Inappropriate Business Practices
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Inappropriate use of Departmental Purchasing Authority is any action that is
determined to be a poor business practice, or is taken to circumvent the
limits of authority, or is illegal. Inappropriate use is of concern because
it normally results in increased administrative processing costs and may
result in higher goods/services costs. These added costs are avoidable if
prescribed limits are observed.
The department head determines who may exercise purchasing authority in the department and is responsible for correct use of that authority. If the purchasing authority is abused, the department head is encouraged to take the appropriate actions relevant to the circumstances. Appropriate actions include written memo, reducing the authorized spending limit, suspending the authorized spending limit, and/or disciplinary action.
Examples of inappropriate use:
Conducting discussions or negotiations with vendors in an unethical manner or a manner that violates the Standards of Conduct and Ethics.
Making repetitive small orders to the same vendor when it is feasible to combine similar requirements. This is a poor business practice. It results in the creation of excess documentation and administrative processing that is costly to the university.
Splitting a requirement to produce multiple orders, each valued under $2,000, is an example of circumvention. The total requirement should be determined. If it exceeds $2,000, it should be placed on a Requisition for Purchase form and sent to Purchasing.
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Exception: For P-Card holders. There are situations where
two or more employees travel on the same itinerary. In these circumstances,
each ticket is regarded as an individual transaction, not the total amount
of all the tickets. The same holds true for conference registrations, each
registration is regarded as an individual transaction.
Example 1: You are purchasing three tickets/registrations, each valued at $1,000. These may be purchased and will be regarded as three separate $1000 transactions (not a $3,000 order that has been split).
Example 2: You have a $2,000 transaction limit on your card and you are purchasing three $2,100 tickets/registrations. If these are processed in the following manner, $2,000, $2,000, $2,000 and $300, this would be regarded as a violation of authorized business practices because the $2,100 transaction was split and exceeded the $2,000 delegated transaction limit. Solution: You may request to have your card limits temporarily raised to accommodate these transactions.
Renting an item of equipment that costs $400 per month for 10 months is an example of poor business practice and circumvention. The total requirement is for $4,000, not 10 separate purchases at $400 each. Further, it is likely that the cost can be reduced if competitively bid.
Asking a vendor to produce multiple invoices, each valued at less than $2,000, is an example of a poor business practice being employed to avoid detection that the delegation limits have been exceeded. This results in excess administrative processing costs for both the vendor and the university....not to mention that the transaction records have been falsified.
The Purchasing Department will randomly review a department's transactions. Any apparent inappropriate use of the Purchasing Authority will be discussed with the ordering department. Purchasing will evaluate the severity of any violation and make a decision accordingly. The decision of the Purchasing Department will be final with respect to these determinations.
Last Updated: March 23, 2005