SECTION OVERVIEW AND POLICIES

The purpose of this section is to advise Business Units that the Office of the State Comptroller (OSC) approved the use of select payment tolerances (tolerances) in the Statewide Financial System (SFS) for preferred source, centralized contract, and discretionary purchases; effective when the first SFS enterprise enhancements are implemented in October 2015.

Prior to establishing tolerances, if a Business Unit entered a voucher with a price contractually higher than the price on the related PO, even if the price varied by only ten cents, the voucher would fail matching. This situation required Business Unit staff to create a change order for the PO to correct the voucher match exception.

As a result of establishing tolerances, Business Units are able to maximize the matching functionality in SFS without having to process as many PO change orders for variances that result in small dollar match exceptions.

For select items, tolerances allow for slight variations in price between purchase orders (PO) and vouchers during the matching process. The actual tolerance value varies based on the category code specified on the purchase order line(s). These select items typically have contractually volatile prices, such as fuel and milk products, or slight variances in quantities provided, such as small overruns for printing services. In these instances, Business Units are contractually required to pay the established price as of the delivery date, or the number of copies provided. In both of these cases, Business Units may not be able to accurately anticipate the prices or quantities when creating the PO.

Tolerance values are not subject to publication. For each category code specified on the purchase order line(s), a tolerance is systematically applied during the matching process.

Select tolerances are systematically applied during the matching process to allow a voucher to match a purchase order when there is a minimal difference between the (i) invoice/voucher unit price per line item and the PO unit price per line item; or (ii) the total line item cost of the invoice/voucher and the total line item cost of the PO. By applying tolerances, the SFS allows the voucher to process without a match exception and ultimately result in payment to the vendor without Business Unit staff intervention.

Business Units are required to process PO change orders for POs with match exceptions. If a PO fails matching, the tolerance has been considered and the variation in price between the PO and the voucher exceeds the allowable tolerance level for the item. Tolerance values may change over time as more information is available and studied.

All requests for changes in tolerances should be made to the Director of the Bureau of State Expenditures at [email protected]. The Business Unit should provide the Director with a detailed reason for requesting the change in tolerance and documentation and other analysis supporting the need.

Business Units should not process invoices for payment that include prices higher than those on the related PO, unless:

• There is a contractual or other legal obligation to do so, or
• Business Unit staff included a lower price on the PO in error and the invoice includes the correct price.

When a vendor submits an invoice that has a price higher than the price on the PO without a legitimate reason, such as the ones listed above, the Business Unit should promptly return the invoice to the vendor for correction.

Note: This section does not pertain to purchases made from Business Unit Contracts. Tolerances are not applied to purchase orders and vouchers associated with Business Unit contracts.

Process and Transaction Preparation:

Preferred Source, Centralized Contract, and Discretionary Purchase

The tolerance is applied to the category code referenced on the purchase order line. To take full advantage of the purchased item’s tolerance, Business Units should select the category code with the appropriate level of detail most closely associated with the item being purchased. For example, if a Business Unit is purchasing food products, including milk, and milk is a purchase that typically fluctuates in price, the Business Unit should create a PO line that references the milk category code for the milk purchase and a separate PO line that references the appropriate food category code for purchase of the additional food products.

A reasonable tolerance is applied to purchases comprised of items susceptible to price fluctuation. Vouchers with purchase prices that do not exactly match the purchase order, but are within the tolerance limit, pass matching. As a result, Business Units do not need to process change orders for purchases where the item being purchased is subject to price fluctuation, as long as the increased price falls within the tolerance level. However, if a voucher is created and the price of the item is outside of the tolerance limit, the voucher fails matching. In these instances, the Business Unit must resolve the match exception. For more information about matching, please see Chapter XII, Section 8.B – Matching of this Guide.

Business Unit Contract Purchases

For contracts let by the Business Unit, tolerances are not applied to the associated purchase orders and vouchers. In these instances, the pricing on the goods or services being purchased is established in the contract; therefore, a tolerance is not appropriate.

Guide to Financial Operations

REV. 7/6/2015