FMPM 290 Prepayments

Intent

The intent of this policy is to set out the requirements regarding the approval of, security over and management of prepayments.

Scope

Definitions (Related Glossary Terms)

Bank Guarantee

Financial Delegate

Prepayment

Policy

• Prepayments represent funds paid in advance of receiving the goods or services to which the payments relate.  They are a purchasing activity and accordingly  must comply with  FMPM 710: Policy - Purchasing and FMPM 291: Procedure – Prepayments.

• The goods or services to which prepayments relate may be received at one future point in time or continually over a period of time in the future.

• Prepayments for transactions (excluding travel related expenses) of less than $5,000 will be expensed directly and not apportioned over the time period for which the expense relates.

• Travel related expenses will be expensed in the period in which the travel is undertaken.

• The main types of Prepayments made by the University are:

• “Up Front” Payments for Goods and Services; and

• Part Payments.

Up Front Payments for Goods and Services include:

• Corporate Credit Card purchases in circumstances where goods and services are paid for at the time of placing the order, prior to delivery of the associated goods/services; and

• Certain goods and services, by their very nature, require payment in advance of being supplied. Common examples of these include:

• subscriptions and memberships;

• utility costs (e.g. rates and insurances);and

• travel costs.

Part Payments

• A supplier may request the University to pay a percentage of the value of an order in advance of the goods/services being delivered. This is most common with larger orders of specialised equipment, where the supplier incurs costs related to the manufacture and/or shipping of the goods.

Security

• The financial responsibility and risks associated with prepayment transactions rests with the Faculty or Division undertaking the transaction.

• Prior to approving a  prepayment, the Financial Delegate must assess the financial risk and take appropriate action to secure the prepayment.  In assessing the security of prepayments consideration should be given to the provider’s reputation, prior dealings, and the economic conditions prevailing in the provider’s industry.

• An option available to secure a prepayment is a Bank Guarantee.  A Bank Guarantee represents a guarantee made by the Bank that the Bank will pay the beneficiary (JCU) the sum stipulated on the Guarantee.  A Bank Guarantee must:

• be in the name of James Cook University;

• be for a sum not less than the University’s maximum exposure;

• cover the period between the date of the payment and the expected date of when the goods/services will be delivered; and

• be forwarded to the Manager, Finance & Taxation, Financial and Business Services.

• The management of Bank Guarantees is the responsibility of the Chief Financial Officer.

For enquiries in relation to this FMPM Policy please contact [email protected]

Administration

Approval Details

Revision History