Basically, when someone is asked to do something for the University and will be paid for it, there will need to be a contract involved. Whether it is thought of as an honorarium, stipend, or a small fee, these are all situations whereby something is being provided and a payment is expected to be made. All cost centers (accounts) are required to use contracts for services including student organizations, student activities, grants, etc… However, 900 and foundation accounts only require the use of contracts when there are other funding sources involved in which case the rules of the other funds supersede.
Consultant and Service contracts are required when a person will be paid to perform tasks or services. These contracts are predominately “intellectual” in character and may include consultation analysis, evaluation, prediction, planning or recommendation of policies or courses of action, and they usually result in the production of a report. Object code 15xx “Professional/Technical Services” usually applies.
Instructional Contracts are defined as any activity undertaken related to classes, training or activities in support of classes and training. Use object code 1560 for these contracts.
Public Speakers and Entertainers involve a presentation or performance which entirely, or in part, is open to the public. The public would be considered to be those persons other than MnSCU students and employees. For these contracts, use object code 1910. If such contractors are not residents of Minnesota, they may be subject to a 2% Minnesota Nonresident Entertainer Tax withholding. Examples of contracts where the 2% withholding applies include:
• non-resident classroom presenter, if open to the public and over $2,000;
• non-resident workshop presenter or keynote speaker, if open to the public and over $2,000;
• non-resident public speaker, if over $2,000; or
• non-resident entertainer, if over $600.
Further information on how to determine if a contractor's payment is subject to this tax withholding can be found at the Department of Finance at http://www.finance.mnscu.edu/taxinformation/entertainer/nrprocedures.html.
Contracts with foreign vendors require as much advance notice as possible in order to have time for processing paperwork for Immigration and IRS documents, contracts, possible 30% federal tax withholding, etc…MnSCU tax services must review and approve the necessary documents prior to the offering of a contract to a person of foreign residency. The requesting department’s office manager and/or faculty member will need to work closely with the professional technical contracts coordinator in AS-122 during this process. More information can be found at: http://www.finance.mnscu.edu/taxinformation/nonresident/nra_vendors/index.html
Contracts with legal firms are prohibited as our legal representation is provided through the Attorney General’s Office. If there is a need to contract with a firm for other reasons, the following language must be stated within the contract: “Contractor’s duties do not include providing legal services to the state within the meaning of Minnesota Statute 8.06”.
HR Determination: When intending to pay an individual for something other than a one-time speaking engagement or performance, submit a completed Independent Contractor/Employee Status Form to Human Resources for approval prior to offering a contract. It will be determined whether this person should be paid as a contractor or an employee. This form can be found at http://www.stcloudstate.edu/humanresources/policies/independent-contractor.aspx .
If approved for contracting, a purchase order can be processed and the signed form sent to Business Services along with the contract when ready for full execution.
All contract requests: must be entered into the Purchase Control System with the purchase order released to 050 (funds encumbered) status prior to offering the contract for signature. In addition, there must be a valid (fully executed) contract on file with a purchase order status of 450 prior to the start of work in order to comply with M.S.16A. A fully executed or valid contract consists of all four authorized signatures. If a contract is offered for signature prior to an encumbrance or if work begins under a contract before it is fully executed, the person obligating the state is in violation of statute16A.
Contracts containing erasures, cross-outs or white outs will be returned to the department to be redone unless the changes have been initialed and dated by all parties involved.
NOTE: Any alteration of the contract will require preapproval from the Attorney General’s Office.
Helpful Hints for Smoother Processing
Questions regarding payments to St. Cloud State University employees for work outside their normal duties should be directed to Human Resources.
For payments to other MnSCU institutions for their employees to teach a course or guest lecture for St. Cloud State University, contact Human Resources. A purchase order is required for this expenditure.
Questions for payments to all other State employees (excluding University of Minnesota employees), should be directed to Human Resources. A purchase order is not required in this case.
Payments to students enrolled in 6 or more credits should be processed through student payroll.
Contracts over $50,000 require a formal bidding process with the purchasing department.
Contracts over $100,000 require approval from the Minnesota State Colleges and Universities Vice Chancellor of Finance. Certificate of Compliance is required.
Contracts using agency funds (900xxx accounts): when only using 900 agency funds, contracts are not required. However, if there are other funding sources involved in a payment in conjunction with this person coming here, a contract would then be required. In this case submit a completed and signed 1400 form for the amount of the contribution to Purchasing. Be sure to reference the PO number of the contract it is to be connected with when sending it to purchasing. Note: It is prohibited to split pay something to a vendor in order to avoid procedure.
An example would be if an individual is coming to speak who will be reimbursed for their travel expenses along with being paid a small amount for compensation. The airfare will be paid using agency funds which may lead the responsible person to believe a contract is not needed. The same person is being paid $100 to speak from another fund so that department may be led to believe they would need to do an ISA for the $100 fee. Actually, this scenario would require the use of an SCSU003 which would need to encompass the entire amount following all funding source guidelines, even for the 900xxx account or other portion. Once Foundation or Agency funds are involved with other funding sources, the rules of those other sources govern the complete contracting and payment process.
Contract Signatures: Persons signing contracts must have prior delegation of authority from the current University’s President. This delegation is held by most Deans and VP’s who are authorized for various dollar thresholds. If unsure who should be signing contracts for your college, please contact the appropriate Dean’s Office. The order in which the contract is signed is determined by the signer of block #3. Many of our administrators prefer to sign prior to the offering of a contract while others prefer to review and sign the contract after the vendor has signed.
Contract Forms: It is best to avoid saving copies of the contract documents as they change along with any MnSCU and/or state regulations, statue changes, etc… In order to avoid contract forms from being rejected, please always start directly from the following link for the most current document version.
Memo Screen: Use the memo screen to make notes to yourself or to Purchasing. Such as which type of contract is being used and if an HR determination or other documentation is being sent to Purchasing. Notes written in the memo will not print on the final documents. However, when duplicating purchase orders, be sure not to duplicate the memo as your notes most likely will not be relevant to the new purchase order.
External Reviewers – People from outside the University who have knowledge of what accreditation companies are looking for or have been through the accreditation process previously. They are hired to come in and work with the department and make suggestions. Contracts are required in order to process payments to these individuals. Their travel costs can be incorporated into the contract as an all-inclusive payment or separated out. If separated, it would require paid in full, itemized, original receipts and mileage documentation attached and submitted along with the Professional/Technical Contract Expense Reimbursement/Invoice for payment.
Contractor’s reimbursable expenses: Some contractors will prefer to avoid the hassle of submitting itemized receipts for reimbursable expenses and simply contract for a lump sum, all-inclusive amount, however, others will prefer to have their reimbursable expenses itemized in the contract. When reimbursable expenses are itemized within the contract, the contract should state that reimbursement will be sent to contractor within 30 days of receiving an itemized invoice with all itemized receipts attached. In this case, it is good practice to send a cover letter along with the contract so the contractor is fully aware of the need for itemized receipts and itemized invoicing. In addition, this is also a good time to explain the need to expedite the paperwork back to the University in a timely manner, etc. Bringing the contract with them to the event leaves little time for fully executing the contract and could result in a 16A violation.
Contractor’s expenses cannot be directly charged to the University and paid for directly with University funds or paid for by a University employee who would then request to be reimbursed. The state is prohibited from paying third party expenses and/or paying in advance. This includes but is not limited to the following:
- airfare, lodging, meals, rental car, taxi, mileage
- the use of state vehicles to provide contractor’s ground transportation
- donations or thank you gestures in paying for contractor’s meal and then requesting to be reimbursed for it
- any supply or material expenses associated with contractor’s visit
In the case where a presentation or service is provided without charge, stipend, honorarium or any other type of compensation, contractor’s expenses may be reimbursed by entering a purchase order without a contract. Enter the reason the individual’s expenses would be reimbursed in the description of the PO. The individual will pay for their own expenses and later request reimbursement by submitting the ITEMIZATION AND/OR INVOICE FOR CONTRACTOR’S REIMBURSEMENT FORM along with their itemized receipts.
For more information on contracting with or without reimbursement of contractor expenses, click here.
Terms of Payment (Page 3): By statute the state has 30 days from the invoice date to make payment. Clearly state what is expected of the contractor in order for them to be paid.
If the contract is for one payment and does not have expenses separated out, it could be stated that payment will be processed within 30 days of receipt of an invoice. Or, if preferred, an authorization form can be printed at the time the contract is fully executed. It will be sent to the department responsible person who will hold onto the form until after the event takes place. Once the duties are completed, the form is signed and sent to accounts payable for processing. Note: Once the purchase order is at 450 process, the system will not allow the printing of the authorization form.
Contracts with multiple payments: Contract form SCSU003 is required when there will be multiple payments made. Contractors are expected and should be told to keep track of their hours and/or reimbursable expenses they have incurred as they will not be paid any amount beyond what was agreed to in the contract. If changes need to be made, both parties must agree to them by entering into a fully executed contract amendment prior to the exhaustion of funds or expiration of the original contract. Multiple payments should be based on a set of duties, phases of work, etc… and should not be set up as a payroll check (every two weeks), etc…
Contract Attachments: To expedite matching attachments to the correct purchase order, please use the suggested format below to staple to your documents before sending them to Purchasing:
TO: Purchasing Department Contracting
THIS ATTACHMENT BELONGS TO PO #_______________
It is always best to call with your questions prior to the event rather than afterwards.