AAC-31-11-00005-P Authorizing Alternative Proofs for Audit by the Comptroller of State Payments

8/3/11 N.Y. St. Reg. AAC-31-11-00005-P

NEW YORK STATE REGISTER

VOLUME XXXIII, ISSUE 31

August 03, 2011

RULE MAKING ACTIVITIES

DEPARTMENT OF AUDIT AND CONTROL

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. AAC-31-11-00005-P

Authorizing Alternative Proofs for Audit by the Comptroller of State Payments

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

Proposed Action:

Repeal of Parts 6 and 21; and addition of section 3.13 and new Part 6 to Title 2 NYCRR.

Statutory authority:

State Constitution, art. V, section 1; State Finance Law, sections 8(14), 109, 109-a and 110

Subject:

Authorizing alternative proofs for audit by the Comptroller of State payments.

Purpose:

To authorize the submission of electronic claims for payments by the State and to update the rates for overtime meal allowances.

Text of proposed rule:

Section 3.13 is added to Part 3 Title 2 of NYCRR as follows:

Section 3.13 Overtime meal allowances.

(a) Overtime meal allowances are paid through the New York State payroll system. Overtime meal allowances shall be granted when it is necessary and in the best interest of the State for an employee to work at least three hours overtime on a regular working day, or at least six hours on a day other than a working day. When an employee is required to work nine hours on a day other than a working day, two overtime meal allowances will be allowed.

(b) The overtime meal allowance rate is $6.00 for represented employees and Management Confidential employees.

(c) This section is not applicable to overtime meals of employees in travel status whose expenses are subject to the provisions of travel rules and regulations, nor to employees of departments, agencies, schools or institutions where meal service facilities are available and where it is the policy to provide meals for employees required to work overtime.

(d) The Office of the State Comptroller may issue further guidance in the form of manuals and guidelines from time to time.

Part 6 of Title 2 of the NYCRR is repealed and replaced as follows:

PAYMENTS OF VENDOR CLAIMS AND STATUTORY EXPENDITURES

6.1 Standard forms for claims.

All claims against the State for the delivery of materials, supplies and equipment, for the rendition of services by nonemployees, or for sums due under construction contracts, employee reimbursements, or petty cash reimbursements must be rendered in a format approved by the Comptroller or on a vendor invoice used in the normal course of the vendor's business. Claimants may elect to submit claims in either an electronic format, which may include a data transmittal, an image or other approved format; or a paper format.

6.2 General requirements for claims.

Each claim must be specific and submitted in compliance with State Finance Law § § 109 or 109-a to the agency against whom the claim is made. Claims for services rendered or articles furnished must show when, where, to whom and under what authority the services or articles were rendered or furnished. Claims presented for supplies, materials and equipment must show a detailed description of each item, the quantity of units, the price per unit and the total thereof. Claims submitted for employee travel reimbursements must identify the distance traveled, between what places, the duty or business for the performance of which the expenses were incurred, and the dates and items for each expenditure. If a claim is submitted in paper format, the form must be typewritten or completed in ink. Certification of claims shall be governed by section 6.3 of this Part. If a claim is made for a purchase under contract, the claim must be sent by the vendor to the designated payment office designated by the agency in accordance with Article 11-A of the State Finance Law, and the contract number must be given. If a claim is made for a purchase pursuant to a purchase order, the claim submitted must reference the purchase order in accordance with purchase order procedure. Each claim must contain an invoice number or other unique identifier to enable the identification of the payment issued in satisfaction of the claim. Claims lacking such notation will be considered incomplete and may not be processed.

6.3 Certification of claimant.

All claims submitted to the State must contain a certification by or on behalf of the party submitting the claim to the effect that the claim is just, true and correct, that no part has been paid, except as stated therein, that the balance therein stated is actually due and owing, and that taxes from which the State is exempt are not included therein; provided that no certification shall be required where a claim is submitted through an invoice used in the vendor's normal course of business. Each certification must be signed by the claimant, or authorized representative thereof, whose title must be shown in the space provided therefor. On electronic claims, the certification must include a valid electronic signature in compliance with Article III of the State Technology Law, the Electronic Signatures and Records Act.

6.4 Agency review of claim.

Upon receipt of a claim, the agency shall review the claim to determine whether it is due and payable in whole or in part under the applicable statute, appropriation, contract or purchase order.

6.5 Agency claim certification.

The head of the department concerned, or such authority in the department as has been designated by the head of the department by a rule or written direction, must certify to the Comptroller that the claim as approved is just, true and correct and therefore appropriate to pay. The agency certifier should satisfy himself or herself that acceptable evidence of receipt and/or inspection is on file. The submission of claims by State agencies to the Comptroller's Office shall be made by an electronic transfer of information into the Statewide Financial System, either directly, or indirectly through the state agency's financial management system. The submission of claims shall be certified by the agency certifier by entry of the unique identification and password that identifies the agency certifier. This unique identification and password is provided by either (i) the Statewide Financial System for those agencies submitting information directly or (ii) the agency's financial management system for those agencies submitting information indirectly.

Electronic certification by a designated officials shall be deemed the equivalent of a conventional written certification by such individuals and shall constitute such individuals' certification that the information entered into the Statewide Financial System, or the agency's financial management system, is correct and just and that payment is approved and the goods or services rendered or furnished are for use in the performance of the official functions and duties of the agency. The individual shall be subject to the same penalties for improper certification that would be applicable if the individual had made such certification in writing.

6.6 Certification of internal controls over the payment process.

(1) Each agency must maintain adequate internal controls over the payment process to support the validity of the agency claim certification. The agency should establish sufficient internal controls over claims processing to ensure claims are appropriate to pay. These controls must include, but are not limited to, the following:

(a) To the extent feasible, separation of duties relating to vendor registration, ordering, receiving and payment functions;

(b) To the extent feasible, separation of on-line data entry of claims from claim certification functions; and

(c) Security over authorized access to agency controlled systems in the form of operator identification and passwords.

(2)The commissioner or head of each agency will be required, annually or upon change of commissioner or agency head, to submit an Internal Controls Certification to the Comptroller's Office certifying that the agency has established such a system of internal controls over the payment process.

6.7 Supporting documentation and retention of records.

(a) Any claim entered into the Statewide Financial System shall be supported by sufficient original source documentation including, but not limited to, a vendor invoice or a vendor claim and a receiving report.

(b) No hard copy material shall be delivered to the Office of the State Comptroller unless specifically requested by the Office of the State Comptroller. However, all such original source documentation and other agency records in support of financial transactions must be retained in accordance with records disposition schedules approved by the State Archives and Records Administration. Agencies must maintain effective audit trails to such records and upon request provide the records promptly to the State Comptroller via electronic transmission or hard copy.

6.8 Appropriation titles.

All claims must identify the appropriation or appropriations being charged, and for such purposes, the appropriation titles furnished by the Comptroller must be utilized. Where articles purchased from two or more appropriations are billed on the same claim, the claim must show the amount chargeable to each appropriation in the space provided therefor.

6.9 Claims for reimbursement of cash expenditures.

Claims for reimbursement must be supported by receipted bills maintained by the state agency. Claims for reimbursement to the petty cash account will name the petty cash account as the claimant. Except where otherwise specifically authorized, claims against the State should be paid only from established, authorized funds.

6.10 Cash discounts.

It is the policy of the State to take cash discounts for which the State is eligible. The agency shall identify any discounts available and the conditions and restrictions applicable thereto and establish the extent to which the State qualifies for such discounts.

6.11 Prepayment of certain expenses.

Claims for certain articles may be paid in advance of receipt. Such articles will be limited to articles normally prepaid, such as postage, subscriptions and rent. Appropriate documentation must be maintained at the agency.

6.12 Agency reconciliation of claims to payments.

If the amount of any claim is reduced, or the claim is rejected in the Comptroller's audit, the certifying agency must notify the claimant. Subsequent to payment, the Statewide Financial System will provide each agency with a record of payments made on behalf of the agency. Agencies should use these records as a basis for posting and reconciliation to expenditure records.

6.13 Petty cash account.

The head of a department or agency may request that a petty cash account be established for his or her department or agency in accordance with section 115 of the State Finance Law. The monies in the account shall be used in accordance with accounting policies and procedures established by the Comptroller.

Part 21 of Title 2 NYCRR is repealed.

Text of proposed rule and any required statements and analyses may be obtained from:

Jamie Elacqua, Esq., NYS Office of the State Comptroller, 110 State Street, Albany, New York 12236, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Same as above.

Public comment will be received until:

45 days after publication of this notice.

Regulatory Impact Statement

1. Statutory authority: Pursuant to Article V. section 1 of the State Constitution and section 111 of the State Finance Law, the Comptroller is charged with auditing all vouchers before payment. Section 109 of the State Finance Law describes the proofs that must be provided in connection with the submission of claims to the Comptroller for audit. Section 109-a of the State Finance Law gives the Comptroller authority to prescribe, by regulation, for a system whereby State agencies, vendors and providers of services provide proofs required for payment upon audit without the submission of vouchers or invoices, including paperless or electronic vouchers. State Finance Law section 8 authorizes the Comptroller to operate and maintain and, at his discretion, revise and modify a state accounting and financial reporting system.

2. Legislative objectives: The proposed rules, which incorporate a number of provisions in the regulations being repealed, describe generally the process for the submission of claims to the Comptroller for audit. The proposed rules reflect the Comptroller's determination that, in the interests of efficiency and environmental sustainability, documents, approvals and certifications necessary to audit State payments should, to the maximum extent possible, be submitted to the Comptroller in the form of electronic transactions within the State Financial Services Online System ("SFS") (as has been the case previously under the Comptroller's "QuickPay Voucher Payment System"). As required by section 109-a, the Comptroller has determined that this alternative format "offers the same degree of accountability and control as provided for in the paper format established by the provisions of sections 109 and 110 of the State Finance Law" and, indeed, it is believed that the new format will offer an improved degree of accountability and control.

3. Needs and benefits: These amendments to the NYCRR are necessary to implement the State's new central accounting system, the SFS, currently scheduled to "go live" in October 2011, which will require that all State agencies submit claims through the SFS. Specifically, the proposed regulations will prescribe the method by which claims are submitted and certified by vendors, employees, other claimants and State agencies. While vendors, employees and other claimants may submit claims by hard copy or electronically, agencies will be required, upon receipt of a claim, to certify and forward the claim to the Comptroller's Office for audit electronically.

In connection with the adoption of these procedures, "Part 21 'Quick Pay' Voucher Payment System" is repealed, however; many concepts of Part 21 are incorporated into the new "Part 6, Payments of Vendor Claims and Statutory Expenditures". This is because under the SFS, the entire State payment system will function in a way similar to the current Quick Pay system.

4. Costs:

a. Cost to regulated parties: It is anticipated that the proposed regulations will not impose significant increased administrative costs on State agencies because agencies are already submitting most claims electronically. However, to the extent there will be increased costs on State agencies for interface with the SFS, there is an appropriation available to State departments, State agencies and public benefit corporations for the development and implementation of SFS. Claimants, who are not State departments, State agencies or public benefit corporations, have the option of submitting documentation electronically or in paper format. There should be no new costs for such claimants, since their costs should be the existing, normal business costs for billing, except where claimants choose to submit claims electronically, in which case, it may reasonably be expected that the costs will be less (since otherwise the claimant, presumably, will elect to continue to submit claims in paper format).

b. Cost to the agency: The Office of the State Comptroller will utilize the same appropriation as discussed above.

c. Source/methodology: The appropriation was made by section 1 of chapter 50 of the laws of 2008 to the Division of the Budget, and transferred and re-appropriated to the SFS pursuant to the provisions of chapter 50 of the laws of 2010.

5. Local government mandates: To the extent that local governments submit claims to the State, they will be required to comply with the proposed regulations; however, since they will be claimants, the rules do not require that local governments submit claims to agencies electronically.

6. Paperwork: As noted, these proposed rules are intended to minimize the paperwork submitted to the Office of the State Comptroller by allowing vendors, employees, and other claimants to submit all claims electronically, and by requiring State agencies to process claims through the SFS.

7. Duplication: Section 305 of the State Technology Law prohibits State agencies from requiring any person to submit or file any record electronically, except as otherwise provided by law. The proposed rules permit, but do not require, any claimant to submit their claim electronically. However, the proposed rule does require State agencies to process claims, after receipt and approval by the agency, electronically through the SFS. The Office of the State Comptroller believes that this requirement is permitted under section 305 based upon the provisions of section 109-a of the State Finance Law that authorize the Comptroller, by regulation, to establish a system whereby proofs required for audit of State payments are submitted electronically.

8. Alternatives: No significant alternatives were considered.

9. Federal standards: There are no federal standards relating to the submission of claims to the State Comptroller's Office for audit.

10. Compliance schedule: All vendors, employees, other claimants and State agencies are expected to comply with the proposed rules upon the implementation of SFS.

Regulatory Flexibility Analysis

1. Effect of rule: The proposed rules, which incorporate a number of provisions in the regulations being repealed, describe generally the process for the submission of claims to the Comptroller for audit, and will aid in the implementation of the State's new central accounting system, the Statewide Financial System (SFS). The regulations provide that claims by vendors, employees and other claimants, including small businesses and local governments, may be submitted by hard copy or electronically, and that agencies will be required, upon receipt of the claim, to certify and forward the claim to the Comptroller for audit electronically. The rules will affect all businesses, small and large, and all local governments throughout New York State who do business with, or submit claims to, the State of New York. An estimated 80,000 businesses/vendors will be affected. Although we are unable to easily estimate the number of small business and local governments that will be affected, it is reasonable to assume that most local governments submit claims to the State of New York.

2. Compliance requirements: The proposed rules include a description of the procedures whereby claimants, including small businesses and local governments, submit claims to the State. The proposed regulations provide that claims by vendors, employees and other claimants may be submitted by hard copy or electronically, and that agencies will be required, upon receipt of the claim, to certify and forward the claim to the Comptroller for audit electronically.

3. Professional services: No professional services will be necessary to comply with these proposed rules; however, it will be necessary to have internet access if small businesses or local governments choose to provide claims electronically.

4. Compliance costs: There is no fee imposed by these proposed rules. The only costs to claimants, including claimants who are small businesses or local governments, would be the normal, existing, costs associated with submission of bills or invoices. If claimants, who are small businesses or local governments, elect to submit claims electronically they will need internet access. However, any claimant may submit either electronic format or a hard copy.

5. Economic and technological feasibility: Small businesses and local governments who opt to send claims electronically will need internet access.

6. Minimizing adverse impact: We do not anticipate any adverse impact. Virtually all small businesses and local governments have online access and, in any event, as noted previously, they will not be required to submit claims electronically.

7. Small business and local government participation: A press release will be issued on the Comptroller's website in order to provide notice of the proposed rules and will provide contact information so that interested parties might comment on the proposed rules.

Rural Area Flexibility Analysis

1. Types and estimated numbers of rural areas: These proposed rules will affect all claimants who enter into contracts with the State or otherwise are receiving funds from the State, including any claimants, vendors and employees and local governments in rural areas. The Office of the State Comptroller cannot easily calculate an accurate estimate of how many of these claimants are located in rural areas.

2. Reporting, recordkeeping and other compliance requirements; and professional services: The proposed rules include a description of the procedures whereby claimants, including rural claimants, submit claims to the State. The proposed regulations provide that claimants may submit claims by hard copy or electronically, and that agencies will be required, upon receipt of the claim, to certify the claim to the Comptroller for audit and payment electronically. Therefore, claimants, including rural claimants, will, if they elect to utilize electronic methods, need to have internet access. It is noted, however, that claimants are not required to transmit information electronically; hard copies may be submitted instead of electronic documents. No professional services are likely to be needed in rural areas to comply with the proposed rules.

3. Costs: There is no fee imposed by these proposed rules. The only costs to claimants, including claimants in rural areas, would be the normal costs associated with submission of bills or invoices. If claimants, including claimants in rural areas, elect to submit claims electronically they will need internet access. However, if any claimant chooses not to use an electronic format they may submit a hard copy.

4. Minimizing adverse impact: We do not anticipate any adverse impact. The process for claimants to submit claims to the State remains essentially the same except that the proposed rules create the option of electronic submissions. Virtually all claimants, including claimants in rural areas, have online access. In any event, the rules allow for hard copy documents to be submitted instead of electronic records. This will mitigate any hardship imposed upon entities without internet access.

5. Rural area participation: A press release will be issued on the Comptroller's website providing notice of the proposed rules and will provide contact information so that interested parties, including parties in rural areas, may comment on the proposed rules.