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Contracts & Debt Collection

• October 2001• North Carolina State University

• David Drooz

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Contracts

• What is a contract?

• Who can sign contracts for NCSU?

• What is the NCSU contract procedure?

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What is a contract

• AN AGREEMENT BETWEEN TWO OR MORE PARTIES TO DO OR NOT DO A PARTICULAR THING

– Oral or written or electronic

– Even if no money is involved

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What is a contract

– Requirements are:

• Clear terms• Mutual agreement on the terms• Mutual obligations • Exchange of value • Legally competent parties

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What is a contract - hypos

• Donor makes unrestricted gift to NCSU

• Organization makes grant to NCSU, where NCSU must provide research report to them

• Prof gives stipend to TA for grading papers

• Staff downloads free Adobe software

• Dean hires caterer for campus event

• College gets use of Reynolds Col. for event

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What is a contract - hypos

• College gets use of Civic Center for event

• NCSU lab performs materials test for outside company

• Dept head sends offer letter to applicant for tenure track position

• Prof seeks permission to use journal article in a coursepack

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Who can enter a contract

• Authority to bind NCSU to contracts is limited

• Chancellor has full executive authority based on statute and the UNC Code – includes the authority to sign contracts for

NCSU unless otherwise prohibited

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Who can enter a contract

• Chancellor can delegate the power to sign

• Provost: academic cooperation agreements

• V.C. for Research: sponsored programs and tech transfer agreements

• V.C. for Finance & Business: everything else*

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Who can enter a contract

• V.C. for F & B: almost everything else*

• * contracts over $250,000 are routed to Purchase & Contract in the NC Dept of Adminstration for approval.

• Once approved, NCSU Purchasing agent may sign a university purchase order.

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Who can enter a contract

• V.C. for F & B: almost everything else*

• * some other transactions require special approvals: – real estate transactions– construction projects– hiring outside counsel– etc.

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Who can enter a contract

• Sub-delegations:

• Director of Purchasing may sign contracts involving $35,000 or less (except real estate, sponsored programs, employment)

• Some other units have limited authority

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Who can enter a contract

• What happens if someone without authority signs a contract?

• NCSU may ratify the contract, or

• NCSU may not accept the contract– signer may have personal liability to other party– signer may face disciplinary action at NCSU

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Who can enter a contract

• Resource:

• NCSU Admin Regulation on authority to sign contracts is at http://www.fis.ncsu.edu/ncsulegal/areg-Authority%20to%20Sign%20Contracts.html

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What is the procedure?

• 1. For purchases: Check with NCSU Purchasing to see if the item or service is on state contract or requires competitive bidding.

• 2. Use a University form contract if you can.

• 3. Send the contract to Contract Management for review and signature.*

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What is the procedure?

• *Contracts within the Finance & Business authority should be sent to Contract Management for review and signature– Jim Garrison at 515-6134

• Applies to non-purchase contracts, too.• Does not apply to bids accepted by NCSU P.O.• Does not apply to small purchases*

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What is the procedure?

• *Small purchases must meet all the following criteria: – non-written agreements (except for NCSU purchase

order form)

– for < $5,000

– for items not on State term contract

• Such agreements may be executed by any employee with departmental approval

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What is the procedure?

• Contract Management will review and mark up contracts according to a Contract Checklist.

• The Checklist consists of contract terms that are unlawful or bad business policy– See http://www.fis.ncsu.edu/ncsulegal/checklis.htm

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What is the procedure?

• Campus users may accept dangerous contract terms by signing Contract Advisory

• except terms prohibited by law.– G.S. 143-291 and sovereign immunity

– G.S. 22B-3: if contract is entered into in NC, then any lawsuits must take place in NC

– G.S. 143-34.2: payments beyond current fiscal year must be expressly subject to legislative appropriations

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What is the procedure?

• Special considerations• Consulting contracts - academic vs. administrative• Other personal services

– independent contractor status

– tax with-holding on some out-of-state contractors

• Licenses - especially online and software• Bid requirements! (over $5000 and not on State

contract)

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Contracts

• Conclusion• Use bid procedure or NCSU form contracts where

appropriate• Identify who is designated to review and sign each

type of contract• Understand why the Contract Checklist exists• Make risk assessment on undesirable contract

terms

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Contracts

• Resources• Call NCSU Purchasing: 515-2171

• Purchasing website:– http://www.fis.ncsu.edu/materialsmgmt/purchasing/

• Contract Management website:– http://www.fis.ncsu.edu/materialsmgmt/purchasing/

contract.htm

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Contracts

• End of slides on contracts

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Debt Collection

• State law requires NCSU to attempt to collect past due debts.– G.S. 147-86.11(e)(3) and G.S. 147-86.21

• Debts include “claims, damages, fees, fines, forfeitures, loans, overpayments, and tuition as well as penalties, interest, and other costs authorized by law.”

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Debt Collection

• Types of debts

• Student loan defaults are outsourced - special procedure

• Other student debts - refer them to NCSU Cashier.– Collection methods include a “hold” on enrollment and

transcripts

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Debt Collection

• Types of debts

• Separated employee

– deduct from last paycheck the value of state property the employee did not return

– deduct from last paycheck the value of overdrawn vacation or sick leave

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Debt Collection

• Types of debts

• For all other types of debts, use the following procedures

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Debt Collection

• Invoice or demand letter

• Send an invoice (with a due date, typically 30 days after invoice) http://www.bas.ncsu.edu/procman-a/a5-1.htm

• or a letter explaining what’s owed, why, how payment may be made, and due date

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Debt Collection

• Past Due

• Refer to Accounts Receivable if payment is not made in full by 30 days after its due– send complete documentation of debt

• Accounts Receivable will issue 30-60-90 day past due letters

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Debt Collection

• Past Due - remedy #1

• When more than 90 days past due, Accounts Receivable will refer to a State-contracted collection agency or the Attorney General’s office

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Debt Collection

• Past Due

• Interest - should be added to past due principal, based on floating rate from Dept of Revenue

• Late fee - up to 10% may be added

• Bad check fee - $25

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Debt Collection

• Past Due - remedy #2 - for vendors who owe $ to NCSU

• May lose opportunity for future contracts

• Possible offset of amounts NCSU owes to the vendor by the amount of the debt owed to NCSU

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Debt Collection

• Remedy #3 - Set Off Debt Collection Act

• Accounts Receivable notifies NC Dept of Revenue of debts over $50 and over 90 days past due

• Revenue may send debtor’s tax refund to NCSU

• Debtor has right to hearing to contest the debt

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Debt Collection

• Remedy #4 - State Employees Debt Collection Act

• State agency that is owed debt sends letter to state agency that employs debtor– can be challenged via State grievance procedures

• Debtor must usually agree to garnishment of 10% or more of net disposable earnings, or lose job

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Debt Collection

• Conclusion

• Promptly and properly send invoices or demand letters for money owed to your unit

• Identify all debts 30 days or more past due, and send them to Accounts Receivable