This guideline is to be used when a Blanket Purchase Order (BPO) is issued and the payments on the BPO vary by both amount and funding source. For example, a BPO is established with a company that provides translation services. The services are used on a regular basis but the length of time needed and the funding source varies per payment. These guidelines have been developed to: 1) work with the established ARIBA system configurations; 2) be in compliance with federal regulations; 3) reduce administrative burden; and 4) comply with generally accepted accounting practices (GAAP).
ARIBA System Configurations
There are a number of key points to note on the ARIBA system configurations:
- When a BPO is set up in ARIBA, the funding sources (e.g., Budgets) must be entered into the ARIBA system.
- A payment cannot be made against a Budget unless the Budget is set up as a Funding source for the BPO.
- If there are multiple funding sources, a percent allocation for each funding source is established. Payments will automatically use that allocation (example: If the Funding Sources are Budget A @ 70% and Budget B @ 30% then any payments made against the BPO will automatically be allocated by that 70/30 split).
- “Lines” can be used to allocate sub-accounts under a BPO. Multiple Lines can be set up under a BPO to demark Budgets, Object Codes, or any other definition.
- Payments on a BPO are initiated by the supplier and must identify the line item and amount; the line item carries the department-determined budget and account codes. UW staff cannot adjust a supplier invoice once it has been entered into ARIBA by the supplier (if the invoice is incorrect then the invoice must be rejected and the supplier must create a new invoice with the correct information.
Setting up payments in ARIBA
There are four possible ways to set up and manage BPOs when the payment and funding source vary by payment. Two of the methods are encouraged, two of are discouraged.
1. Separate Lines. Departments set up each Budget as a separate line amount on the BPO. The Line Description should be clear so that the supplier knows which Line (Budget) to select when requesting a payment.
- Benefits: the amount paid under each Budget can vary by each payment and there are minimal adjustments to be made to the BPO by department staff.
- A limit (maximum amount to invoice) must be set for each Line and there is a risk of Departments setting the limit too high to avoid having to make adjustments; and
- The risk of supplier error in not selecting the correct Line when requesting a payment and will have to resubmit (departments cannot adjust or correct the request).
2. Separate BPOs. Departments set up separate BPOs for each Budget number. Suppliers invoice against each BPO based on the budget number under which they completed their tasks.
- Benefit: No adjustments to the BPO set up are needed by the department. The risk of supplier error is also minimized.
- Drawback: Setting up a separate BPO for each budget is an administrative burden for the department.
Note: This will only be effective if the department anticipates that the supplier will be invoicing more than once against a single budget. If the department anticipates that the consultant will only charge one time charge to a single budget then departments should not set up a BPO, but instead setup separate purchases orders (POs).
3. BPO/Cost Transfers. The BPO is set up with a single Funding Source (Budget) of a departments or other non-sponsored funding source. The supplier invoices against and payment is charged to that department budget. The department subsequently completes a Cost Transfer to allocate the expense from the department budget to the budget where the expense really belongs.
Note:Departments should never have a BPO set up under a federally-sponsored Award as a “default” or holding place until the expense can be moved via Cost Transfer. As expenses posted to federal awards are reimbursed (paid) by the federal government shortly after the expense is posted, this means the federal government is paying for an expense that does not belong to the budget.
- Benefit: the BPO set up is established once and does not have to be modified or changed (unless to increase the maximum amount).
- Drawback: Department has to complete a Cost Transfer. Cost Transfers should be avoided as they are a time consuming process for the department and are increasingly an audit flag. If the allocation of costs of an expense is known at the time the expense is posted, the best practice is to allocate the cost at the time of posting rather than have to move it (via Cost Transfer) at a later date.
4. BPO is Modified. The BPO set up is modified to adjust the Budgets and allocation before each supplier payment is submitted. A single Line is established with multiple funding sources (budgets).
- Benefit: the supplier will always select the correct Line as there is only one Line.
- Drawback: the department must adjust the funding sources (budgets) and allocation before each payment to match what the supplier will be invoicing. This is an administrative burden and creates a risk of error.