Payments Associated with Contractual Agreements

Regardless of the procurement method used to purchase goods and/or services, the University requires a Purchase Order be created when the total purchase price is at or exceeds $10,000 pre-tax.

When a department enters into a purchase agreement with a vendor/service provider, the terms and conditions of that purchase must accompany that agreement.  These terms and conditions are incorporated by reference in the University of Toronto Purchase Order (recognized as a legal contract or agreement) and vendors/service providers are expected to be aware of, and deliver the goods and/or perform the service(s) accordingly.  Departments are responsible for forwarding the Purchase Order to vendor/service provider to ensure they are aware of these obligations. Refer to Managing Risks – Insurance and Contracts for additional information.

Where the terms and conditions of the Purchase Order are not sufficient and more comprehensive terms and conditions are negotiated, a separate form of agreement or contractual document may be required. Examples of these include contracts for consulting or independent contractor services. These types of contractual documents must be signed by those specifically identified in the Policy on Approval and Execution of Contracts and Documents. Such contracts can be signed by others than those specifically identified in the policy only under expressed approval, a copy of which is to be maintained in the Governing Council Secretariat.

Regardless of the contractual document used, a system Purchase Order must be generated and used for tracking, reporting and audit purposes.  This reflects accountability not only for the purchasing decision (which is attached to the Purchase Order based on the University’s Approval Authority Schedule), but also to ensure that a budget commitment for that purchase is reserved in the applicable FC or FC/Fund combination for when payment is required. A Purchase Order must be created before goods have been received and/or services have commenced.

The information below assists Faculties and Departments in determining how to structure the various types of Purchase Orders to facilitate payment:

Standard Purchase Order

  • The official confirmation of an order and is issued once all supplier quotations have been evaluated and a purchasing decision has been made.
  • Typically used when the term of an engagement with a vendor/service provider does not span across multiple fiscal years.
  • The quantities and prices outlined on the Purchase Order should match the quantities and prices of the vendor/service provider’s approved quotation.
  • When the approved vendor quotation contains multiple line items, the Purchase Order should be itemized for tracking purposes (e.g. the sub-total of the quote should not be used to expedite the creation of a Purchase Order).
  • A Goods Receipt should be created in FIS as confirmation once the vendor/service provider has delivered the agreed upon goods/services.
  • All invoices should be reviewed against the Purchase Order for discrepancies and approved prior to disbursing payment. Once the invoices have been approved, an Invoice Receipt should be created in FIS.

Lease Purchase Order

  • Used when a department enters into a contract by which a vendor lends the University land, property, equipment, etc. for a specified period of time, in return for a periodic payment.
  • Since lease terms often span multiple fiscal years, each fiscal year is recorded in a separate line item on the Purchase Order.
  • To ensure funds are disbursed in the appropriate fiscal year, only the payment(s) that will be committed in the current fiscal year should be represented in the first line of the Lease Purchase Order. The remaining years are represented by separate line items, each with a $1.00 placeholder.
  • The department will be required to update the $1.00 placeholders on an annual basis to facilitate future payments.
  • A Goods Receipt should be created in FIS as confirmation once the vendor/service provider has delivered the agreed upon goods/services.
  • All invoices should be reviewed against the Purchase Order for discrepancies and approved prior to disbursing payment. Once the invoices have been approved, an Invoice Receipt should be created in FIS.

Revised June 2020