UK Internal Audit (UKIA) has recently engaged or completed several reviews across the university during which similar concerns pertaining to inappropriate payments to employees were noted. UKIA noted that each of these cases involved a UK employee being paid as a vendor to perform work or provide a service and, in each of these cases, UK policies were not being followed.
UK has a number of policies that are designed to work collectively to help prevent, catch and/or ensure that occurrences such as these are vetted and properly approved, monitored and compensated. It is imperative that each unit follow them to protect the university and avoid improper payments to vendors.
Policies Related to Vendor Payments
Vendor Selection
The BPM Section B-2 General Purchasing and Contracting Authority prohibits purchases and contracts from being “made with an employee of the University of Kentucky for any item of supply, equipment, or service.” These situations clearly indicate this policy is not being followed. While certain exceptions may be made in the event of sole source providers and, in health care, when it is a medication or therapy deemed to be best approach for a patient, in general, using a company owned by a UK employee is unallowable. UKIA attributes use of employees as vendors to a lack of communication regarding the policy noted above and the ability to bypass the established processes for engaging and vetting vendors:
- Supplies: Units should always verify that the vendor they want to use is listed in the SAP vendor database. If the vendor is not listed, the unit should follow the steps to onboard a new vendor in the PaymentWorks system found here (see BPM B-3-1 Use of Existing Contracts).
- Services: Units should verify that a university unit or state personnel cannot provide this service. If it cannot be provided, the unit should complete a Standard Contract for Personal Services and submit it to Purchasing for approval.
Employee Compensation
Hours and wages for UK employees performing work in a department outside their primary unit should always be paid through HR Compensation – never on a ProCard (BPM Section B-3-2 III.B. Delegated Procurement Policy for Departments; HR Policy and Procedure #30 Compensation Administration). Additionally, the following steps must be taken:
- The completion of a Worker Status Evaluation Form is also required to be completed and submitted to Human Resources in order to determine if the worker is already an employee and if not, whether that person should be classified as a temporary worker or an independent contractor (BPM E-7-3 Worker Classification Employee or Independent Contractor).
- Non-exempt staff working in two or more departments of the University creates a concurrent employment situation which requires the advance approval of managers from both units. The employee should enter all hours worked in SAP and the department where the employee primarily works should bill the department temporarily requiring the employees’ services for the appropriate hours. The payment should be made via a funds transfer (BPM Section B-3-2 III.B. Delegated Procurement Policy for Departments; HR Policy and Procedure #30 Compensation Administration).
- When an exempt employee is needed to perform work in another department, the requesting department should complete a Staff Internal Overload Form and submit to Human Resources for approval (Administrative Regulation (AR) 3:9 Consulting and Other Overload Employment).
Expense Reimbursements for Vendors
Food, catering and other expenses incurred by an employee while serving in an external vendor capacity should always be included as part of the total services being provided per the vendor quote or contract and therefore paid according to the type of service being provided, per the AP Quick Reference Guide. Vendor expenses should not be paid via the employee reimbursement process using the UK employee PERNER form.