DV Step 1: Determine the most appropriate payment method
Purchase Order (PO) process
- Processed in KFS.
- A Requisition (REQS) document initiates a Purchase Order (PO), which eventually results in a payment through a Payment Request document (PREQ) and sometimes requires a Credit Memo (CM) document.
- The REQS and PO documents are owned by Purchasing; the PREQ and CM are owned by Accounts Payable (FMS).
Procurement Card (P-card)
- A departmental credit card.
- The card is owned by Purchasing; the payments to U.S. Bank are made by Accounts Payable (U.S. Bank pays the vendors directly).
- Can be used by IU employees only.
Disbursement Voucher (DV) document
- Processed in KFS.
- An electronic document that processes payment transactions.
- Owned by Accounts Payable (FMS).
- Add a payment, in addition to an employee’s base salary, to an employee’s paycheck.
- Processed in using an Additional Pay eDoc in HRMS.
- Owned by Payroll Operations (FMS).
- For payments to employees only.
A DV is one of several ways to make a payment at IU. Each method of payment may be more or less appropriate depending on the nature of the goods or services being paid for, the vendor, and the cost.
When paying an individual or entity external to IU, Purchasing requests that a Purchase Order (PO) is used whenever possible. If a PO cannot be used, a Procurement Card (p-card) is the next preferred method of payment. When a p-card cannot be used, payment can be made with a DV.
Order of Preference:
- First Choice: Purchase Order (PO)
- Second Choice: Procurement Card (p-card)
- Third Choice: Disbursement Voucher (DV)
A PO is IU’s preferred method of payment because its use is highly controlled. Purchasing staff negotiate contracts and prices for goods and services purchased with POs, ensuring that our vendors adhere to specific requirements IU, as a state-funded institution, must follow. Additionally, Purchasing runs regular, detailed spend reports to track where IU’s funds are being used. DVs, by contrast, are not controlled like POs are, and therefore do not have the same level of institutional oversight.
There are 16 payment reason codes associated with DVs. Those in bold are the most commonly used.
KFS codes each payment reason with a letter, listed in parentheses below.
- (Z) Claims, Settlements, or Tax Payments
- (E) Compensation for Services (maximum dollar amount: $1,000)
- (D) Compensation in Respect to Decedent
- (H) Medical, Health Care, or Insurance Payment
- (C) Payment to Research Participant
- (L) Payments for Contractual Agreements
- (A) Prize or Award
- (F) Refund/Repayment to Individual or Agency
- (B) Reimbursement for Out of Pocket Expense (maximum dollar amount: $500)
- (T) Rental Payment
- (K) Revolving Fund Reimbursement
- (R) Royalties
- (W) Subscriptions, Books, Fees, and Resale
- (P) Travel Payment for Prepaid Travel
- (N) Travel Payment for a Nonemployee
- (G) Utilities, Freight, or Postage
Keep in mind that a refund refers to funds IU has taken in and needs to return, while a reimbursement occurs when an IU representative has given money to a third party while conducting university business, and that money must be repaid to the IU representative. Generally, IU employees receive reimbursements and individuals external to IU receive refunds, but that is not always the case.
Note: although payments to IU students (with the exception of compensation for services) are almost always disbursed through SIS, IU students may occasionally need to be paid on a DV. In such an event, the DV document initiator should contact the Director of Student Financial Services on their campus so the DV document can be reviewed by SIS staff.
IU Foundation funds, not IU funds, should be used to purchase the following items:
- Funeral flowers.
- Donations, contributions, or gifts.
- Food/refreshments for individuals other than current students or prospective students, faculty members, or staff.
This restriction is governed by the following IU Policies: Inappropriate Use of University Funds, FIN-ACC-I-330; Hospitality Expenditures, FIN-ACC-I-50; and Gifts to Employees or Non-Employees, FIN-ACC-I-590.
Never use a DV to purchase or reimburse for:
- An IU employee’s services, unless payment is being made to a research participant.
- Transactions between university departments; use a Transfer of Funds, Budget Adjustment, Internal Billing, or Service Billing document instead.
- Controlled substances.
- Firearms or ammunition.
- Items considered personal in nature.
- Purchases representing a conflict of interest.
- Radioactive chemicals and substances.
- Retirement gifts or parties.
A DV document initiator may never also be the DV’s payee, as this violates segregation of duties. It is not possible to submit a DV document in KFS in which the document initiator and the DV payee are the same.
Use a PO, not a DV, to purchase the following goods and services:
- Compensation for services over $1,000 (including honoraria, speaker fees, and lecture fees).
- Purchase of capital equipment (useful life expectancy of one year or greater, meets or exceeds the capitalization thresholds, and will depreciate over time).
- Payments for computer software and/or upgrades.
- Installment and/or recurring payments.
- Consulting fees.
- Trophies, plaques, and other prizes.
- Telecommunication charges.
- Credit and collection services.
- Hospitality (exceptions require approval; see below).
- Legal services.
- Online subscriptions and/or data sets.
- Magazine and newspaper ads.
- Photographers and videographers.
- Temporary services.
- Recurring payments (although there are rare exceptions).
Allowable hospitality purchases (food/refreshments for current/prospective students, prospective faculty members, and/or prospective staff) should always be done on a PO unless the purchase cannot be made within normal procurement procedures. In that case, allowable hospitality expenses can be reimbursed on a DV as an out-of-pocket expense. When reimbursing out-of-pocket hospitality expenses with a DV, the hospitality approval must be included, if applicable.