COMMITMENTS

1.0 GENERAL INFORMATION

The terms COMMITMENT and ENCUMBRANCE have the SAME meaning in state accounting. The official definition is "Encumbrances means the obligations in the form of purchase orders or contracts which are to be met from an appropriation and for which a part of the appropriation is reserved"; (Section 4-69 C.G.S.). However, in the context of this manual, general reservation transactions are also referred to as commitments or encumbrances.

1.1 Statutory References

Sections 4-69, 4-89, 4-98 & 4-99 C.G.S.

1.2 Commitments and Appropriations

Before any obligation is incurred which will require a future expenditure out of an appropriation, a portion of that appropriation must be "reserved" to ensure that funds will be available when payment is due. The amount reserved is the unliquidated encumbrance balance. When a payment is processed the balance in the unliquidated encumbrance is reduced and the cumulative total of expenditures is increased.

1.3 Commitments and Allotments

Quarterly allotments are, except for the first quarter, effective on the first day of the quarter, i.e. October 1, January 1, and April 1. Commitments against these allotments should not be sent to the Comptroller before the effective date of the allotment.

1. Prior to the start of the first Quarter of a new fiscal year, a commitment may be processed provided all of the following are observed:
   1. It is no earlier than 15 days before the start of the fiscal year.
   2. It is encumbered against an annual (lapsing) appropriation.
   3. A commitment is on file covering the appropriation which was already allotted.
   4. The commitment may not be liquidated before the start of the new fiscal year.

1.4 Commitments and Expenditures

The orderly processing of batch lists means that commitments be submitted at least five working days prior to the submission of invoices to ensure commitments are posted to the system prior to payment. Paperless agencies must allow sufficient time for the Comptroller's pre-audit and posting of all commitment documents (except the Addition/Deletion [AD] CO-958) which automatically post during an agency commitment audit release. The vendor FEIN/SSN and profile information must be in the CAS vendor file prior to processing commitment or expenditure documents.

1. Payments will not be processed when a commitment is required but has not been submitted.

2. Commitments are required before payment except as follows:
   1. From debt service, agency, and trust funds (2000 and 7000 funds).
   2. For payrolls.
3. The individual authorizing the commitment or expenditure must have a claims authorization card (CO-512) on file in the Comptroller's Accounts Payable Division.(Refer to Section 10.13 and Exhibit 5-13 for form completion)

2.0 COMMITMENT BATCH LISTS

2.1 Introduction

The Commitment Batch List, CO-96 is the transmittal form with which commitment documents are submitted to the Comptroller's Accounts Payable Division. (Refer to Section 10.1 and Exhibit 5-1 for form completion)

2.2 Specific Instructions

The agency name and number must be completed. The name of the preparer and telephone number should be that individual who can answer specific questions regarding the contents and not necessarily the individual who types or signs the forms.

All commitment documents must be submitted with a commitment batch list. Discard all carbons before submission and do not staple purchase orders together.

Commitment Adjustment/Deletion CO-958 with a document type of FC, AD or DD must be submitted on separate commitment batch lists. Paperless processing agencies are not required to submit AD documents to the Comptroller's Accounts Payable Division with the exception of file change documents (FC) and (DD) delete documents. However, AD documents must be kept on file at the agency.

Commitment Detail Coding Continuation CO-956 This form is used when a commitment document requires additional line(s) of coding. On the original commitment document, the last line of coding must read "see attached coding continuation." Staple this form to the Comptroller's copy of the commitment document. (Refer to Section 10.12 and Exhibit 5-12 for form completion).

3.0 COMMITMENT DOCUMENTS

3.1 Purchase Order, CO-94 (Refer to Section 10.2 and Exhibit 5-2 for form completion)

Used for all outright purchases of commodities and equipment in excess of $1,000.00. You must comply with all purchasing regulations as set forth by the Commissioner of Administrative Services.

Commodity Purchase Order - Committed amount must (be equal) to the total dollar amount of the purchase order. The only exception is blanket purchase orders. In the body of the purchase order, under the "description" section, type (in capitals) "BLANKET PURCHASE ORDER," and identify the goods to be purchased.

Purchase orders are also used to contract leasing, rental and maintenance services for personal property (including EDP equipment), and for outside data entry and microfiche services.

Installment Purchase, Lease Purchase and Capital Lease - Purchase orders for the acquisition of equipment from a budgeted appropriation, where the payments extend beyond the end of the fiscal year, require either specific legislative approval (e.g. Special Act) or Finance Advisory Committee (FAC) approval. (Refer to section 5.2 - 5.4 for a detailed discussion of the distinction between operating leases and capital leases/installment purchase/lease purchases).

In the body of the purchase order, under the description section, type (in capitals)
"INSTALLMENT PURCHASE" and state the complete contract terms, including the
total contract price and the amounts to be committed in each fiscal year (consistent with
the FAC approval). Attach a copy of the FAC approval or other authorization to the
purchase order.

EDP Equipment or Services - A copy of the approved request for acquisition of personal
property (purchase or lease) where applicable must accompany the purchase order when
submitted to the Comptroller for contracts or acquisitions exceeding $10,000.00 or for
any contract or acquisition where a master contract agreement exists.

Other than EDP Equipment - Purchase orders for leasing, rental or maintenance services
on other than EDP equipment must have the approved state purchase requisitions, SP-10
attached to the purchase order when submitted to the Comptroller.

3.2 Personal Service Agreement, CO-802A (Refer to Section 10.7 and Exhibit 5-7 for form completion)

This form is used for the commitment of funds for each approved agreement for all contracts for personal services. For example doctors, lawyers, consultants, etc..

Prior to contracting with an individual for personal services, the agency is responsible for determining if the characteristics of an employee/employer relationship exits. This can be determined by applying the Internal Revenue Service Common-law Rules (following). If an individual does meet the characteristics of an employee, the agency must follow established procedures for placing the individual on the agency payroll.

If the individual is a State employee a copy of the approved dual employment form must be attached to the Comptroller's copy.

A contract which exceeds $3,000 per fiscal year for an individual must have the approval of DAS/Personnel attached to the Comptroller's copy.

Each agreement must be assigned with an identification number starting with 20. Do not
include the fiscal year.

Common-law Rules. To help you determine whether an individual is an employee under the common-law rules, the IRS has identified 20 factors that are used as guidelines to determine whether sufficient control is present to establish an employer-employee relationship.

These factors should be considered guidelines. Not every factor is applicable in every situation, and the degree of importance of each factor varies depending on the type of work and the individual circumstances. However, all relevant factors are considered in making a determination, and no one factor is decisive.

It does not matter that a written agreement may take a position with regard to any factors or state that certain factors do not apply, if the facts indicate otherwise. If an employer treats an employee as an independent contractor and the relief provisions discussed earlier do not apply, the person responsible for the collection and payment of withholding taxes may be held personally liable for an amount equal to the taxes that should have been withheld.

These 20 factors indicating whether an individual is an employee or an independent contractor are:

1) Instructions. An employee must comply with instructions about when, where, and how to work. Even if no instructions are given, the control factor is present if the employer has the right to control how the work results are achieved.

2) Training. An employee may be trained to perform services in a particular manner. Independent contractors ordinarily use their own methods and receive no training from the purchasers of their services.

3) Integration. An employee's services are usually integrated into the business operations because the services are important to the success or continuation of the business. This shows the employer is interested in the methods as well as the results.

4) Services rendered personally. An employee renders services personally. This shows that the employer is interested in the methods as well as the results.

5) Hiring assistants. An employee works for an employer who hires, supervises, and pays workers. An independent contractor can hire, supervise, and pay assistants under a contract that requires him or her to provide materials and labor and to be responsible only for the result.

6) Continuing relationship. An employee generally has a continuing relationship with an employer. A continuing relationship may exist even if work is performed at recurring although irregular intervals.

7) Set hours of work. An employee usually has set hours of work established by an employer. An independent contractor generally can set his or his own work hours.

8) Full-time required. An employee may be required to work or be available full-time. This indicates control by the employer. An independent contractor can work when and for whom he or she chooses.

9) Work done on premises. An employee usually works on the premises of an employer, or works on a route or at a location designated by an employer.

10) Order or sequence set. An employee may be required to perform services in the order or sequence set by an employer. This shows that the employee is subject to direction and control.

11) Reports. An employee may be required to submit reports to an employer. This shows that the employer maintains a degree of control.

12) Payments. An employee is generally paid by the hour, week, or month. An independent contractor is usually paid by the job or on a straight commission.

13) Expenses. An employee's business and travel expenses are generally paid by an employer. This shows that the employee is subject to regulation and control.

14) Tools and materials. An employee is normally furnished significant tools, materials, and other equipment by an employer.

15) Investment. An independent contractor has a significant investment in the facilities he or she uses in performing services for someone else.

16) Profit or loss. An independent contractor can make a profit or suffer a loss.

17) Works for more than one person or firm. An independent contractor is generally free to provide his or her services to two or more unrelated persons or firms at the same time.

18) Offers services to general public. An independent contractor makes his or her services available to the general public.

19) Right to fire. An employee can be fired by an employer. An independent contractor cannot be fired so long as he or she produces a result that meets the specifications of the contract.

20) Right to quit. An employee can quit his or her job at any time without incurring liability. An independent contractor usually agrees to complete a specific job and is responsible for its satisfactory completion, or is legally obligated to make good for failure to complete it.

3.3 Requisition for Reservation of Funds, CO-110 (Refer to Section 10.8 and Exhibit 5-8 for form completion)

A block of funds that can be committed for a specific expenditure purpose. The general
commitment for each particular requisition category is shown below:

A separate form CO-110 must be used for each requisition category.

In accordance with Memorandum 98-14, agencies must submit a new Requisition for the Reservation of Funds (Form CO-110) each fiscal year for renewal of reservation numbers 9-19.This is required for all existing, revised, and new reservations.

Complete each reservation and indicate:

- The classification type as existing, new or revised. Write the appropriate classification in the upper right hand corner of form CO-110.

- In the "Fund Description" section list the type(s) of claims to be paid. A full explanation and justification must be included with each form CO-110.

The renewal CO-110's do not need to be submitted on a Commitment Batch List (CO- 96). The forms must be submitted to the Comptroller's Accounts Payable Division prior to the start of each new fiscal year.

Reservation number 1 through 8 should not be submitted unless your agency is establishing it for the first time.

Unliquidated balances for reservations are carried forward for all appropriations with the system re-establishing the commitments. Commitment of additional funds for the new year is accomplished by submitting a form CO-958, Commitment Adjustment/Deletion stating "Add to Requisition No. _________".

Agencies should keep detailed information on separate CO-110's for their own internal accounting and budgeting purposes.

3.4 Special Instructions for Leases and Contracts

Listed below is an explanation of how various types of commitment documents for leases and contracts should be completed:

Lease indicator (LSE IND)

C = Capital lease, lease purchase, installment purchase of equipment

O = Non-capital (operating) lease of equipment

Blank = All contracts for other than equipment leases.

Committed amount - amount to be currently encumbered by the document against the
appropriations involved.

Contract period - The beginning and ending dates of the contract or agreement. Incorrect completion adversely affects and delays the subsequent processing of commitment adjustments and invoice payments against these commitments.

This information contained on the commitment documents for these items is also crucial for the generation of reports needed to prepare the Comptroller's Comprehensive Annual Financial Report in conformity with generally accepted accounting principles (GAAP). Proper completion will substantially reduce the information which agencies will have to provide the Comptroller as part of the year-end GAAP closing.

4.0 ADJUSTMENTS TO COMMITMENTS

4.1 Purchase Order Amendment (Refer to Section 10.10 and Exhibit 5-10 for form completion)

Purchase Order Amendment Form CO-95 must be used for any adjustment to the original
or previously adjusted purchase order (CO-94). An amendment is any change to the
existing terms and conditions (including price changes or name changes) of the original
purchase order. There is an allowance of up to 10% for bulk commodities, only.
Changes to purchase orders for personal property leasing, rental, maintenance or EDP
services must have attached a new approved SP-10 for the amendment when required for
the original purchase order.

Amendments to purchase orders for installment purchase of equipment must have the
FAC approval attached for the change.

Adjustments to accounting codes and/or commitment amounts should be processed using
a commitment adjustment/deletion form CO-958. The distinction of this form is it does not affect the vendor.

4.2 Personal Service Agreement Changes (Refer to Section 10.7 and Exhibit 5-7 for form completion)

A revised form CO-802A must be submitted by the agency for all amendments to the
original contract agreement. All signatures originally required must be secured, except for the following:

When a CO-802A is being cancelled or the obligated amount is being decreased, an amended CO-802A must be completed.

In the description section, indicate the reason for cancellation. Complete the batch header information and if applicable, the detail coding section.

4.3 Adjusting Commitments on Reservations (Refer to Section 10.11 and Exhibit 5-11 for form completion)

Changes to reservations may be made by completing a CO-958 commitment adjustment/deletion form.

4.4 Amendments to State Leased Rental Property

To amend the reservation follow the procedure in paragraph 4.3

To amend the hard copy document, you must complete both forms CO-507-1 and CO-507. Submit them directly to the Comptroller's Accounts Payable Division with the supporting legal authorization. (Refer to Section 10.4-10.5 and Exhibit 5-4-5.5 for form completion)

4.5 Debit and Credit Adjustments on Expenditure Batch Lists

A debit adjustment will serve to reduce the unencumbered balance and increase the unliquidated encumbrances. A credit adjustment works in the reverse; it serves to increase the unencumbered balance and reduces the balance of unliquidated encumbrances. The proper use of these debit and credit adjustments are as follows:

To make minor adjustments so that the amount encumbered will equal the amount to be paid.

Minor adjustment means a change not exceeding 10% on bulk commodity purchase orders only. Other increases require a form CO-95. The adjustment is taken automatically by completing block #10, liquidation, with the letter "F" for full liquidation. It will liquidate the established commitment. If a partial liquidation is required on an established commitment, an "F" must be indicated on the individual line of coding block #20, full liquidation.

Adjustments on commodity purchase orders for FREIGHT CHARGES must be coded to the freight object code number 02080. This should be done on the final payment to the vendor.

The freight charge must be put on a separate line detail on the expenditure document. Do not put the "F" in block number 10, liquidation. The "F" must be indicated on each individual line of coding in block number 20, full liquidation.

For example assume a purchase order is properly committed for $2,000.00 and the total amount actually received against this purchase order requires a payment of only $1,950.00. If a payment for $1,950.00 is processed without an "F" in the liquidation block, the extra $50.00 will remain as part of the unliquidated balance. If an "F" was indicated in block #10, liquidation, it will be recorded as $1,950.00.

5.0 INSTALLMENT PURCHASES, LEASE PURCHASE, AND CAPITAL LEASES

5.1 Statutory Reference

Section 4-98 of the General Statutes states, in part, "...The amount to be charged against the appropriation for any budgeted agency in any year for a capital expenditure, including an installment purchase, shall be the state's total cost for such capital expenditure unless otherwise authorized by the general assembly or approved by the finance advisory committee...".

5.2 Application to Lease, Lease Purchase, and Installment Purchase

The determination of whether a transaction is a "capital expenditure" is dependant on the substance and not merely the form of the contract or agreement and any agreement which transfers substantially all the benefits and risks inherent in the ownership of the property should be accounted for as a capital expenditure and the acquisition of an asset.

1. The specific criteria to be applied are drawn from Generally Accepted Accounting Principals as promulgated by the Governmental Accounting Standards Board (GASB) and the Financial Accounting Standards Board (FASB) and any lease agreement which meets ANY ONE of the following criteria is a "capital lease" to be accounted for as a "capital expenditure" under the statute:
   1. The lease automatically transfers ownership (title) of the property to the lessee either during its term or at the end of the lease term.
   2. The lease contains a bargain purchase option.
   3. The lease term, including any bargain renewal options, is equal to 75 percent or more of the estimated economic life of the leased property.
   4. The present value at the beginning of the lease term of the minimum lease payment is 90 percent or more of the fair value of the leased property.
      
      It is recommended that the above criteria be applied in the order shown.

2. As the criteria require judgment and a knowledge of the specifics of a transaction and
   the uses of the property, it will be an agency determination whether a lease is a capital lease or not.

5.3 Approvals, Appropriations, and Object Codings

The following is a matrix of required approvals, appropriations to be charged, and object codings to be used. Finance Advisory Committee (FAC) approval applies only to transactions against budgeted appropriations.

In addition, all purchasing regulations, as listed by the Commissioner of Administrative
Services, must be followed.

5.4 Definitions and Guidelines for Capital Lease Determinations

1. LEASE TERM: The non-cancellation period of the lease plus bargain renewal periods.
   1. A lease that is cancelable only upon a remote contingency, or with permission of
      the lessor, or provided the lessee enters a substitute lease with the same lessor, or
      only on payment of a prohibitive penalty is non-cancelable lease for this purpose.
   2. A lease that provides for cancellation if funds are not appropriated in future
      periods is to be considered non-cancelable if the possibility of this occurring is remote.
2. BARGAIN PURCHASE OPTION AND BARGAIN RENEWAL OPTION: An option price so low that the predictability of exercising the option is almost certain. The definition should be constructed so that it is obvious; i.e. if it isn't obvious, it isn't a bargain.

6.0 STATE LEASED RENTAL PROPERTY

All leases on real property must be approved through the Department of Administrative
Services - Public Works Leasing. Once approved, the original lease and the following
documents must be submitted to the Comptroller's - Accounts Payable Division.

6.1 Requisition for Reservations of Funds - RL(Refer to Section 10.8 and Exhibit 5-8 for form completion)

Requisition for Reservation of Funds, CO-110 must be prepared and submitted with a commitment batch list, CO-96. The reservation will be set up on the Comptroller's Accounting System will encumber money on an appropriation.

6.2 Lease and Rent Account Control - Transmittal (Refer to Section 10.4 and Exhibit 5-4 for form completion)

Lease and Rent Account Control - Transmittal, CO-507-1, must be completed. This document will not be data entered by the Comptroller and will not be used to encumber money on an appropriation. Do not submit this form with a commitment batch list, CO-96.

6.3 Lease and Rent Account Control (Refer to Section 10.5 and Exhibit 5-5 for form completion)

Lease and Rent Account Control, CO-507 must be completed. This document will not be data entered on Comptroller's Accounting System and will not be used to encumber money on an appropriation. Do not submit this form with a commitment batch list, CO-96. Submit with the lease and rent account control - CO-507-1. The original copy of the lease must be attached.

7.0 TRAVEL AUTHORIZATION

7.1. General Information (Refer to Section 10.9 and Exhibit 5-9 for form completion)

1. Agency Funded Travel - Agencies now have the authority to approve their own agency funded travel requests. Effective July 1, 1998 agencies should no longer submit a Travel Authorization Request Form (CO-112) to the Comptroller's Office for approval.
2. 9916 Employee Travel Fund - The Office of the State Comptroller will continue to administer the fund for Tuition, Training and Travel Reimbursements applicable to certain collective bargaining units. Travel Authorization (CO-112) requests must be submitted to the Comptroller's Office for approval. Submit all copies of the agency approved CO-112 intact to:

Office of the State Comptroller
Support Services Unit
55 Elm Street
Hartford, CT 06106

It is the agency's responsibility to ensure that these funds are available prior to approving employee travel and prior to the reservation of airline tickets. If adequate 9916 employee travel funds are not available, the cost will come out of the employee's agency budget.

7.2 Special Considerations

1. Air Travel

Effective July 1, 1998, the State's designated travel agent is Sanditz Business Travel Services, who is providing travel services, including air, hotel, auto reservations, air travel information and airline ticketing.

Upon agency head approval, all State related business travel arrangements must be made in advance by contacting Sanditz Business Travel Services at 1-800-447-3381. Do not obtain tickets directly from an airline or non-designated travel agent.

1. Tickets $1,000 and Under:

All state agencies must follow travel procedures as prescribed in Comptroller's Memorandum 98-27. Travel charges will be debit adjusted monthly against the unencumbered balance by the Comptroller's Support Services Unit. Agencies will be billed through a transfer invoice on or about the 12th of each month. If the agency does not have enough in their unencumbered balance privileges will be revoked.

 

2. Tickets Over $1,000:

All state agencies must follow travel procedures as prescribed in Comptroller's Memorandum 98-42. Purchase orders for individual transactions exceeding $1,000 must be prepared immediately, electronically transmitted (paperless processing agencies) and forwarded to the Comptroller's Accounts Payable Division. Agencies are encouraged to issue a blanket purchase order to Sanditz Business Travel Services. This will eliminate the requirement of generating a new purchase order for each transaction exceeding $1,000. Payment must be made within 30 days of the receipt of the travel itinerary (which is also the vendor invoice) to avoid the assessment of interest charges.

2. Parking Permits -
   
   Parking permits will be issued to the employee by their agency with the proper agency head approval and must be validated with an expiration date. These are available through the State's contracted vendor, Vanguard.
   
   For more specific information, refer to Comptroller's Memorandum 98-27.

8.0 FISCAL YEAR-END PROCEDURES

8.1 Commitment Document Processing

The State's fiscal year for all agencies ends June 30. Fiscal year-end instructions are issued each year which contain cut-off dates earlier than June 30. These cut-off dates are to permit the processing of documents by the statutory limits of June 30 and July 31.

8.2 Lapsing and Continuing Appropriations and Subsequent Expenditures

When an appropriation lapses, all unexpended balances lapse, (i.e. the unliquidated encumbrances, unencumbered balance, and unallotted balance.) The following outlines the treatment of appropriation balances, unliquidated commitments as of June 30 and subsequent expenditures against those commitments in the new fiscal year:

1. Continuing Appropriations

   - All balances are brought forward.

   - State Agency Appropriation Accounting System (SAAAS) users must bring all encumbrance balances forward to the new fiscal year. Failure to do this will cause discrepancies between the Office of the State Comptroller's Central Accounting System (CAS) and SAAAS.

   - All unliquidated commitments as of June 30 are re-established by the system in the new year.

   - Expenditures (payments) will be processed through the normal liquidation procedure.

2. Lapsing Appropriations With A New Year Appropriation

   - No balances are brought forward.

   - The unliquidated commitments as of June 30 are re-established by the system in the new year.

   - Expenditures (payments will be processed through the normal liquidation procedure.

    

   STATE ACCOUNTING MANUAL

   5-18

   OCTOBER 1998

    

3. Lapsing Appropriations With No New Year Appropriation

   - The unliquidated balance only is brought forward. This balance is continued to the new fiscal year for one month to permit the liquidation of obligations.

   - Unliquidated commitments as of June 30 are re-established by the system in the new year for one month only and will lapse July 31.

   - The Comptroller will notify agencies with "one month carry forwards" of the appropriations concerned and the cut-off-dates and procedures for submitting claims to the Comptroller's Accounts Payable Division.

9.0 MISCELLANEOUS

9.1 Assignment and Assumptions of Contracts, Leases and Vendor Payments.

Assignments and assumptions are two parts of the same transaction. In general an assignment is a contract in which one party agrees to transfer ("assign") some or all of that party's rights and/or duties/obligations under an existing contract to a third-party who agrees to accept ("assume") the rights and duties/obligations of that existing contract. The party making the transfer is the "assignor" and the party accepting the transfer is the "assignee."

There are two types of assignment, complete and partial, which are explained more fully below:

Complete Assignment and Assumption. A complete assignment and assumption occurs when a party (the "assignor") assigns all of their contractual rights and duties/obligations to a third party (the "assignee") who accepts the assignment. The assignee becomes responsible for complying with all terms and conditions of the original contract between the original parties, i.e. the state and the assignor. An assignment and assumption does not result in any substantive changes to the original contract, the assignee is merely stepping into the shoes of the original party, the assignor. This usually occurs when one business purchases another.

An assignment and assumption can be the result of a larger corporate restructuring such as a merger. Examples of types of mergers are 1) vendor "A" merges into vendor "B" in which case vendor "A" ceases to exist and does not conduct regular on-going business; 2) vendor "B" merges into vendor "A" and vendor "B" ceases to exist ceasing on-going business as in #1; or 3) vendor "A" and vendor "B" merge into each other and both cease to exist for on-going business purposes but a new company vendor "C" is created.

In each instance of 1, 2 and 3 above the state would have a binding contractual agreement under the original terms with the new business entity provided the new merged entity has complied with the assignment and assumption requirements of the contract with the state. In the case of a merger, if the surviving entity in examples 1 and 2 above is not the original contracting party, the new entity in each instance would need to supply a new taxpayer identification number ("TIN") which is either a social security number or federal employer identification number ("FEIN") to the state. A new TIN would need to be provided by the vendor in example 3 above for the same reason, it is a new entity requiring a new unique identifier.

Partial Assignment. A partial assignment occurs when a party to the contract, the assignor, assigns only a portion of their rights and/or duties under that contract to a third-party, the assignee. The assignor can assign either their right to payment, accounts receivable, or some or all of its performance obligations. If only the performance obligations were assigned, the State would continue to make payments to the original vendor.

NOTE: A change in name only is not an assignment and assumption because the State is still dealing with the same legal entity and the respective rights and duties under the contract remain unchanged.

Completing an Assignment and Assumption. If a vendor wishes to assign all or part of its contractual rights and duties to a third party, then the State must comply with the following procedures:

1. Obtain a letter of understanding from the vendor containing the following:

a. explanation of type of assignment, i.e. full/partial, accounts receivable or performance; and

b. acceptance of the assignment and assumption from both parties, assignor and assignee executed by a duly authorized individual (see Authorization below) of each entity;

2. Assignor must submit proof that the assignment and assumption are permitted under its contract with the State. If the contract requires, written confirmation of the agency's consent to the assignment and assumption must be obtained;

3. The documents specified in 1 and 2 of this section must be submitted to the Vendor File Section of the Comptroller's Accounts Payable Division. The documents must reflect the vendor name, TIN for the original state vendor, assignor, and the new third party vendor, assignee.

4. After OSC approval of the documents, the State agency must amend documents in Core-CT reflecting the vendor name, new TIN for both the original state vendor, assignor, and the new third party vendor, assignee for: personal service agreements (CO-802a) and leases (CO-507) to the Accounts Payable Division of OSC. If the assignee is not in the Core-CT Vendor File a vendor profile (SP-26 or SP-26NB) for the assignee must be submitted to the Office of the State Comptroller Accounts Payable Division for review and entry into Core-CT.

Required Forms.

Amended personal service agreements (CO-802a) and change orders require the assignee's (new third party vendor's) name and TIN. It should indicate it is for accounting purposes only.

Authorization.

Documentation or proof that both parties are authorized to enter into an assignment and assumption contract/agreement must demonstrate three things: (1) authority of the assignor or assignee to respectively assign or assume all or part of the contract; (2) authority of a particular individual to enter into the assignment and assumption agreement; and (3) verification that the individual signing the agreement in fact holds a position authorized to execute the agreement.

The following types of documentation are acceptable proof of authority for the type of entity specified:

Corporation

 

- certified corporate or board of directors resolutions (certification is by the secretary of the corporation);

 

- current certified copy of the corporation's by-laws authorizing a specific individual to execute contracts with certification that the specific individual currently holds such office; or

 

- in lieu of certified resolutions or by-laws, a certified copy of the minutes of the board of directors of the corporation.

 

Limited Liability Company ("LLC")

 

- certified copy of all relevant portions of the management agreement or operating agreement providing the authority to enter into contracts and identifying the member(s) or manager(s) authorized to sign contracts on behalf of the LLC; and

 

- certification that the individual(s) specified in the operating agreement is/are member(s) or manager(s) or that such member/manager has authority to delegate signature authority to another individual;

Note: If the LLC has a sole individual member or director a notarized or sworn affidavit from that individual will be required.

Partnerships

 

- normally any general partner can bind the partnership;

 

- every effort should be made to obtain a partnership authorization which provides evidence of a partner's authority to bind the partnership. This can be in the form of a certified partnership resolution or a certified copy of the partnership agreement.

Note: A Company will not necessarily hold a board meeting to approve every contract it enters into and the general guidance provided in this section should be used to verify the authority to enter into the agreement.

Individuals

 

- an individual assigning a contract is required to provide a notarized or sworn affidavit as the assignor.

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