Requirements
Purchase Order management is a standard procurement process practiced by companies to ensure every purchase is relevant, rational and cost-optimized. Purchase Order Management is necessary as UC Merced uses encumbrance accounting and all purchase orders are encumbered and should be used to manage department budgets.
(See a PDF version of this page)
Types of Purchase Orders
Standard purchase order
Most common purchase order used at the university. Used for one-time orders that are not expected to be made regularly. Standard POs require specific information from vendors and are not meant for long-term usage. They are typically used for goods and, depending on the dollar value, can be purchased with a Procurement Card. (allowable or restricted purchases for P-Cards).
After being fully invoiced, these purchase orders will be closed automatically via a centralized process.
Annual purchase order
Used by departments to request a 12-month PO for monthly goods. Issued as an agreement with a vendor for future purchases in the current fiscal year in which the quantity of the items is unknown. Annual purchase orders include the same details as a standard purchase order, with the exception that the quantity of items remains unspecified, along with delivery details.
These purchase orders should be closed at the end of every fiscal year.
Agreements or Duly Executed Contracts
An agreement or a contract that states there will be legally binding services or goods in the future and provides deliverables for when they occur. These purchase orders should be closed when the performance period of the contract has concluded. Purchase orders can be created for one of two options and will be based on the requestor’s discretion, the vendor's need or funding agency’s requirement.
1. Purchase Orders have the flexibility to be generated for the complete value of the agreement during the relevant budget period. Although the funds will be encumbered based on the budget period, the
Purchase Order is granted approval for the entire amount. It's important to be aware that the terms and conditions specified in the agreement or the properly executed contract will undergo a review during the purchase order creation process, and they may supersede the department's requested amount setup.
2. Purchase orders can be created for the current fiscal year only; this will encumber the current year's funds and contain terms and conditions that cover the multi-year agreement. At the end of each fiscal year, a line will be added to the purchase order to update the amount to reflect the next year. This process will continue until the performance period of the agreement has been completed. Note: Terms and conditions outlined in the agreement or duly executed contract will be reviewed upon purchase order creation and may override department request for amount setup.
Agreement or Duly Executed Contract Extension: To extend an existing agreement or duly executed contract, engage a procurement commodity manager for assistance.
Applicability
This process is applicable for all purchase orders being processed on behalf of the University of California, Merced.
Responsible Individuals
All individuals requesting purchase orders
Process
All purchase orders will be reviewed to ensure allowability based on the above requirements as well as UC policy, state and federal regulations.
Fiscal Year End
A budget carry-forward exception must be requested and approved by Financial Planning and Analysis for all purchase orders entered after the fiscal year-end close deadline. Purchase orders submitted after the fiscal year end close will automatically be entered and encumbered in the following fiscal year.
Controls
All purchase orders will be reviewed based on the guidance above. Purchase orders are to be managed at the department level and are the sole responsibility of the department to ensure funds are available. Once a purchase order is fully executed, unless canceled, there is no way to prevent invoice payment to the vendor.
Exception Management
There are no exceptions to this process.
