Accounts Payable Policies

1099 Tax Reporting

Payments for services to U.S. independent contractors, other individuals, or unincorporated businesses of $600 or more in a calendar year are reportable to the IRS on a 1099 form. Any payments for legal and medical services to U.S. corporations are also reportable to the IRS on a 1099 form.

The university (i.e., Accounts Payable, and/or originating department) is responsible for obtaining the correct vendor name, address, social security number/employer identification number and type of organization for tax reportable payments to new vendors prior to making the first payment. This information should be captured upon completion of the W-9 form. If the supplier does not complete the W-9 form, the IRS requires that W&M withhold 28% tax on payments to the vendor, therefore the university will not do business with a vendor who does not provide the a W-9 form.

Accounts Payable is responsible for mailing 1099 forms to the vendor and submitting the electronic file of the 1099s to the IRS.

Advance Payments

Advance Payments are those that are made prior to receipt of goods or services. After an agency or institution makes an advance payment, there is no absolute guarantee that the vendor will deliver the goods or perform the requested services, placing the Commonwealth's assets at risk. 

However, advance payments are allowed for expenditures normally prepaid as a standard industry practice or where such prepayments are considered cost beneficial to the Commonwealth. Documentation should be retained within the agency and made available for review upon request to substantiate the decision to make advance payments.

The following describes those payments, which under certain terms and conditions, may be prepaid. These lists are not all inclusive. All allowable miscellaneous advance payments are subject to a maximum prepayment period of 90 days. 

  1. Legal Services
  2. Media Services
  3. Specialized Pharmaceutical Supplies and Rare Medical Drugs
  4. Mechanical, Electrical and Equipment Repair & Maintenance Contracts
  5. Computer Hardware and Software Maintenance Contracts
  6. Licensing Agreements
  7. Specialized Equipment Purchases
  8. Real Property & Equipment Rentals
  9. Insurance Premiums

 In addition, Allowable advance payments pursuant to written contracts, leases, or agreements are subject to a maximum prepayment period of one year, where delivery, performance, or refund is assured based on written obligations. Vendors should be encouraged to invoice the agency on a monthly or quarterly basis in the absence of a sufficiently reduced annual pricing arrangement.

Allowable and Appropriate

Expenditures charged to all William & Mary accounts must be both allowable and appropriate. Department designees are ultimately responsible for ensuring that charges to accounts are allowable, appropriate, and in the best interest of the department and the university as a whole. 

ALLOWABLE expenditures that are charged to W&M accounts must have a business purpose and be adequately documented.

APPROPRIATE expenditures should be charged when they are necessary and beneficial to the university.

Comptroller's Debt Set-off

The Comptroller’s Debt Set-Off (CDS) Program intercepts vendor payments to offset debts owed by vendors to State agencies. The State provides agencies with the tax-id number for vendors with debts to the Commonwealth. William & Mary is required to reduce a vendor payment by the Debt Set-Off amount and remit the payment to the Virginia Department of Taxation.

The Virginia Department of Taxation verifies the Debt Set-Off amount for the university prior to payment being issued. Three payment instances may occur:

  1. Partial payment is taken, the vendor will receive the remaining balance. The ACH or Check remittance will indicate the amount taken for the debt owed.
  2. Full amount of payment is taken, the vendor will not receive any amount of the payment.
  3. None of the payment is taken, the vendor will receive the full amount of the payment.

The AP office will always mail a letter to the vendor indicating any amount intercepted by Debt Set-Off. A vendor with questions about Debt Set-Off must contact the Virginia Department of Taxation customer service line at 804-367-8045. W&M staff are not able to provide information to the vendor (taxpayer) about any money owed to the Commonwealth of Virginia.

Accounts Payable Documentation

One of the most important underlying principles for allowable and appropriate expenditures is ensuring transactions are adequately documented. Adequate documentation includes an invoice or receipt that identifies:

  1. Who purchased it?
  2. What was purchased?
  3. When it was purchased?
  4. Where it was purchased?
  5. Why it was purchased?

When exceptions are requested they must be properly justified with additional documentation. Accounts Payable payments are processed using the Vendors Payment Request Form (VPRF). Documentation supporting the payment request must be attached to the VPRF.

Expenditure Accounting Codes

The expenditure structure is a mechanism designed to classify the different expenditure categories and collect expenditure information in a systematic manner. The information is used for accounting control, financial management and budgeting purposes

Level of Expenditure Codes

Operating Expenditures

  • Personal Services                  611XX0
  • Contractual Services              712XX0
  • Supplies and Materials           713XX0
  • Transfer Payments                 714XX0
  • Continuous Charges               715XX0

Fixed Assets Expenditures

  • Property and Improvements   721XX0
  • Equipment                              722XX0
  • Plant and Improvements        723XX0

Debt Service Expenditures

  • Obligations                             731XX0

 Most Frequently Used Expenditure Codes (pdf)

Honorarium Policy
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Scope

This policy is to provide the framework and guidelines for consistent application when offering honorarium payments to individuals at the University. This policy does not apply to employees or students who provide services to the University.

Purpose

This policy defines the types of activities for which an honorarium payment is appropriate and provides information on the eligibility for and processing of such payments.D

Definitions

Honorarium:  An honorarium is a “thank you” gift to an individual who, at no charge, provides a service to the university. It is a token payment, a tangible gesture of appreciation.

Policy

A. Honorarium Transactions

The types of activities for which honorarium payments may be offered include the following: 

  1. A special lecture, a short series of such lectures or other creative activity.
  2. Participation in a seminar or workshop as a guest, speaker or panelist, provided such services furnished on a short-term basis.
  3. Award to an individual for a special achievement or renown for participation in a short term activity or event that is of an educational, research, or public service nature and no-specific deliverable or specific result is requested or expected.

An event that requires set-up of equipment, staging, use of temporary structures, etc., or invites business risk, does not qualify as an honorarium eligible transaction.

B. Eligibility

  1. Honorarium may be paid to persons of professional or scholarly standing in conjunction with an academic activity.
  2. Honoraria may be paid to foreign visitors but subject to the restrictions of their visa classification.

C. Payments Not Qualifying for Honorarium 

  1. No honorarium payments may be made to a current employee, permanent, part-time, full-time or temporary.
  2. No honorarium payments may be made to a current student.
  3. An honorarium may not be based on a negotiated amount between the individual providing services and the individual seeking services.
  4. Any verbal or written negotiated agreement in which the university will be obligated to pay for services is a contractual arrangement and must be made in accordance with procurement regulations.
  5. Honorarium payments may not be used for independent contractors or consultants.

D. Allowable Rates and Procedures

Honorarium payments may not exceed $1,500 to an individual in one fiscal year.  If payment is $1,500 or more then the payment must follow the appropriate University procurement protocol (i.e. speaker, performer, independent contractor process).

Travel expenses may be reimbursed or paid directly on behalf of the guest, in addition to an honorarium, provided they are in accordance with the University’s travel policies.

An Honorarium may be paid in lieu of travel expenses directly to the individual.

1. Honorarium Payments

  • Honorarium payments to individuals that are US Citizens/Permanent Residents will be disbursed through the Accounts Payable office. If the recipient information does not exist in the Vendor Database, the department must submit a W-9 Form for the recipient.  All Honorarium payments will be reported on Form 1099 MISC.
  • Honorarium payments to individuals that are Non-Resident Aliens will be disbursed through the Accounts Payable office. If the recipient information does not exist in the Vendor Database, the department must submit a W-8 Form for the recipient.

    Honorarium payments to Non-Resident aliens are subject to Federal Tax withholding and reported on a Form 1042-S.  Federal Taxation of Non-Resident Aliens is dependent on the NRA Visa classification. VISA classification and Immigration status establishes if the NRA is allowed to receive an honorarium payment. 

2. Payments are NOT transferable.

  • An individual who assigns or transfers compensation for personal services to another individual or entity is not relieved of Federal income tax liability, regardless of the motivation behind the transfer. This includes donating the honorarium payment to the university.
Approval and Amendment

This policy was created by Office of Financial Operations and is effective November 15, 2019 and may be amended or terminated by the Senior Vice President of Finance and Administration.

Questions about the implementation of this policy or its interpretation should be directed to the Vice President for Finance and Technology.

Improper Expenditures

Agency purchases must be considered essential to the operation of the agency and in support of the agency’s mission to justify the use of State funds. Since all State-funded expenditures are subject to public scrutiny, agencies should consider the appearance of unusual purchases in general prior to authorization. Since individual circumstances vary widely, adequate documentation for unusual purchases should always be included with the voucher.

The following lists contain examples of expenditures considered to be improper uses of State funds. These lists are intended to provide general guidance to agencies in judging the appropriate use of State funds. However, any State-funded expenditure may be questioned, even those which are not included on the following lists.

Employee personal expenses such as—

  1. Books for classes (unless they remain property of the State)
  2. Snacks or refreshments (only allowed as a business meal, please refer to the Travel website)
  3. Baby sitting
  4. Non-business related newspapers or magazine subscriptions
  5. Personal articles that are lost or stolen
  6. Tuxedos or other formal wear
  7. Clothing (non-uniform) or repairs to clothing damaged in the work- place
  8. All expenses related to personal negligence of the employee, such as traffic fines.

Agency-sponsored event expenses incurred which do not clearly support the agency mission such as (please refer to the Local Fund Expenditure Policy for these types of purchases).

  1. Retirement parties or employee going away parties
  2. Holiday decorations
  3. Alcoholic beverages
  4. Charitable contributions
  5. Gifts and flowers
Prompt Payment Compliance

State agencies that acquire goods and services, or conduct business through contractual agreements with nongovernmental and privately-owned businesses, to pay by the "required" payment due date for delivered goods and services.

 The required payment due date is established by the terms of the contract; or if a contract is not in existence, thirty calendar days after the receipt of a proper invoice, or thirty days after the receipt of goods or services, whichever is later.

  • All payments to nongovernmental and privately owned businesses for the purchase of goods and services must be due dated. Departments should assign a payment due date of 30 calendar days after the receipt of the goods, services, or invoice whichever is later; or the due date specified in the vendor's contract.
  • However, in circumstances where an invoice has already been delayed more than 30 calendar days, and a contractual agreement exists with the vendor, or vendor relations are in jeopardy, an earlier due date may be assigned to expedite the payment.
  • In the event an original invoice has not been received, the agency should contact the vendor and request a copy of the original invoice. The agency should annotate the invoice copy as "Certified Copy." The "required" payment date should be calculated from the date the invoice copy is received from the vendor.
  • Disputed Invoices- Disputed invoices must be documented in writing by the agency. The vendor must be contacted within 15 calendar days after the receipt of the vendors invoice. Payments are due 30 days from the resolution date of the dispute.
  • The Code of Virginia, Section 2.2-4354 requires contracts awarded by State agencies to include a special payment clause which directs individual contractors to provide their SSN, and sole proprietors, partnerships, and corporations to provide their EIN. Invoices for vendors who refuse to provide such information are considered in dispute under the provisions of the Prompt Payment Statutes.
Virginia Sales Tax and Use Tax Exemptions

William & Mary (W&M) and the Virginia Institute of Marine Science (VIMS), as public institutions of the Commonwealth of Virginia, qualify for the Virginia retail sales and use tax exemption on purchases of tangible personal property for the use or consumption by W&M and VIMS (with certain exceptions). Therefore, all purchases made on behalf of W&M or VIMS must be made using a Commonwealth of Virginia Sales and Use Tax Certificate of Exemption (Form ST-12), regardless of the method of payment or institutional funds used. It is the responsibility of the individual initiating the purchase to alert the vendor to our tax-exempt status at the time of purchase, otherwise sales tax may be charged and the vendor is not required to provide a refund after the sale has occurred.

Reimbursements to employees for purchases made with personal funds or a personal credit card should only occur in emergency situations or for situations in which the procurement process or small purchase charge card cannot be used (please refer to the list of allowable reimbursements). In these instances, reimbursements of Sales tax is prohibited.

For additional information please click on the link below:
VA Sales Tax Exemption