FY 2017

Summary: FY 2017 Private Vehicle Mileage Rates

As authorized by K.S.A. 75-3203a, the Secretary of Administration has fixed the private vehicle maximum mileage reimbursement rates for FY 2017 at:

54¢ per mile for privately owned automobile

51¢ per mile for privately owned motorcycle

19¢ per mile for moving mileage rate

$1.17 per mile for privately owned airplane (based on air miles rather than highway miles)

These rates were effective January 1, 2016 and remain unchanged.

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Summary: State of Kansas Encumbrance Policy

Informational Circular 17-A-004 introduces a new statewide accounting policy for encumbering agency obligations.  The three methods for encumbering in the Statewide Management, Accounting & Reporting Tool (SMART) are purchase orders, travel authorizations and General Ledger (GL) encumbrance journals.

The new encumbrance policy resides in Policy Manual (PM) Filing number 10,300 – Statewide Encumbrance Policy, and can be found at:  https://admin.ks.gov/offices/chief-financial-officer/policy-manual. 

PM Filing 10,300 identifies obligations that are required to be encumbered as well as obligations that are not required to be encumbered but are optional for agency budget management.  In addition, best practices are found in the attached document.

Please note:  The following payments remain under review pending a determination of any encumbrance requirement:

• Payroll expenditures and remittance of payroll taxes, deductions and garnishments
• Single Pay voucher payments

The provisions of PM Filing 10,300 should be followed in conjunction with all requisition and purchase order requirements issued through the Office of Procurement & Contracts.

PM Filing 10,300 will be effective January 1, 2017.

The Department of Administration recognizes the significant impact this will have on agency processing.  A six month transition period will allow agencies the opportunity to review and amend internal procedures and processes necessary for compliance with the statewide encumbrance policy.  Auditing by the Agency Audit Services Team of the Office of the Chief Financial Officer for compliance with the statewide encumbrance policy will begin July 1, 2017.

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Attachment:
Best Practices – Statewide Encumbrance Policy
 

Summary: Clarification on Agency Purchasing Authority

This informational circular is being issued to define the basis for determining the level of authorization necessary for agency purchases from a single supplier during the budget year.

K.S.A. 75-3739(e) allows the Director of Purchases, with the approval of the Secretary of Administration, to delegate authority to any state agency to make purchases of less than $25,000.  Under this statute, the Director of Purchases has generally authorized for state agencies to spend up to $5,000 with one supplier during each fiscal year.  The fiscal year has been defined to be equivalent to the budget year.  Under this authorization, the agency has the ability to spend up to $5,000 with one supplier using their delegated purchasing authority during a budget year, in addition to any spend which occurs using a prior authorization and/or state contract.

Example:  An agency has a contract with a supplier for shoes.  The agency has already purchased $10,000 of contracted items.  With the same supplier, the agency makes a purchase of socks for $500 for which there is no contract.  The agency can use their delegated purchasing authority for the $500 purchase of socks without approval from the Office of Procurement and Contracts.  If the agency discovers later in the same budget year that they need to buy an additional $4,500 of socks, then authorization from the OPC must be attained prior to the commitment to purchase the additional socks.

Please see the chart below.
 

Amount of Allowable Agency Spend with a Supplier in a Single Budget Year
 

For individual purchases with one supplier which are under $5,000, but total spend for the supplier is $5,000 or greater for the budget year, approval from the OPC is required unless the items for that supplier are already on state contract or a prior authorization has already been obtained.  See the attached document which provides instructions on how to obtain OPC approval.

Attachment
 

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Summary: New Account Codes for KPERS Working After Retirement 3^rd Party/Independent Contractor Expenditure Tracking

As a result of the implementation of KPERS Working After Retirement (WAR) 3^rd Party/Independent Contractor member contributions, a new account code has been added to SMART to use for employer contribution expenditure tracking. The following account code is eligible to be used starting immediately.

Account Code                    Description                                                   Short Description           

518101                                ER KPERS WAR 3^rd PTY/CNSLNT               SHARP REQ    

This account code is to be used to track non-payroll employer contributions for KPERS WAR 3^rd Party/Independent Contractor member type ACTR that are not tracked in SHARP. Agencies are reminded that they will need to work with KPERS to establish reporting procedures and billing frequencies for these members. As these member contributions are not tracked in SHARP agencies are required to be billed via a SMART interfund for amounts due to KPERS. Agencies should use SMART account code 518101(ER KPERS WAR 3^rd PTY/CNSLNT) to record the expense side of the interfund.

Any interfunds that have been processed using any SMART account code other than 518101 will need to be corrected by creating a journal voucher in the Accounts Payable module, not Interfund module See the How to Enter a Journal Voucher job aid for instruction on entering the AP journal voucher. The payment method on the Payments tab of the journal voucher may need to be changed to ‘CHK’ in order to save the journal voucher. Submit a ManageEngine Service Desk ticket if you need additional assistance.

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Summary: Revised Clarification on Agency Purchasing Authority

This informational circular is being issued to define the basis for determining the level of authorization necessary for agency purchases from a single supplier during the budget year.

K.S.A. 75-3739(e) allows the Director of Purchases, with the approval of the Secretary of Administration, to delegate authority to any state agency to make purchases of less than $25,000.  Under this statute, the Director of Purchases has generally authorized for state agencies to spend up to $5,000 with one supplier during each fiscal year.  The fiscal year has been defined to be equivalent to the budget year.  Under this authorization, the agency has the ability to spend up to $5,000 with one supplier using their delegated purchasing authority during a budget year.   Please note that any spend which occurs using a prior authorization will also accumulate toward the $5,000 delegated purchasing authority limit.

Example A:  An agency has a contract with Payless (supplier) for shoes.  The agency has already purchased $10,000 of contracted items.  With the same supplier, the agency makes a purchase of other items for $1,000 for which there is no contract.  The agency can use their delegated purchasing authority for the $1,000 purchase of other items without approval from the Office of Procurement and Contracts (OPC).  If the agency discovers later in the same budget year that they need to buy an additional $4,500 of other non-contract items, then authorization from the OPC must be obtained prior to the commitment to purchase the additional items.  The non-contract spend (agency delegated authority) now exceeds the agency delegated purchasing authority amount.  Any further plan to purchase non-contract items from this supplier would require additional authorization from OPC.

Example B:  An agency has determined they need to purchase $10,000 of items for which there is no contract from a particular supplier.  The agency must seek Prior Authorization from OPC before a commitment is made to purchase the items.   Before submitting for the Prior Authorization, the agency should consider additional multiple purchases to this supplier during the remainder of the budget year and submit the Prior Authorization for that projected amount.  Since the Prior Authorization was equal to or greater than $5,000, the agency has no additional agency delegated purchasing authority remaining with that supplier for the budget year.  

Please see the chart below.

Amount of Allowable Agency Spend with a Supplier in a Single Budget Year

For individual purchases with one supplier which are under $5,000, but total spend for the supplier is $5,000 or greater for the budget year, approval from OPC is required unless the items purchased from that supplier are already on an OPC-approved contract.  

See the attached document which provides instructions on how to obtain OPC approval.

Attachment

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Summary: Travel and Expense payments must be paid using direct deposit payment method starting May 1, 2017.

As required by the Secretary of Administration’s 100% electronic payment policy issued May 21, 2010, beginning May 1, 2017, the Office of the Chief Financial Officer (OCFO) will require direct deposit for employee travel advances, travel reimbursements, and miscellaneous reimbursements generated within the SMART Travel and Expense module.

Details for Implementation

All employees must have direct deposit (ACH-Automated Clearing House) as the payment method for payments generated from the SMART Travel and Expense module.  Any travel and expense payments for employees set-up with System Check as the payment method will remain unpaid until the agency establishes the Automated Clearing House information within the employee’s profile in the Travel and Expense module.  The following steps should be taken to replace a System Check payment method with the Automated Clearing House payment method for travel and expense payments:

• For employees who will be receiving travel and expense payments and do not have banking information established in their SMART employee profile, agencies should ask for the employee to complete Form DA-184, Authorization for Direct Deposit of Employee Pay and/or Employee Travel and Expense.  The employee must select one bank account to be used for their travel and expense payments.
  • The form can be downloaded from the Department of Administration web site: Document Center 
  • Employees have the option of using a State of Kansas Paycard as a means of receiving their travel and expense payments.  Employees can be referred to your agency’s human resource and payroll staff to obtain a paycard.  The employee can then complete the DA-184 including the paycard routing number and account number for the bank information.
• The agency must update the employee’s SMART Travel and Expense profile.
  • For information on how to enter direct deposit information into employee profiles, please see the job aid available on SMARTWeb: http://www.smartweb.ks.gov/ .   Go to Training, Travel and Expenses, T & E Job Aids, Adding a Bank Account to an Employee Travel Profile.

A new SMART query has been created to identify active employees with ‘System Check’ as the payment method on the employee profile where the employee has been paid by check within a user-defined date range.  The query is named KS_EX_EE_CHECK_PAYMENT_LIST. 

Summary: Increased fraud prevention practices regarding changes to SMART supplier information. 

Fraudulent re-direction of direct deposit (ACH-Automated Clearing House) payments is a crime that targets all businesses and entities. While the Office of the Chief Financial Officer is unaware of any successful attempts at re-routing payments, fraudulent attempts to request changes to supplier ACH accounts have been reported.  These attempts have been very sophisticated.  Unauthorized individual(s) submitted information via email that contained email addresses and company logos that appeared to be from the supplier.  In addition, these unauthorized individuals may have contacted multiple state employees to obtain different pieces of information in order to not raise suspicions.

Fraud prevention tips:

• DO NOT provide a supplier with any account or identifying information. The supplier should already have that information.
• If the person requesting the change of supplier information is unfamiliar to you, confirm the individual requesting the form does exist at the company and is authorized to make the change requested.
  • Contact the person you normally deal with at the supplier to verify the requestor’s identity.
  • Establish a relationship with a new supplier by using a known phone number for the supplier.  Do not use a phone number submitted with the request or on the email communication.  Use the contact information from the invoice.
  • Ask the supplier/individual requesting the change to confirm the current account number and/or invoice number.  

DA-130 Authorization for Electronic Deposit of Supplier Payment form:
The DA-130 form has been updated to incorporate additional verification needed to validate banking update requests.  The DA-130 is not a public document; therefore, the DA-130 is not published on the Department of Administration’s website and should not be published on agency websites accessible to the public. Agencies acquire the DA-130 form by creating a ManageEngine Service Desk ticket. To maintain the security of the form, agencies are responsible for providing DA-130 forms directly to suppliers upon request in lieu of providing access on an agency website.

It is important that processes and procedures to reduce the risk of account fraud are developed and are put into practice both when a DA-130 form is requested and when completed DA-130 forms are received.  Do not send the DA-130 form to suppliers/individuals who cannot confirm their identity.

DA-130 form completion/submission:

• The DA-130 form must be filled out by the supplier or an authorized representative and cannot be completed by the agency.
  • The DA-130 (Rev. 05-2017) form requires the supplier provide a recent payment amount and date. DO NOT give them this information. If they do not know, direct the supplier to the Vendor Payment Self-Service website https://admin.ks.gov/offices/chief-financial-officer/central-responsibilities/vendor-payment-self-service
  • An official bank letter, voided check, or deposit slip must accompany the completed DA-130 form.  The bank document must contain the bank name, routing number and account number as well as the supplier’s name.  A letter from the supplier with the bank information is not acceptable.
    • The bank document must be submitted with the DA-130 form as an additional attachment when creating the ManageEngine Service Desk ticket.

• When a DA-130 form is received by your agency, review for completion.  Incomplete forms will not be accepted.
• Verify that the request is from the supplier and complete the agency certification on the DA-130 form.
• The updated job aid for the DA-130 form is located at: http://smartweb.ks.gov/training/accounts-payable#Suppliers

   

Adding the Supplier to SMART
Attach the DA-130 form and bank documentation to the supplier record in SMART. A hold will be placed on any new ACH information for a supplier that does not have the correct documentation attached.

DA-130C Cancellation of Electronic Deposit of Supplier Payment form:
The DA-130 form no longer contains a cancellation section.  A DA-130C form has been created to cancel an ACH payment method for a supplier.  The same level of due diligence achieved in applying fraud prevention processes and procedure in establishing or changing ACH payment information for suppliers using the DA-130 form shall also be applicable for cancellations using the DA-130C form.

TM-21 SMART Supplier Information Change Request form:
The TM-21 form has been modified to include supplier phone number and email to allow agencies to store confirmed contact information.  Changes to supplier information using this form should also be confirmed with the supplier.  Confirmation is recorded by completing the agency certification section. 

Summary: Increasing SMART ACH Participation Rate

In a continued effort to streamline work processes and to reduce the cost of state operations, the Department of Administration is encouraging agencies to review current business practices to increase ACH (Automated Clearing House) participation for SMART payments. ACH is the payment method whereby the payer initiates an electronic payment that is directly deposited into the payee’s bank account. This informational circular provides guidance for increasing agency ACH participation.

As detailed in Informational Circular 17-A-010, effective May 1, 2017 the required payment method for SMART Travel and Expense reimbursements is ACH. Although not required, best practice is for agencies to use ACH as the payment method for all SMART supplier payments. There are some types of agency payments that may not be easily or quickly converted to ACH payments; however, agencies should review their business process and develop a transition plan to utilize ACH as the payment method in the future.

Details for Implementation of Supplier ACH Initiatives:

New Suppliers

• At the time an agency starts doing business with a new supplier, the agency is expected to request completion of both a Form DA-130 (Authorization for Electronic Deposit of Supplier Payment) and a Form W-9 (Request for Taxpayer Identification Number and Certification) from the supplier. The agency must enter the ACH information as the new supplier is being entered into SMART as well as attaching the DA-130, banking documentation, and W-9 to the supplier record. The ACH location should be checked as the default payment location. If the appropriate documents are not attached, the supplier or the supplier’s ACH location will be placed on hold.

Suppliers Receiving Payments from Multiple State Agencies

• The Office of the Chief Financial Officer will contact the set of suppliers identified on Attachment A to request the supplier accept ACH payments from all state agencies. The list includes suppliers who received paper checks from more than nine agencies during the first quarter of 2017. No action is needed from agencies for the suppliers on this list.   
• As ACH information is added to SMART for the suppliers listed on Attachment A, notification will be provided so agencies will know when they can begin using the ACH payment method.

Most Frequently Paid Suppliers Currently Receiving Checks:

• Agencies should use the public query KS_AP_PAYMENT_CHK_COUNT to get a count of check payments by supplier for a given payment date range. The results should be used to identify which suppliers to target.  Moving the most frequently paid suppliers to ACH will yield the biggest cost savings. The following steps are recommended to transition these suppliers to ACH: 
  • View the supplier information in SMART to determine if ACH information exists:  Suppliers > Supplier Information > Add/Update > Supplier > Location tab, view all locations:
    1. If ‘SYSTEM CHECK’ is listed as the only location description, the supplier does not have ACH account information in SMART.  A DA-130 form should be sent to the supplier.  Once the form is completed and returned, the agency-verified DA-130 form and banking documentation should be submitted to the Supplier Team through the ManageEngine Service Desk. The Supplier Team will enter a new location in SMART and will designate it as the default payment method so the ACH payment method can be selected for future payments.
    2. If ‘ACH ****’ is listed in the location description, verify the effective status indicates an active account and the location is not on hold. The agency should use the last four digits of the ACH location description to confirm with the supplier that the ACH in SMART can be used for their agency payments. (The last four digit of the bank account number are always used as the last four digits in the ACH location description.) Once confirmed, the agency should begin using the ACH location for all SMART payments.
    3. If ‘ACH****’ is listed in the location description and the effective status indicates an inactive account, the location is on hold, the agency is unable to confirm the ACH information with the supplier, or the supplier is requesting use of different banking information, a DA-130 form should be sent to the supplier. Once the form is completed and returned, the agency-verified DA-130 form should be submitted to the Supplier Team through the ManageEngine Service Desk. 
    4. The agency may request maintenance to the supplier record to set the ACH location as the default by submitting a ManageEngine Service Desk ticket if the supplier has only one ACH location.

The Department of Administration provides a web page for suppliers receiving payments from the State of Kansas so details of their payments can be viewed. Payment information on the page is available for thirteen months following the issue date. Suppliers can access the self-service payment web page here.  A job aid titled “Vendor Self-Service Payment Look Up” can be provided to suppliers using this web site and is available on SMARTWeb, http://www.smartweb.ks.gov/, by going to Training > Accounts Payable > Suppliers.

Attachment

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Informational Circular (IC) 17-A-004 was issued on October 11, 2016 to introduce the new statewide accounting policy for encumbering agency obligations effective January 1, 2017.  

The encumbrance policy resides in Policy Manual (PM) Filing 10,300 – Statewide Encumbrance Policy, and can be found here.

PM Filing 10,300 identifies obligations that are required to be encumbered as well as obligations that are not required to be encumbered but are optional for agency budget management.  In addition, best practices are found in the attached document.

As stated in the policy, the three methods for encumbering in the Statewide Management, Accounting & Reporting Tool (SMART) are purchase orders, travel authorizations and general ledger (GL) encumbrance journals.

Agencies are reminded that the Agency Audit Services Team of the Office of the Chief Financial Officer will begin auditing for compliance with the statewide encumbrance policy effective July 1, 2017.

IC 17-A-014 is issued to provide supplemental information on payments exempt from the encumbrance policy. 

Supplemental information to the encumbrance policy:

Additional obligations that are generally not required to be encumbered but are optional for agency budget management include:

• Out-of-state travel where the supplier is not known until five business days prior to the travel occurring.
• Recording of expenditures of a local fund (petty cash and imprest funds).
• Inmate wages paid through agency imprest funds.

However, the above obligations are required to be encumbered at fiscal year-end, or if specifically required by the Office of Procurement and Contracts (OPC).

Canteen funds, work therapy funds, benefit funds, trust funds and employee use funds are examples of funds that have private funding which is not held in the state treasury, thus they are exempt from the encumbrance policy.

Please note:  The following payments remain under review pending a determination of any encumbrance requirement:

• Payroll expenditures and remittance of payroll taxes, deductions and garnishments
• Single Pay voucher payments

The provisions of PM Filing 10,300 should be followed in conjunction with all requisition and purchase order requirements issued through OPC. 

SMART vouchers without a purchase order will be pushed back to the agency for compliance.  To assist agencies as they work to educate staff for compliance with the encumbrance policy, the following dates will be used in reviewing AP vouchers:

• Effective July 1, 2017, purchase orders with a budget date subsequent to the invoice date will result in an audit finding.  
• Effective July 1, 2018, purchase orders with a budget date subsequent to the date of service or order/purchase will result in an audit finding.

Effective July 1, 2017, SMART expense reports with no existing travel authorization or GL encumbrance noted will be identified as an audit finding (unless exempt per PM 10,300). 

For guidance on fiscal year closing and determination for all obligations, please see PM Filing 14,002 – Fiscal Year Closing Including Fiscal Year Determination.

Attachment:

Best Practices – Statewide Encumbrance Policy

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