June 30, 2016
A considerable portion of the expenditures of every government is for purchases of supplies and equipment. The purchasing function includes the entire process of securing goods and services suitable to the needs of the governmental unit, when needed and at the most economical price, in accordance with applicable law and regulations.
l. The best method of providing for the government's purchasing is to centralize responsibility for this process in one officer whose responsibilities include:
a. Purchasing for all departments according to the rules and regulations established by the General Statues and the chief executive
b. Supervising the delivery of all material
c. Supervising or operating central inventory warehouses
d. Maintaining a file on price quotations of supplies most frequently purchased by the unit
e. Maintaining other supplemental data to assist in making purchases at the best prices possible
2. Using centralized purchasing, more complete accounting control can be obtained and accurate financial reports can be prepared readily. Vendors are allowed to deliver material for the account of the governmental unit only on the basis of an official purchase order issued through approved channels.
Prior Approval Requirements
Certain procurements require prior written approval by or through the Division of Social Services in order for the costs incurred to be eligible for state and federal financial participation. Procurement items are mentioned in more detail in the next few pages.
G.S. l59-28 requires that a preaudit certificate appears on the face of each contract or purchase order, and that it be signed by the county finance officer before it becomes an obligation of the governmental unit.
An agreement that obligates the governmental unit in excess of the amount appropriated is void as to the governmental unit and could become a personal liability of the employee who made the agreement. "An obligation in violation of this employee incurs an obligation...in violation of this section; he and the sureties on his official bond are liable for any sums so committed..." (G.S. l59.28 (e))
A requisition should be initiated by the department requiring purchased commodities and forwarded to the purchasing agent. The requisition shows the quantity and type of commodities needed, the purpose for which they are to be used, and the date required. Two copies are prepared, the original going to the purchasing agent and the duplicate remaining in the department that requisitioned the commodity. Upon receiving the requisitions from the various departments, the purchasing agent notes the commodities needed and where appropriate, solicits bids from various vendors. When price quotations are received, the purchasing agent prepares a purchase order to the vendor offering the best price for the quality and type of commodity required; this is then sent to the finance officer so that he may verify the availability of funds.
The basic document in the purchasing system is the purchase order. A purchase order should be issued for all materials or supplies purchased by the agency. No invoice may be honored for such commodities unless it is supported by a properly signed purchase order. The purchase order should be prenumbered, and should include complete specifications or reference to specifications, as well as shipping and invoicing instructions. The finance officer must determine whether a sufficient balance remains in the budget or appropriation to liquidate the invoice when it is received, and may not validate any purchase order unless sufficient funds are available to pay the obligation when it is due. G.S. l59-28 requires a preaudit certificate signed by the finance officer to appear on the purchase order.
Except in certain cases listed in G.S. l43-l29, contracts for construction or repairs costing $500,000 or more and contracts for the purchase or lease purchase of supplies, materials, or equipment costing $90,000 or more require the use of formal bidding and contracting procedures. Dividing contracts to evade these requirements is prohibited by G.S. l43-l33.
Contracts for construction or repairs costing from $30,000 to $500,000 and purchases or lease-purchases of apparatus, supplies, materials, or equipment costing from $30,000 to $90,000 require the use of an informal bidding process. Quotations from vendors on price and availability may be solicited by phone, letter, catalog prices, or similar methods. Dividing contracts to evade these requirements is prohibited by G.S. l43-l33.
Receipt of all goods and services by the governmental unit should be reported to the purchasing agent so that the status of all purchase orders issued may be monitored and controlled. The purchasing department should ensure that it is provided with sufficient receiving information to enable it to ascertain the date, quantity, description, and condition of receipts.
2. Payment of Vendors' Invoices
The purchasing agent should provide to the accounting department, on a timely basis, documents and data needed to consider/approve vendors' invoices. This should include a copy of the purchase order with expected prices when issued, receiving data (if not provided directly from the receiving department), returns/allowances data, and advice of any exceptions or discrepancies noted between goods and/or services ordered and those received.
Procurement of ADP equipment is subject to the standards of competitive selection imposed by Article 8 of General Statute 143. In addition, such procurement is subject to the standards imposed in OMB Circular A-102 (Attachment O) and in 45 CFR 74 (Subpart P) which include a requirement for the maximum degree of practical, open, and free competition, regardless of whether the procurement is made through the use of formal advertising or through negotiation.
Acquisitions of automated data processing equipment (hardware and software) and services are also governed by federal regulations of the Department of Health and Human Services (USDHHS) and the Department of Agriculture, Food and Nutrition Service (USDA). Prior written approval must be obtained from both the DIRM and the federal government (if USDHHS and/or USDA will be participating in any of the costs) in any of the following circumstances:
a. The total acquisition cost is $5 million or greater (45 CFR 95.611, 7 CFR 277.18(c), Policy IIA1). For counties, this threshold is based on annual total costs for the State Fiscal Year.
b. The total acquisition cost is $1 million or greater, and is acquired noncompetitively from non-governmental sources (45 CFR 95.611, 7 CFR 277.18(c), Policy IIA2). For counties, this threshold is based on annual total costs for the State Fiscal Year.
c. Federal Financial Participation (FFP) is being requested at an enhanced rate, regardless of the acquisition cost (45 CFR 95.611, 7 CFR 277.18(c)).
d. If an acquisition does not require DIRM and Federal approval under the three circumstances above, DIRM prior written approval is required, regardless of acquisition cost, if the project includes any of the following (Policy IIA4):
i. Development of software
ii. Custom modification of purchased software
iii. Purchase of specialized human services software other than off-the-shelf software commercially available to the public for general business or personal use
DIRM and/or federal approval is obtained by submitting an Advance Planning Document (APD) to the Division of Social Services (45 CFR 95.611, 7 CFR 277.18(c), Policy IIA). Prior written approval thresholds for county acquisitions are determined based on the cumulative total for the fiscal year (Policy IIG).
Prior approval is not required for certain types of acquisitions and FFP is available at the regular rates if the acquisition does not require prior written approval by DIRM and /or the federal Government as described above. An ADP Equipment Acquisition Plan must be filed with the Division of Social Services prior to the expenditures being claimed for reimbursement. To ensure that expenditures will be eligible for reimbursement, counties may wish to submit their plan before acquisition of the equipment. Items purchased which are subsequently not approved must be funded with 100% county dollars. Acquisitions in this category are:
a. Terminals, personal computers, personal computer printers or workstations up to the level of one such device per worker.
b. System printers up to one per three workers or one per floor or one per site, whichever is greater.
c. Local area networks or minicomputers when necessary to maximize the benefit of such devices and other devices as required when connecting with the State network.
d. Off-the-shelf software commercially available to the public for general business or personal use.
Acquisitions by central county data processing facilities of data processing equipment and services from commercial sources that are acquired primarily to support public assistance programs are subject to the prior written DIRM and federal approval requirements. Data processing equipment and services are considered to be primarily acquired to support public assistance programs when these programs may reasonably be expected to either be billed for more than fifty percent (50%) of the total charges made to all users of data processing equipment and services during the time period covered by the service agreement or directly charged for the total cost of the purchase or lease of data processing equipment or services (45 CFR 95.605).
Federal regulations allow equipment with a unit cost of $5,000 or less to be expensed, rather than depreciated, regardless of the total cost of the acquisition. ADP equipment is also subject to the use and disposition requirements that are covered in 45 CFR 74, Subpart O.
For questions or clarification on any of the policy contained in these manuals, please contact your local county office.