Professional/Technical Contracts

Basically, when someone is asked to do something for the University and will be paid for it, there will need to be a contract involved. Whether it is thought of as an honorarium, stipend, or a small fee, these are all situations whereby something is being provided and a payment is expected to be made.  All cost centers (accounts) are required to use contracts for services including student organizations, student activities, grants, etc… However, 900 and foundation accounts only require the use of contracts when there are other funding sources involved in which case the rules of the other funds supersede.

Consultant and Service contracts are required when a person will be paid to perform tasks or services. These contracts are predominately “intellectual” in character and may include consultation analysis, evaluation, prediction, planning or recommendation of policies or courses of action, and they usually result in the production of a report. Object code 15xx “Professional/Technical Services” usually applies.

Instructional Contracts are defined as any activity undertaken related to classes, training or activities in support of classes and training. Use object code 1560 for these contracts.

Public Speakers and Entertainers involve a presentation or performance which entirely, or in part, is open to the public. The public would be considered to be those persons other than Minnesota State students and employees. For these contracts, use object code 1910. If such contractors are not residents of Minnesota, they may be subject to a 2% Minnesota Nonresident Entertainer Tax withholding. Examples of contracts where the 2% withholding applies include:

• non-resident classroom presenter, if open to the public and over $2,000;
• non-resident workshop presenter or keynote speaker, if open to the public and over $2,000;
• non-resident public speaker, if over $2,000; or
• non-resident entertainer, if over $600.

Further information on how to determine if a contractor's payment is subject to this tax withholding can be found on the Minnesota State Non-Resident Entertainer Tax web page.

Short Term Foreign Visitors and/or Foreign Contractors: See the Center for International Studies website for all types of short term visitors. Their focus now includes all (non-employee) foreign persons who visit St. Cloud State for a meeting, speaking engagement, provide a service, or are invited to do something else for or on behalf of St. Cloud State. Departments or groups many times invite foreign visitors to campus because they are in the country already for other business or pleasure and would like to have them come to campus and talk to their class or participate in an event while in the states. Often times, faculty or staff want to offer them transportation or give them a small payment to cover their expenses of coming.

This process includes those for whom there is no expectation of payments or reimbursements to be made as well. There are countless variables to take into consideration due to taxation, immigration as well as other matters. So, the intake process of all such visitors starts with CIS who will help the inviting department navigate through the proper channels to ensure all required documentation, legal and liability responsibilities have been addressed for the University and our visitors. If it is determined there must be a contract in place with the visitor, please require as much advance notice as possible in order to have time for processing paperwork for Immigration and IRS documents, contracts, possible 30% federal tax withholding, etc…Minnesota State tax services must review and approve the necessary documents prior to the offering of a contract to a person of foreign residency. The requesting department’s office manager and/or faculty member will need to work closely with the professional technical contracts coordinator in AS-122 during this process. More information can be found on the Minnesota State Nonresident Alien (Foreign) web page.

Contracts with legal firms are prohibited as our legal representation is provided through the Attorney General’s Office. If there is a need to contract with a firm for other reasons, the following language must be stated within the contract: “Contractor’s duties do not include providing legal services to the state within the meaning of Minnesota Statute 8.06”.

HR Determination: When intending to pay an individual, submit a completed Independent Contractor/Employee Status Form to Human Resources for approval prior to offering a contract. It will be determined whether this person should be paid as a contractor or an employee. Additional information is available regarding securing resources for Independent Contractors.

If approved for contracting, a purchase order can be processed and the signed form sent to Business Services along with the contract when ready for full execution.

All contract requests must be entered into the Purchase Control System with the purchase order released to 050 (funds encumbered) status prior to offering the contract for signature. In addition, there must be a valid (fully executed) contract on file with a purchase order status of 450 prior to the start of work in order to comply with M.S.16A. A fully executed or valid contract consists of all four authorized signatures. If a contract is offered for signature prior to an encumbrance or if work begins under a contract before it is fully executed, the person obligating the state is in violation of statute16A. 

Contracts containing erasures, cross-outs or white outs will be returned to the department to be redone unless the changes have been initialed and dated by all parties involved.

NOTE: Any alteration of the contract will require preapproval from the Attorney General’s Office.

Questions regarding payments to St. Cloud State University employees for work outside their normal duties should be directed to Human Resources.

For payments to other Minnesota State institutions for their employees to teach a course or guest lecture for St. Cloud State University, contact Human Resources. A purchase order is required for this expenditure.

Questions for payments to all other State employees (excluding University of Minnesota employees), should be directed to Human Resources. A purchase order is not required in this case.

Payments to students enrolled in 6 or more credits should be processed through student payroll.

Contracts over $50,000 require a formal bidding process with the purchasing department. 

Contracts over $100,000 require approval from the Minnesota State Colleges and Universities Vice Chancellor of Finance.  Certificate of Compliance is required.

Contracts using agency funds (900xxx accounts):  when only using 900 agency funds, contracts are not required.  However, if there are other funding sources involved in a payment in conjunction with this person coming here, a contract would then be required.  In this case submit a completed and signed 1400 form for the amount of the contribution to Purchasing. Be sure to reference the PO number of the contract it is to be connected with when sending it to purchasing. Note: It is prohibited to split pay something to a vendor in order to avoid procedure.

An example would be if an individual is coming to speak who will be reimbursed for their travel expenses along with being paid a small amount for compensation. The airfare will be paid using agency funds which may lead the responsible person to believe a contract is not needed. The same person is being paid $100 to speak from another fund so that department may be led to believe they would need to do an ISA for the $100 fee. Actually, this scenario would require the use of a Professional/Technical contract which would need to encompass the entire amount following all funding source guidelines, even for the 900xxx account or other portion.  Once Foundation or Agency funds are involved with other funding sources, the rules of those other sources govern the complete contracting and payment process.

Contract Signatures: Persons signing contracts must have prior delegation of authority from the current University’s President. This delegation is held by most Deans and VP’s who are authorized for various dollar thresholds. If unsure who should be signing contracts for your college, please contact the appropriate Dean’s Office. The order in which the contract is signed is determined by the signer of block #3. Many of our administrators prefer to sign prior to the offering of a contract while others prefer to review and sign the contract after the vendor has signed.

Contract Forms: It is best to avoid saving copies of the contract documents as they change along with any Minnesota State and/or state regulations, statue changes, etc… In order to avoid contract forms from being rejected, please always start directly from the following link for the most current document version.

Memo Screen: Use the memo screen to make notes to yourself or to Purchasing. Such as which type of contract is being used and if an HR determination or other documentation is being sent to Purchasing. Notes written in the memo will not print on the final documents. However, when duplicating purchase orders, be sure not to duplicate the memo as your notes most likely will not be relevant to the new purchase order.

External Reviewers: People from outside the University who have knowledge of what accreditation companies are looking for or have been through the accreditation process previously. They are hired to come in and work with the department and make suggestions. Contracts are required in order to process payments to these individuals. Their travel costs can be incorporated into the contract as an all-inclusive payment or separated out. If separated, it would require paid in full, itemized, original receipts and mileage documentation attached and submitted along with the Professional/Technical Contract Expense Reimbursement/Invoice for payment.

Contractor’s reimbursable expenses: Some contractors will prefer to avoid the hassle of submitting itemized receipts for reimbursable expenses and simply contract for a lump sum, all-inclusive amount, however, others will prefer to have their reimbursable expenses itemized in the contract. When reimbursable expenses are itemized within the contract, the contract should state that reimbursement will be sent to contractor within 30 days of receiving an itemized invoice with all itemized receipts attached. In this case, it is good practice to send a cover letter along with the contract so the contractor is fully aware of the need for itemized receipts and itemized invoicing. In addition, this is also a good time to explain the need to expedite the paperwork back to the University in a timely manner, etc. Bringing the contract with them to the event leaves little time for fully executing the contract and could result in a 16A violation.

Contractor’s expenses cannot be directly charged to the University and paid for directly with University funds or paid for by a University employee who would then request to be reimbursed. The state is prohibited from paying third party expenses and/or paying in advance. This includes but is not limited to the following:

• airfare, lodging, meals, rental car, taxi, mileage
• the use of state vehicles to provide contractor’s ground transportation 
• donations or thank you gestures in paying for contractor’s meal and then requesting to be reimbursed for it
• any supply or material expenses associated with contractor’s visit

In the case where a presentation or service is provided without charge, stipend, honorarium or any other type of compensation, contractor’s expenses may be reimbursed by entering a purchase order without a contract. Enter the reason the individual’s expenses would be reimbursed in the description of the PO. The individual will pay for their own expenses and later request reimbursement by submitting the Itemization and/or Invoice for Contractor's Reimbursement Form along with their itemized receipts.

Terms of Payment (Page 3): By statute the state has 30 days from the invoice date to make payment.  Clearly state what is expected of the contractor in order for them to be paid. 

If the contract is for one payment and does not have expenses separated out, it could be stated that payment will be processed within 30 days of receipt of an invoice. Or, if preferred, an authorization form can be printed at the time the contract is fully executed. It will be sent to the department responsible person who will hold onto the form until after the event takes place.  Once the duties are completed, the form is signed and sent to accounts payable for processing. Note: Once the purchase order is at 450 process, the system will not allow the printing of the authorization form.

Contracts with multiple payments: A Professional/Technical contract is required when there will be multiple payments made. Contractors are expected and should be told to keep track of their hours and/or reimbursable expenses they have incurred as they will not be paid any amount beyond what was agreed to in the contract. If changes need to be made, both parties must agree to them by entering into a fully executed contract amendment prior to the exhaustion of funds or expiration of the original contract. Multiple payments should be based on a set of duties, phases of work, etc… and should not be set up as a payroll check (every two weeks), etc…

Contract Attachments:  To expedite matching attachments to the correct purchase order, please use the suggested format below to staple to your documents before sending them to Purchasing:

DATE:
TO: Purchasing Department Contracting
FROM:
THIS ATTACHMENT BELONGS TO PO #_______________                                                        

It is always best to call with your questions prior to the event rather than afterwards.

Most requests for Consulting or Instructional Services under $3,000 are processed using a St. Cloud State University Individual Service Agreement (ISA) form (pdf) along with a HR approve Independent Contractor Employee Status Form. The ISA is for situations where there is only one all-inclusive payment for the vendor to be processed after the event. The Guest Lecturer Template can be used on low risk and less than $3,000. The standard Professional/Technical contract form may be used for contracts of any value but is required for those over $3,000 or those containing travel or expense reimbursements to the vendor.

Process

1. If the type of work requires an HR determination, submit a completed Independent Contractor/Employee Status Form to Human Resources for approval prior to offering a contract.
2. Enter your purchase order request through PCS using object code 15XX, 1910 or other appropriate object code. The description must always include the type of performance or presentation, duties, date(s) and location.
3. Complete the Individual Service Agreement (ISA) form prior to the event or performance. Be sure to complete all fields of the form in order to avoid processing delays.
4. Indicate in the PCS memo that the ISA form will be sent to Business Services after the event or presentation has taken place. This lets us know which contract you are using and which process need to be followed. Enter the Social Security Number, Federal Taxpayer ID Number or Minnesota Tax ID Number that was confirmed with the contractor to be used. Since vendors can have more than one tax identification number, you must always be sure you are contracting with them using the ID# they intended. If there are attachments, such as an HR determination, note this in the memo as well. Reference the PO# on the form and submit to the Purchasing Department.
5. Release your purchase order/ISA request to the Purchasing Department (050) status. The entry into PCS prior to the signing of the contract encumbers your obligation, thus avoiding a M.S. 16A violation.
6. Once the order is at the 050 status, the ISA can be sent to the vendor for their signature.  The vendor will need to sign and return this form prior to the event for liability purposes. Their signature must be original (not faxed) as this is a contract.  Meanwhile, once the PO is approved, it will be at 450 status. It will be printed and sent to your department.  The original can be used for your file copy or given to the vendor as a confirmation of the event to take place.

IMPORTANT! You must always make sure you have the original PO in hand or at least that the order is in the 450 status prior to the event.

After the ISA obligation is complete, the Authorized Account Representative should sign the ISA form and submit it to the Purchasing Department for payment. If you’ve promised the vendor payment within a certain amount of time, you must hand carry the form to accounts payable and let them know. Otherwise, it will go through normal payment processing.

Requests for Consulting or Instructional Services over $3,000 require a Professional/Technical contract. It is encouraged, whenever possible, to combine all amounts into compensation as an all-inclusive payment situation. Separating compensation and travel reimbursement will obligate the contractor to invoice us and/or complete the Professional/Technical Contract Expense Reimbursement form and attach the itemized paid receipts according to the commissioner’s plan and state travel policy. Note: Any contract situation which includes the reimbursement of travel expenses or requires payments to be made throughout the term of the contract, (regardless of the amount) must be processed using the Professional/Technical contract form:

• Professional/Technical Services contract (doc)

Process

1. If the type of work requires an HR determination, submit a completed Independent Contractor/Employee Status Form to Human Resources for approval prior to offering a contract.
2. Enter your purchase order request through PCS using 15XX, 1910 or other appropriate object code. The description must include the type of work, performance or presentation, date(s), location, etc…
3. Indicate in the PCS memo that the Professional/Technical contract is being used.  Enter the Social Security Number, Federal Taxpayer ID Number or Minnesota Tax ID Number that was confirmed with the contractor to be used. Since vendors can have more than one tax identification number, you must always be sure you are contracting with them using the ID# they intended.  If there are attachments, such as an HR Determination, note this in the memo as well. Reference the PO# on the form and submit it to the Purchasing Department.
4. Release your purchase order/contract request to the Purchasing Department (050 status.)
5. The Purchasing Department will pre-audit your request and the contract documents and proceed under the Minnesota State Colleges and Universities Purchasing guidelines. Your purchase order/contract request will remain in 230 status until the contracts become fully executed and valid with four signatures. If the request is not entered and approved in PCS prior to the date of the contract, you may be required to complete and return a letter of explanation (16A), before payment will be issued.
6. Complete the online Professional/Technical contract.  Be sure to reference the purchase order number on the front of the contract.  It is best to provide enough detail within the contractor’s duties in order to link phases of work to payment terms when there will be multiple payments made throughout the contract.
7. Obtain signature of approval in Block #3 on the last page of the contract. The College Dean or Associate Dean will likely have the authority to sign the contract.  Be aware of their delegation limits.
8. Send the contract to the vendor to sign Block #1.
9. Please note, all signatures on this contract MUST be original.  Electronic signatures are not an option at this time.
10. When the signed contract is received back from the vendor, indicate in the PCS memo the contract is being sent to Purchasing via intra-campus mail.
11. Submit one original contract to the contract coordinator in Purchasing, 122 Administrative Services. The original must remain in Business Services for audit purposes. If you wish to receive copies of the fully executed contract, you must submit those copies with the original. Once the contract is fully executed the copies will be returned to you.
12. If all Minnesota State Colleges and Universities purchasing requirements are met in the pre-audit, Purchasing will approve the contract by signing (#2 Verified As To Encumbrance and #4 As To Form And Execution.) The associated PO will be updated to status 450.
13. After the vendor has met their contract obligations, the responsible person verifies the vendor met these obligations by signing the professional/technical authorization form and returning it to the Purchasing Department for payment or by signing off on the invoice submitted by the contractor.
14. Please contact extension 8-3136 for procedure questions.

After a Professional/Technical Contract is fully executed, the terms that both parties are required to abide by have been set. A Professional/Technical Contract Amendment Form is needed to adjust or change any of the terms of an existing, fully executed contract (i.e. contract length, dollar amount, duties, etc.).

An amendment must be fully executed prior to the end date of the contract if extending the term and prior to additional work being done if extending the pricing. Any changes acted on prior to having a fully executed amendment will result in a 16A violation.

In completing the amendment form, please be sure to:

1. Enter the PO# and current amendment number at the top of page 1.
2. Delete any sections that have no changes to be made. 
3. Delete all “help” and instructional language in brackets and italics. 
4. In sections to be changed, copy and paste the information from the original contract to the amendment.  Use the strike-over option within your MSword toolbar to strike through the original information. Immediately following, enter the new information and/or pricing.  We must be able to see all prior and current information.
5. As with the original contract, amendments must have all original signatures to become fully executed and valid.

NOTE:  There are four required signatures. The signature blocks are in a different order than the signature page of the original contract so please pay close attention to who is signing in what blank. Those signing should be the same names that were on the original contract.

The IRS requires 30% federal income tax withholding on compensation paid to a “foreign national”, which includes a foreign corporation, foreign partnership, foreign trust, foreign estate and/or any other person who is not a U.S. citizen. This is required unless the amounts are either exempt under the terms of a tax treaty, or exempt from tax under the Internal Revenue Code. Generally, short term international visitors requiring contracts would be those who would be paid to perform, present or facilitate for the campus community or the general public.

Note: AN ITIN, SSN or other US TIN (Taxpayer Identification Number) is required in order to claim a tax treaty benefit to reduce or eliminate the 30% tax withholding. If they do not have an ITIN and wish to be exempt from withholding if eligible, they will need time to apply for one through the Federal System.

Helpful Hints for Foreign Contracts

• First and foremost, the more lead time allowed and the more information given can be crucial to having a seamless contract situation for all parties involved.  Many times it can take a while to nail down the specifics, get forms back and forth, etc…
• Please be aware, additional forms may be requested on an as needed basis and the process may become more involved if new information comes in to play throughout the process.
• We must secure prior approval from Minnesota State before hiring a non-citizen of the United States to determine possible eligibility and tax withholding requirements.
• If it is determined to be a contract situation, contracting with a foreign individual requires an Professional/Technical contract form to be used rather than an ISA regardless of the dollar amount due to the various needs surrounding non-resident alien vendors.
• All-inclusive contracts are always the easiest but not always wanted by the contractor.  It all depends upon how they take care of their tax issues.
• Meals (including Garvey), lodging (even the Hayman suite), ground travel (even if picked up by SCSU people) are the responsibility of the contractor. We cannot reimburse anyone else or pay for any of these items out of departmental, foundation, student fees, agency accounts or otherwise. Faculty and/or staff cannot pick up this person, then claim mileage or other expenses due to this person’s visit. In addition, the university cannot be direct billed by a third party vendor for anything in connection with your contractor. All expenses need to be accounted for within the contract.
• In other words, all expenses must be paid for by the contractor for which they will request and receive reimbursement in accordance with the current Commissioner’s Plan. Itemized paid receipts are required for invoicing and are to be stapled to the back of the contractor’s signed Itemized List of Contractor Expenses.
• Contracts containing erasures, cross-outs or white outs will be returned to the department to be redone unless the changes have been initialed and dated by all parties involved. Any alteration of the contract will require preapproval from the Attorney General’s Office.
• As always, please be careful not to make verbal promises that you may not be able to keep.

Process for Foreign Contracts

Once the requesting department has worked through the short-term international visitor process with Chee Moua-Yang, Center for International Studies (CIS), and completed the required International Visitor Worksheet, she will send the completed International Visitor Worksheet to Minnesota State Tax Services in order to determine their eligibility.

Business Services Contract Coordinator, Carol John will be notified by Minnesota State Tax Services of any additional forms or other requirements needed in order to fulfill IRS regulations and will then contact the department.

After all required documentation and approvals have been obtained, notification will be given to the department to proceed in offering the contract. Follow the steps for processing a Professional/Technical contract.

NOTE: If there is not enough time to process the contract through the mail, fax or email the contract with the Dean’s signature to the vendor to sign and return electronically. This ensures they are agreeing to the contract language and payment terms but is not yet a valid contract. The department will hold on to the “original contract” until the vendor arrives at which time the contract should be immediately signed by the contractor and then fully executed in Business Services as usual, prior to the start of work. We will be looking for any final immigration documents that may have been required upon entry at this time as well.

Please do not hesitate to contact Carol at x3136 with any questions or concerns.

Foreign Contractor Terms of Payment

It is always preferred for payments to be sent to contractors through the mail after their departure in order to allow processing time.  However, we are aware that in some countries it is next to impossible for individuals to cash these checks.  In this case, if the contractor is requesting payment prior to their departure, please see below.

• If the contract is for compensation/honorarium only, it is possible to request the pull warrant from St. Paul.  The contract needs to reflect this information on Page 3, section 3.b.i.  Also, enter this information in header page 2 of the purchase order under instructions to vendor as well as entering this information in the PO’s memo field.  We must have two weeks lead time in order to receive the check back from St. Paul prior to the contractor’s departure.  Provided that all required forms and immigration documents have been submitted and approved along with a signed additional authorization form from the inviting department, the check may be presented to the contractor after their duties are completed and prior to U.S. departure.

• If expenses are involved a pull warrant may be possible prior to departure provided that all required forms and immigration documents have been submitted and approved along with an itemized invoice and corresponding original itemized expense receipts, all showing a zero balance due.  Again, we must have two weeks lead time in order to receive the check back from St. Paul prior to the contractor’s departure.