Contracted Services, Including Consultants, UPPS No. 03.04.01
Speakers, and Other Services Issue No. 4
Effective Date: 04/21/2008
Review: August 1 E4Y
01. POLICY STATEMENTS
01.01 This UPPS describes the policies and procedures to follow when using a contractor to provide contracted services to Texas State University–San Marcos (Texas State).
01.02 Except where federal or state laws prevail, or Texas State University System (TSUS) rules and regulations or university policies prevail, each account manager at Texas State is responsible for determining the need for contracted services in his or her area of responsibility, recommending the award of a contract to a contractor to perform those services, initiating the required contract documents, obtaining any required approvals to enter into a contract and initiating the payment process to pay for the services.
01.03 Contracted services obtained from another state agency are procured consistent with UPPS No. 03.04.07, Interagency or Interlocal Cooperation Contracts or Agreements.
01.04 The university attorney must approve in advance contracts prepared by outside entities. These contracts should not commit the university to undesirable obligations and should conform to Texas law.
01.05 The tax specialist reports contracts using appropriated funds with a “cumulative fee” that is equal to, or greater than, $14,000 to the Legislative Budget Board according to the Board’s requirements.
01.06 It is in violation of state and federal laws to hire someone as an independent contractor who would otherwise be hired as an employee of the university. Before hiring the services of a contractor, the tax specialist and the account manager must determine whether the contractor will be an independent contractor or university employee. Refer to Section 03.
02.01 Personal academic services include entertainment, performing arts services, speakers, and guest lecturers.
02.02 Independent contractors include sole proprietors, partnerships or corporations that perform services for the university and provide services to the general public. Subcontractors under a sponsored program are included in this category.
02.03 Professional services, as defined by Texas Government Code, Chapter 2254, Subchapter A, are within the scope of the practice, as defined by state law, of accounting; architecture; landscape architecture; land surveying; medicine; optometry; professional engineering; real estate appraising; or professional nursing; or are provided in connection with the professional employment or practice of a person who is licensed or registered as a certified public accountant; an architect; a landscape architect; a land surveyor; a physician, including a surgeon; an optometrist; a professional engineer; a state certified or state licensed real estate appraiser; or a registered nurse.
*02.04 Consulting services, as defined by Texas Government Code 2254, Subchapter B include the service of studying or advising a state agency under a contract that does not involve the traditional relationship of employer and employee. A consultant is generally one who provides services to a university department to develop or review curriculum or policy, or provides a similar service to the entire university. Only a primary contracting official (as defined in Section 02. of UPPS No. 03.04.02) may sign a contract for consulting services, regardless of the amount involved.
02.05 Cumulative fee is the amount expected to be paid in total by Texas State to the contractor for performance of the contracted work during the fiscal year. Contracts shall not be subdivided or broken down into a series of smaller value contracts to avoid the increased scrutiny, required approvals, or notification, posting, solicitation, or reporting requirements required to process and execute larger value contracts.
(Texas Government Code Chapter 2254, Professional and Consulting Services)
03. PROCEDURE FOR DETERMINATION OF CONTRACTOR VS. EMPLOYEE
03.01 UPPS No. 04.04.08, Determining Contract Labor and Independent Contractor Status, establishes policy for correct classification of an individual to be hired by the university to perform services as an independent contractor. Before hiring an individual as an independent contractor, the account manager must complete the Independent Contractor form FS-06 located on the tax specialist Web page (http://www.txstate.edu/gao/taxspec/).
03.02 The account manager will submit this form to the tax specialist as documentation that the individual is correctly classified as a contractor. If the account manager’s determination is accepted, Form FS-06 is filed with the contract and payment voucher in the tax specialist’s office.
03.03 If, as a result of completing the checklists, the tax specialist and the account manager determine that the individual should be classified as an employee, the account manager will begin the employment process for the individual in accordance with UPPS No. 04.04.03, Staff Employment.
03.04 When neither the tax specialist nor the account manager can agree on the classification of the individual, the tax specialist will review the classification with the director of Accounting. The president or the president’s designee may provide the final approval.
(IRS Pub 1779, IRS Tax Topic 762, Independent Contractor vs. Employee)
04. PROCEDURE FOR PAYMENT TO FOREIGN PERSONS
04.01 Contact the tax specialist for the proper procedures regarding payment of foreign persons invited by the university to perform services at least thirty days prior to their arrival on campus.
*04.02 To review federal regulations and procedures for processing payments to visiting non-resident aliens, see UPPS No. 03.04.06, Nonresident Alien – Honorarium and Contracted Services Payments and FSS/PPS No. 03.09.03, Non-Resident Alien Contract Payments.
05. PROCEDURE FOR PAYMENT OF UNIVERSITY EMPLOYEES OR FORMER UNIVERSITY EMPLOYEES
05.01 All university employees performing a contracted service must have an approved contract for such work. See UPPS No. 04.04.12, Compensation in Excess of Base Annual Salary for Staff, for policies regarding services allowed. If services are approved, payments will be made by personnel change request (PCR) through the university’s payroll system. Total payment for services performed which are charged to the account designated will include matching fringe benefits. The PCR should clearly indicate that the payment is for the performance of contracted services work.
05.02 Any individual who has been a full time employee of the university within the past twelve months must be paid by processing a PCR through Human Resources or Faculty Records, as appropriate, due to the continuing relationship maintained between the employee and the employer. The definition of employee includes temporary employee, staff or faculty. Exceptions must be approved by the president or designee on a case by case basis. For additional details, please see UPPS No. 04.04.08, Determining Contract Labor and Independent Contractor Status.
(IRS Pub 1779, IRS Tax Topic 762, Independent Contractor vs. Employee; Texas Government Code 2252.901, Contracts with Former or Retired Agency Employees)
06. PROCEDURE TO REQUEST A UNIVERSITY VENDOR IDENTIFICATION NUMBER
06.01 If the contractor does not have a university vendor identification number (university financial system vendor number) assigned, or has a change of address or banking information, the contractor must complete and sign the Vendor Maintenance Request form.
07. PROCEDURE FOR PROCESSING CONTRACTS
07.01 In selecting the contractor, the account manager will base the choice on “best value” or demonstrated competence and qualifications, and on the amount of the fee. If competitive solicitation is required, the account manager will base the choice on the best value to the university, as defined in the TSUS Rules and Regulations, Chapter III, Section 16. When all other considerations are equal, preference will be given to an independent contractor whose principal place of business is within the State of Texas.
07.02 Account managers should allow at least thirty days prior to the performance need date for the processing of the contracted services paperwork. They should allow a longer time when contract services require a formal notification or a solicitation process, posting in the Texas Register or the Electronic State Business Daily, or additional university or TSUS approvals.
07.03 The account manager must negotiate the fee offered for contracted services. The contract must include the hourly rate, day rate, and total fee to be paid or not to exceed amount, and the dates of service to be performed. The university prefers that the fee include material, travel and other expenses. However, Texas State may pay for travel or incidental expenses in addition to the fee agreed upon in the contract. If the contract provides for reimbursement for the contractor’s travel or other expenses along with the fee, it should include the maximum reimbursable amount and the assumed travel dates. If the university is to be directly billed for travel expenses in accordance with the contract, the account manager must complete and approve a travel application and submit it to the Accounts Payable Travel office.
07.04 The account manager is responsible for obtaining all required approvals. Persons authorized to obligate the university in accordance with its policies (UPPS No. 03.04.02 and UPPS No. 03.04.04) must approve the contract. Individuals not authorized to sign contracts for the university may be held personally liable for any damages resulting from the repudiation of the contract.
07.05 The Contracted Services Agreement, (contract, or standard university contract) is used as a template for the standard university contract agreement.
07.06 Regardless of the cumulative fee of the contract, the account manager will assure that sufficient funds are available, reserved, committed, or obligated to pay the contract.
08. PROCEDURE FOR CONTRACTED SERVICES OF LESS THAN $5,000
08.01 A standard university contract, while recommended, is not necessary if the fee for services to be performed during the fiscal year is expected to be less than $5,000. However, if travel or other expenses are to be reimbursed in addition to a fee, a contract is necessary. Without a formal contract, arrangements for services should be reduced to writing in order to eliminate any misunderstanding about expectations, deliverables, terms and conditions or compensation.
08.02 Other than the account manager approval signature on the payment voucher or contract, no further university approval will be necessary prior to the performance of the contracted service if the fees are less than $5,000.00.
09. PROCEDURE FOR CONTRACTED SERVICES OF $5,000 OR GREATER
*09.01 If the cumulative amount of payments to the contractor for contracted services during the fiscal year is expected to equal or exceed $5,000, the account manager must encumber the funds through the creation of a purchase requisition in the University Financial System, and obtain a Texas State purchase order number in addition to completing a standard university contract. The contract number and purchase order number must be referenced on the contract and the payment voucher when submitted for payment. If line items related to the purchase order can be identified on the invoice, they should also be noted.
09.02 At least thirty days prior to the need for performance of the contracted services, the account manager will send the original signed contract to the university tax specialist. The tax specialist will review the contract for completion and proper approvals, keep a copy on file, and return any additional copies upon request to the account manager.
10. PROCEDURE FOR CONTRACTS – FOR CONSULTANTS ONLY - OF $25,000 OR GREATER
10.01 Consulting services as defined in Section 02 of this UPPS, expected to equal or exceed $25,000, require special processing. This includes transmitting notices of intent to the Governor’s Planning and Budget Office and the Legislative Budget Board, and the postings of an invitation to provide offers of consulting services and notice of consultant contract award in the Texas Register.
10.02 Account managers should contact the director of Contract Compliance at least sixty days prior to the need for performance of an affected consulting services contract for the current procedures. The Governor’s Office has issued guidelines to assist in processing these types of contracts. These guidelines may be found on-line at: http://www.governor.state.tx.us/divisions/bpp/guidelines.
*10.03 Only a primary contracting official (as defined in Section 02 of UPPS No. 03.04.02) may sign a contract for consulting services, regardless of the amount involved.
11. PROCEDURES FOR CONTRACTS REQUIRING TSUS CHANCELLOR OR BOARD OF REGENTS APPROVAL
11.01 Requests for contract approval by the TSUS chancellor or Board of Regents will be submitted by the vice president for Finance and Support Services. Refer to UPPS No. 03.04.04, Processing, Approving and Executing Contracts, Purchases, and Agreements, regarding which contracts require additional TSUS approvals.
11.02 Normally, requests for contract approval are prepared, reviewed and submitted no later than six to eight weeks prior to a regularly scheduled quarterly TSUS Board of Regents’ meeting. Refer to TSUS Regents’ Rules and Regulations.
12. PROCEDURE TO REQUEST PAYMENT FOR CONTRACTED SERVICES
12.01 The university will pay a contractor using the Contracted Services Payment Voucher (Payment Voucher), except as noted in Section 12.04 below. Submit one original and one copy of the payment voucher to the tax specialist for processing.
12.02 The payment voucher is used for payments from all accounts, including general revenue fund accounts, auxiliary fund accounts, designated fund accounts and restricted accounts.
12.03 The contractor must sign the fully completed payment voucher unless an invoice from the contractor’s company is attached and verified. The name on the payment voucher or invoice must match the contractor’s name in the University Financial System. The account manager must sign the payment voucher. The designee in the Office of Sponsored Programs must sign the voucher if using sponsored program funds.
12.04 A vendor invoice may replace a payment voucher only if the invoice includes a Texas State purchase order number and a vendor number. The vendor name and address on the invoice must match the vendor name and address in the University Financial System. The invoice must contain the performance dates and description of work performed. The invoice must have the same approval signatures that are required by the payment voucher.
12.05 Approved travel or other expenses may be repaid to an independent contractor on university business or paid directly by the university on behalf of the contractor. In order to meet IRS accountable plan rules, (1) there must be a business connection and the expense must be reasonable; (2) there must be reasonable accounting for the expenses; and (3) all excess reimbursements must be repaid to the university in a reasonable time. The General Accounting Office or the tax specialist must receive the payment voucher for reimbursement of expenses within sixty days of the date the expenses were incurred. The university will consider payments that do not meet IRS requirements as taxable income to the vendor and will report it on IRS Form 1099-MISC.
12.06 The university may not reimburse a university employee who pays an “out-of-pocket” payment to an independent contractor.
12.07 Texas State’s standard terms of payment are net thirty days in accordance with the Texas Prompt Payment Act (Ref: Texas Government Code Chapter 2251 “Payment for Goods and Services”). Alternate payment terms proposed by a contractor, including pre-payment, installments, or requiring payment in less than thirty days, must be reviewed by the assistant director of Accounts Payable prior to the execution of the contract.
01. REVIEWERS OF THIS UPPS
13.01 Reviewers of this UPPS include the following:
Associate Vice President for August 1 E4Y
Director, Accounting August 1 E4Y
Tax Specialist August 1 E4Y
Director, Contract Compliance August 1 E4Y
University Attorney August 1 E4Y
Vice President for Finance & August 1 E4Y
02. CERTIFICATION STATEMENT
This UPPS has been approved by the following individuals in their official capacities and represents Texas State policy and procedure from the date of this document until superseded.
Associate Vice President of Financial Services; senior reviewer of this UPPS
Vice President of Finance and Support Services