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New York State Accounting System User Procedures Manual

Volume Name
CONTROLS AND SPECIAL PROCEDURES
Volume
XI
Date
3/15/85
Section Name
Special Payments - Non-Employee Payments
Section
6.0100

     This section describes guidelines to determine when a payment to-an individual, other than an employee, who rendered a service to the State meets the non-employee definition. Individuals who meet non-employee definition are paid by voucher and those who are determined to be an 'employee' must be paid via the payroll process. This procedure does not apply to payments to individuals for reimbursement of expenses. Reimbursements of expenses are covered in other sections of this manual.

STATUTORY AUTHORITY

Federal Social Security Act
Section 115 of the State Finance Law
Section 112 of the State Finance Law

GUIDELINES TO DETERMINE A NON-EMPLOYEE

     Payments by-voucher should only be made to an individual when it can be determined that the individual acts as an independent contractor in providing the service. The following general description is provided to agencies in determining if a voucher can be used to pay an- individual:

     An independent contractor is one who agrees to do a specific piece of work for a lump sum or its equivalent, who has control of himself and his helpers as to when, within a reasonable time, he shall begin and finish the work; as to the method, means or procedure of accomplishing it; and who is not subject to discharge because he does the work as to method and detail in one way rather than another. Often he furnishes his own tools and supplies.

AGENCY'S RESPONSIBILITIES

1. Each agency is responsible for determining if payments to individuals through the voucher processing system clearly meet the tests of "independent contractor".

2. Each agency is responsible for developing adequate documentation to support the fact that a voucher payment to an individual meets the "independent contract" test. The rationale justifying this determination may be required before a voucher will be paid. If the actual facts of the situation establish that an employer/employee relationship exists, the individual will be treated as an employee even though the agency may have submitted a contract; payments then will have to be made on the State payroll system.

3. If the payment for services to be rendered by an independent contractor will exceed $5,000 within a fiscal year, a contract should be entered into and submitted for review and prior approval.

4. Contracts are not necessary in those cases where payment is based on a state-wide approved fee schedule (e.g., medical fee schedule or stenographic services rate schedule). When a contract is not feasible or practical because of special circumstances, this should be discussed and cleared with the department.

5. Each agency is responsible for establishing whether an individual to whom a voucher payment is planned is, or has been, on the payroll of the State at any time during the current calendar year. The State encompasses any department, board, commission, etc, that has its payroll processed by OSC. The legislature, its commissions, and the judicary are included as the State.

Generally, if an individual is-an employee of the State and provides services to another department, board, etc, of the State, he/she must be paid for these services as an employee. The extra service procedures of the State payroll system provides a method of making these payments.

EXCEPTIONS

     Payments to employees who provide a product or lease property or equipment to the State are not governed by these extra service provisions. These payments can be made in the State voucher payment system. Agencies should be aware of the appearance of conflict of interest in dealing with State employees who provide goods or lease equipment or services.

HONORARIUMS

     Payments to individuals for an honorarium, either for services rendered or in lieu of expenses, are governed by this section. In most instances, an honorarium payment meets the independent contractor definition and can be paid on the voucher processing system.

PROCESSING VOUCHERS FOR NON-EMPLOYEES

     Processing vouchers for payment to individuals that comply with this Section can be made in accordance with the existing procedures as outlined in the User Procedure Manual, Volume III, Encumbrances and Expenditures, Section 7. In all instances, payment to individuals require the individuals social security number to be entered in the payee identification block and a 'N' entered in the 1099 code block of the voucher.

REPORTING 1099

     The State is required to report to the Federal government all payments made to individuals during the calendar year. The Federal government can assess a fine against the State for each individual reported without a social security number or an employee with an incorrect social security number. The Federal government receives the State's payroll records and voucher payment records, so it is important that agencies comply fully with the intent of this Section.