SECTION OVERVIEW AND POLICIES

This section provides agencies with information related to the issuance and maintenance of purchase orders.

Overview

A purchase order (PO) is an ordering document authorizing a vendor to provide goods or services at a dollar amount within the agency’s authority as set in law or by contract. The PO communicates critical information to the vendor including the contract number, specific goods or services ordered, price and delivery date, thereby supporting agency and vendor collaboration.

Using a PO establishes a consistent communication process between all agencies and vendors. Creating the PO in the SFS enables the State to (i) establish proper internal controls over the purchasing function, (ii) enhance procurement intelligence, (iii) better manage planned cash spending and (iv) include Appendix A – Standard Clauses for New York State Contracts. Furthermore, creating the PO in the SFS as an ordering document gives an agency the ability to roll the PO over a closeout period, preventing the need to reenter the PO at the start of a new period.

In the SFS, the PO drives the agency’s ability to effectively manage procurements (e.g., vendor invoices, receiving information, vouchers and payments). To facilitate this, agencies must include adequate details in the PO line(s) to describe the specific goods or services ordered as well as the related price(s).

Agencies must also properly configure POs for receiving, which includes selecting the unit of measure that is in accordance with the contract or most closely associated to what is being purchased. For example, when an agency creates a PO for temporary staff services, and the contract specifies a unit of measure of “hours,” the agency should set up the PO using the same unit of measure. Configuring POs with the correct unit of measure may prevent match exceptions with the associated vouchers in the SFS. For more information, please refer to Section 9 - Receiving of this Chapter and Chapter XII, Section 8.B – Matching of this Guide.

In addition, agencies should ensure POs include relevant payment discount terms. For more information on these topics, please refer to Chapter XII, Section 5.F - Selecting the Appropriate Payment Terms of this Guide.

Note: The use of stand-alone POs as a contract agreement above the OSC pre-approval threshold is no longer supported. Agencies must create these agreements as Procurement Contracts in the SFS and follow the business process outlined in Chapter XI, Section 3 – Purchase Orders Subject to OSC Review of this Guide.

Policies

Effective April 1, 2018, agencies are required to use a PO for all single purchases of $10,000 or more (or where the use of a PO is otherwise required per contract terms) from any vendor that has a classification as a “procurement supplier” in the NYS vendor file. In addition all purchases from an agency contract require the use of a PO regardless of the dollar value of the contract.

This policy, subject to the exceptions listed below, is applicable regardless of whether the agency intends to pay the vendor with a check, electronic payment (ACH) or with the PCard. For more information on the different types of vendors, please refer to Chapter X, Section 4.A – Vendor Classifications of this Guide. For more information on using the PCard, please refer to Section 4 - Procurement Card Use of this Chapter.

For online agencies, in cases where the agency plans to pay for a purchase using a PCard, the agency must check the box on the PO to indicate the use of the PCard, and then select the applicable masked PCard number from the drop down menu. Alternately, where applicable, the agency may select these options on a requisition, which will be carried forward to the PO.

Agencies must ensure POs reference the appropriate payment and discount terms offered by the vendor applicable to the purchase.

It is a best practice for agencies to use POs for all planned purchases. The following types of purchases are exempt from the mandatory use of a PO, but agencies may use POs for these purchases if the PO adds value:

• Utilities (including, but not limited to purchases of power, water, sewer and telephone service)
• Interagency bills
• Petty cash replenishment
• Postage meter replenishment
• Courier services
• Arbitration services
• Legal settlements
• Centralized contract purchases made outside of the SFS through vendor ordering systems where prices are variable, for example:
  • Purchases of prescription drugs (e.g., Cardinal Health)
  • Purchases of perishable foods (e.g., Sysco, Driscoll)

The Division of Budget (DOB) manages and monitors agency spending through financial planning ledgers and a budgeting tool in the SFS called the Payment Schedule Projection (PSP). The PSP method uses specified system functionality associated with a PO that allows DOB to predict when spending will occur; therefore, agencies must specify the PSP method in the PSP type field on a PO. For more information on PSP, please refer to the Division of the Budget’s Bulletin B-1217.

Process and Transaction Preparation:

A PO can be directly entered or can be created from a purchase requisition (PR). Agencies should enter POs in accordance with the guidance below and its own internal business practices.

Online Agencies

Purchases from an Agency Contract

Once an agency contract is approved in the SFS, the agency must issue a PO to spend against the associated contract, regardless of dollar amount.

Preferred Source, Centralized Contract and Discretionary Purchases

Agencies should use a purchase requisition to begin the purchasing process for planned purchases from preferred sources, centralized contract vendors, and discretionary purchase vendors. Approved PRs are auto-sourced to POs; once approved, POs should be dispatched to the vendor for fulfillment. For more information, please refer to Section 2 – Purchase Requisitions of this Chapter. For emergency-related purchases where the agency is unable to create a PO prior to purchase, the agency may start the process with a confirming PO.

Scheduled Lead Times

The Scheduled Delivery Due Date should communicate to a vendor the required date the agency plans to receive the goods or services being ordered. On each PO line, the Scheduled Delivery Due Date will automatically populate as the current date plus the default lead time. Lead times are specified by category code but can be changed by agencies after evaluating the appropriateness of the populated date based on the contract and expectations set forth with the vendor. For additional instruction on this topic, visit job aid default lead times by category code published to SFS Coach. SFS Coach is accessible from the SFS home page after logging in with your SFS user ID and password.

Applying Credits

The vendor may provide an agency with a credit for previously paid goods or services. The agency should create a credit adjustment voucher which will allow the credit to be applied to the original payment voucher and the related purchase order. If the purchase order has not yet been closed, the credited quantity/amount will be restored to the purchase order to allow receiving and payment for replacement goods.

If the associated purchase order is closed, the agency should still create a credit adjustment voucher. This will allow the credit transaction to properly impact any applicable budgets and contract balances; however, it will not restore the purchase order. It is not a best practice for the vendor to issue an invoice that contains both charges and credits. The agency should instruct the vendor to issue the credit separate from the invoice, and encourage them to access the eSupplier portal to obtain information to assist with this process.

Accumulating credits from previous purchases to apply them to a future purchases is not best practice; it does not allow the agency to take advantage of the credit as early as possible.

Bulkload Agencies

Purchases from an Agency Contract

Bulkload agencies must include the contract ID and contract line on the PO line when the agency sends a bulkload file to the SFS.

Preferred Source, Centralized Contract and Discretionary Purchases

For centralized contract purchases, Bulkload agencies must include the contract ID and contract line on the PO line when the agency bulkloads a file into the SFS. Bulkload agencies are required to adopt PO policies similar to this one for use in their agencies’ systems (excluding POs where the payment method is the PCard).

All Agencies

Trade-In Allowances

The vendor may provide an agency with a trade-in allowance (i.e., fixed discount), on the price of new goods, such as equipment, in exchange for providing the older goods back to the vendor. To record this in SFS, the agency should create a negative line on the same purchase order used for the new items to properly account for the allowance amount.

For additional instruction on this topic, visit job aid related to creating and using purchase orders published to SFS Coach. SFS Coach is accessible from the SFS home page after logging in with your SFS user ID and password.

Guide to Financial Operations

REV. 12/10/2018