deposit is a partial or full payment to a vendor used to reserve a meeting room, space, or audio and visual equipment, or to cater an event on a specific date. If a vendor requires a deposit in order to conduct business, making a deposit is allowed if these guidelines are followed.

1. Refund of Deposit Clause

The Refund of Deposit Clause must be included in the contract or on the invoice issued by the vendor and it must state the following:

"Refund of Deposit/Prepayment. In the event this Agreement is canceled by <insert name of vendor> for reasons not attributable to The University of Texas at Austin (university) or if canceled by the university for default of performance by <insert name of vendor> or Force Majeure, then within 30 days after termination, <insert name of vendor> will reimburse the university for all advance payments paid by the university to <insert name of vendor> that were (a) not earned by <insert name of vendor> prior to termination, or (b) for goods or services that the university did not receive from <insert name of vendor> prior to termination."

2. Amount of Deposit

These dollar thresholds apply to the amount of the deposit, not to the total amount of the service being provided. Regardless of whether prepayment approval is necessary or approved, the total amount of the service being provided must still be approved through the normal contract and/or purchase order process.

  • Less Than $5,000
    Approval for a deposit is not needed if the amount of the deposit is less than $5,000 and the Refund of Deposit Clause is added to the invoice. This is true even if the deposit is 100 percent of the fee.
  • $5,000 or Greater
    If the amount of the deposit is $5,000 or greater, a contract is required. Prepayment approval may be granted, provided the Refund of Deposit Clause is written into the contract, and the contract is signed by the Business Contracts Office, or by a person who has been granted delegated authority to sign contracts. For a list of designated delegates, see Delegations of Authority for The University of Texas at Austin. For more information, contact the Office of the Vice President and Chief Financial Officer (Business Contracts).

F. Resources

Texas Comptroller of Public Accounts, Restricted Expenditures – Early and Late Payments: Advance Payments

 

 

Part 9. Expenditure Procedures - Table of Contents