MGIC - Payment of Expenses and Advances

Payment of Expenses and Advances

Purpose

The purpose of this policy is to establish clear requirements for the payment of expenses and advances by Maryland Global Initiatives Corporation (MGIC) on behalf of UMB and Affiliate Entities, thereby ensuring compliance with legal and organizational requirements, promoting financial integrity, and safeguarding MGIC funds during international transactions. This policy also defines roles, responsibilities, and controls to mitigate risks associated with international payments.

Background

MGIC is authorized to make payments directly to foreign vendors, collaborators and partners with bank accounts outside the United States (U.S.), when the purpose and benefits of using MGIC align with the risk management and strategic global engagement goals of UMB or Affiliate Entities (hereafter referred to as UMB/Affiliate) that obtain services from MGIC.

MGIC holds business accounts with U.S. banks and international money transfer services. MGIC also has the ability to open foreign bank accounts as a legal business entity when required for UMB’s/Affiliate’s international activities. Through MGIC’s U.S.-based accounts, transactions can be performed in every foreign currency (subject to bank restrictions), multiple intermediary banks can be used to route wire transfers to complex destinations, and payment processing timeframes and procedures can help promote effective institutional partnerships and services.

MGIC is a subsidiary of UMB and is financially accountable to UMB. Its policies are approved by the MGIC Board of Directors. Transactions made through MGIC are included in the financials of UMB. MGIC is therefore subject to rigorous compliance standards and audit by the University System of Maryland as well as annual required reporting to the USM Chancellor and Board of Regents.

The International Operations (IO) division of UMB’s Administration & Finance Department administers MGIC and executes MGIC activity on behalf of the MGIC Board of Directors.

Policy Statement

Payments - General

1. MGIC may make payments on behalf of a Requesting Unit for purchased goods and contracted services outside the U.S., as well as to recipients of MGIC Funding Agreements and other internal agreements funded through a Requesting Unit’s discretionary funds or private grants.
2. Required supporting documentation for any payment includes:
3. An executed contract, purchase order, Funding Agreement, or similar legally binding contractual instrument between UMB/Affiliate or MGIC and the recipient, unless the payment is allowable as an MGIC Non-PO payment (see MGIC Non-PO policy).
   • MGIC may pay a foreign vendor contracted through UMB’s/Affiliate’s Procurement division, provided the Requesting Unit coordinates with their respective Procurement division to close or draw down the existing Purchase Order before MGIC makes the payment. This step will prevent possible duplicate payments by UMB/Affiliate and MGIC.  
   • For allowable MGIC Non-PO payments, the Requesting Unit must submit documentation proving the business purpose of the expense, in lieu of a procurement agreement. Examples of acceptable Non-PO documentation include a visiting faculty appointment letter, royalty letter, fellowship or stipend award, honorarium letter, or participant payment offer (when paying participants directly through MGIC).
4. A valid vendor invoice for goods or services, if applicable (see Financial Management Systems and Processes policy for invoice standards).
5. A Payee Bank Information Form signed by the recipient, unless sufficient bank details are pre-printed on a commercial invoice.
6. A Payment Authorization Form (PAF) signed by a representative of the Requesting Unit who is authorized to accept contractual deliverables and commit funding for the expense.
7. US Internal Revenue Service (IRS) Taxpayer Identification and Certification Form (e.g. W9, W8-BEN or W8-BEN-E) if applicable, or an MGIC Foreign Source Statement (FSS) if applicable, and any additional forms requested by IO to confirm the recipient’s tax status. See MGIC Tax Payment and Reporting policy.
8. A negative-result search confirmation through MGIC’s commercial sanctions screening software, performed by IO staff, if not already completed through an MGIC procurement process. Positive hits encountered during the screening search must undergo additional due-diligence research, and a memo indicating a suspected false-positive result must be kept on file.
9. Other documentation necessary for specific types of payments, as determined by IO.
10. No payment will be made without an MGIC Payment Voucher Form (PVF), produced and cleared by the IO finance team and approved by the Assistant Vice President (AVP) - IO in their capacity as MGIC Vice President. Each PVF will be reviewed and approved by personnel with distinct roles and responsibilities to ensure appropriate segregation of duties, following the MGIC Table of Authorities.
11. Because MGIC is used to pay foreign persons in often geographically remote, under-resourced, and low-income contexts, MGIC will accept hand-written Payee Bank Information Verification Forms obtained by UMB/Affiliate employees who are in communication with the payee, provided the UMB/Affiliate employee attests that the form was prepared and signed by the payee. IO finance staff may at their discretion conduct additional due diligence to validate the bank information provided on this form, including direct correspondence with the payee where logistically feasible. IO may also independently confirm banking system identifiers specific to individual countries as needed.
12. MGIC must use the most secure forms of payment for financial transactions. See MGIC policy on Banking and Money Transfers.
13. International wire transfers and domestic ACH transfers to verified bank accounts are preferred from the perspective of risk mitigation, traceability and fraud protection services, and legal protections.
14. In certain cases, Mobile Money Transfers (MMT) may be the only feasible option, such as when MGIC must directly pay local research participants or unbanked individuals who support UMB activities.
15. Lower priority should be given to payment by check or money order from an MGIC bank account, and only in very limited circumstances at the discretion of the MGIC VP - Policy & Administration.
16. Cash is not used for MGIC transactions as of this policy date. Any extraordinary request to conduct business through MGIC in cash requires prior written approval of the MGIC President.
17. When the payment is made to a recipient on behalf of a Requesting Unit, MGIC may only send funds to bank accounts located outside the United States. MGIC may make domestic (U.S.) payments only when the payment directly benefits the MGIC corporation.
18. MGIC will not make payments directly to UMB personnel and affiliates other than MGIC employees. UMB/Affiliate personnel include faculty, staff and contingent employees, and students. MGIC may make payments directly to MGIC employees outside the United States. See MGIC policy on Travel and MGIC policy on Financial Systems and Processes.
19. MGIC may not issue any payments to Subrecipient organizations (partners implementing subawards or subcontracts under a UMB/Affiliate award from a sponsor or pass-through entity). All subrecipient payments are made by UMB/Affiliate.

Travel and Business Expense Advances to Non-UMB/Affiliate Personnel

1. MGIC employees, MGIC non-employees (such as consultants and research collaborators, also referred to as MGIC Guests for travel purposes), and program partners that are not funded through UMB/Affiliate subrecipient agreements, may receive advances through MGIC for authorized business travel and business expenses. Travel advances may be used to cover the costs of lodging, meals and incidental expenses, ground transportation, and other reimbursable travel expenses. Business expense advances are appropriate when MGIC cannot readily make a direct payment by more secure means to a vendor or other entity or person. See MGIC policy on Travel for more information.
2. MGIC may not issue personal advances, which are loans to individuals for personal or non-business purposes.
3. When a trip or a business activity is cancelled or postponed, the recipient of the advance must return the unspent funds immediately.

Travel and Business Expense Reimbursements and Clearance of Advances

1. MGIC must adhere to U.S. Government (USG) travel requirements and restrictions when using USG-sourced funds. Requesting Units are responsible to ensure all travel expenses paid through MGIC have prior sponsor approval if required and comply with all applicable sponsor regulations.
2. Travel advances and reimbursement of expenses for MGIC personnel and approved non-employees (also called MGIC Guests for travel purposes) must comply with the applicable UMB/Affiliate Policy and Procedures on Business Travel. Requesting Units are responsible to comply with their organization’s respective Travel policies. See MGIC policy on Travel for more information.
   • For UMB Requesting Units, requests for payment must include the following supporting documentation:
     • Approved Travel Request in UMB’s travel management system
     • Documentation of the business purpose of the trip (e.g. conference registration, invitation letter)
     • For advances: line-item budget on which advance amount is based
     • For travel reimbursements: approved travel expense report signed by the Requesting Unit, prepared in U.S. Dollars (USD) or with proof of conversion rate applied.
     • For travel and program reimbursements: receipts or other proof of payment documents (scanned originals) for every expense other than rate-based Meals and Incidental Expenses (M&IE) per diem (see below). Proof of conversion rates must be included for expenses in foreign currency. Missing receipts must be acknowledged by the traveler in writing and authorized for acceptance by the UMB Requesting Unit.
3. Meals and Incidental Expenses (M&IE) allowances for travelers coming to U.S. locations may not exceed the current per diem rates published by the U.S. General Services Administration (GSA), and the rates published by the U.S. Department of State (DOS) for non-U.S. residents traveling to other foreign locations. Rate-based M&IE expense reimbursements do not require receipts.
4. Expenses incurred in currency other than USD shall be converted by the traveler using prevailing Oanda rates on the date of expense, or with proof of forex rate charged by a legal market vendor, with rate calculations attached to the expense report.
5. MGIC will withhold applicable U.S. source income tax on payments to non-U.S. persons when the travel is considered taxable according to the U.S. Internal Revenue Service.
6. Any outstanding advance for an individual or entity must be reconciled (cleared) before a new advance to that individual or entity may be issued from MGIC.
   • Unspent funds from a travel advance must be returned to MGIC as facilitated by the Requesting Unit and the IO finance team.
   • Balances owed to the traveler upon reconciliation will be processed through MGIC.
7. Advances not reconciled within 60 days must be escalated to senior leadership in the Requesting Unit for action.

Payments and Pre-Payments to Vendors, Independent Contractors, and Collaborating Partners

1. Payments that are identified as a first milestone payment tied to the execution of the contract/agreement, with no required deliverable other than the co-signed contract, do not require an invoice for the payment. All subsequent payments up to the approved award value require an invoice along with the associated deliverables stipulated in the contract/agreement.
2. The Requesting Unit must confirm to IO in writing that the deliverables or performance of work have been received and accepted as satisfactory to meet the requirements of the engagement, before each payment is processed through MGIC.
   • These confirmations must be kept in MGIC finance files as proof of contractor performance; actual deliverables will be retained by the Requesting Unit.
3. Final payment for goods and services must only be made when all deliverables have been completed and accepted by the Requesting Unit.
4. In certain cases, collaborators working under MGIC Funding Agreements or UMB/Affiliate discretionary funds and private grants, as well as independent contractors and vendors selling goods and services under Contracts and Purchase Orders, may receive a pre-payment from MGIC for activities defined in a valid contract/agreement.
   • Pre-payment for the full value of an Funding Agreement (not a contract for goods or services) with a collaborating partner may be authorized by MGIC under certain circumstances, when the total amount and the nature of the partnership does not require incentive-based payment structures or carry a risk of performance failure by the partner. Such determinations will be made by the AVP - IO in their capacity as MGIC VP – Policy & Administration.
   • MGIC may pre‑pay up to 100% of the total contract value for goods and services when the total contract value is at or below U.S. $1,000, in consideration of business expediency and cost efficiency.
   • For goods and services contracts with a total value above U.S. $1,000:
     • Non-compensation items may be partially or fully prepaid, based on the activity or purpose of the expense, prevailing industry practices, or vendor requirements.
     • Pre-payment of compensation-related costs is generally limited to a maximum of fifty percent (50%) of the total compensation-related portion of the contract.
       • MGIC may, at the discretion of the MGIC VP, pre-pay up to 100% of the compensation portion if the compensation portion is less than U.S. $1,000. This exception will be considered upon the IO procurement team’s assessment of risk, including the level of leverage required to ensure contractor performance.
       • MGIC retains discretion to reject partial or full prepayment of the compensation portion if the non-compensation portion of the contract is substantial and requires full or significant prepayment under prevailing industry practices or contractor mandated requirements. This ensures that total prepayment exposure remains appropriately managed while supporting operational efficiency.
5. MGIC may not issue payments of any type to subrecipient organizations (partners implementing activities under UMB/Affiliate sub-agreements or sub-contracts from sponsors).
   • However, MGIC may issue pre-payments to commercial vendors and other service providers that are directly procured under UMB/Affiliate sponsored awards (i.e. not through subrecipient agreements). Requesting Units are accountable to ensure advances to any sponsor-funded payees through MGIC are allowable by applicable sponsor regulations.

Payments to Third-Party Payees

1. MGIC may, with due diligence validation by IO and the approval of the MGIC VP – Policy & Administration, send payments to third-party payees rather than directly to the provider of goods and services or the intended recipient of UMB/Affiliate funds. This can be necessary, for example, when the recipient has no access to a bank on the international financial system, the recipient’s account cannot accept international wire payments, or the recipient transacts business through a third-party bank account as its routine practice.
2. When a non-commercial recipient requests payment to a third party on their behalf, both the recipient and the third party must complete an MGIC Release of Liability Form. The third party must also submit the MGIC Payee Bank Information Verification Form and provide any identification documents or details required by the country’s banking system or by MGIC policies and procedures. The third party may be liable for US and foreign taxes and fees, for which MGIC bears no responsibility.
3. If a commercial vendor requires payment to a bank account not held in the vendor's name, it is the vendor's responsibility to provide documentation sufficient to allow UMB/Affiliate or MGIC to independently verify that:
   • The account owner is a legitimate and authorized representative of the contracted commercial entity
   • Neither the vendor nor the account owner appears on any applicable sanctions, debarment, or restricted party lists. UMB/Affiliate or MGIC retains sole discretion to approve or deny the payment arrangement pending satisfactory completion of this review.
4. Payments to third parties for goods, services, or partnership activities under a valid contract or agreement require the same supporting documentation described in Payments – General.
5. At its discretion, the IO division may independently verify the information received on all forms and must conduct the same sanctions screening on the third party as direct payees.
6. Under no circumstances may external recipients have MGIC payments sent to an MGIC employee or to UMB personnel or affiliates on their behalf, through any form of payment.

Currency Exchange

1. MGIC’s functional currency and currency of preference is USD, both for denomination of the contract/agreement as well as for payment. However, MGIC exists to facilitate international activities in contexts and conditions requiring flexibility in the use of foreign currencies. Therefore, MGIC may process foreign currency transactions under the following circumstances via its bank account or its money transfer account, with agreement by the Requesting Unit:
   • Payments made by MGIC under valid contracts and agreements, and for approved business purposes such as travel expenses, stipends and royalties, shall be sent in the currency of the contract instrument (or, for Non-PO payments, in the currency stipulated by the Requesting Unit) as standard practice, provided that the MGIC bank is able to send international wires in that currency and that the recipient account can receive that currency. This policy applies to all currencies on the regulated currency market.
   • MGIC may convert a payment under a USD-denominated contract/Non-PO to a different currency at the payee’s request, as indicated on the payee’s invoice and related correspondence and as agreed by the Requesting Unit, provided that such conversion is possible in MGIC’s banking or money transfer platform and that the payee’s bank account can receive international wire deposits in that currency. The payment shall remain denominated in USD to match the contract/Non-PO and to support the Requesting Unit’s budget management. In such cases, the payee shall be responsible for any exchange loss.
2. The exchange rate of a foreign-denominated transaction will be set by MGIC’s financial institution, calculated at the time of transaction, and may be less favorable than the market rate. Requesting Units should therefore refer to commercial currency conversion platforms such as Oanda only for budget planning and estimations of cost. The actual exchange rates and fees charged by MGIC’s financial institutions are beyond MGIC's control and may exceed the equivalent USD budgeted by the Requesting Unit. Nevertheless, the equivalent USD value of the transaction will be invoiced to the Requesting Unit, with the applied exchange rate documented, and Requesting Units must reimburse MGIC in full.
3. When there is no option to make a foreign-denominated payment in a currency other than USD, or when the AVP-IO (in their capacity as MGIC VP – Policy & Administration) determines the exchange would carry unacceptable risk to MGIC or the recipient, MGIC shall wire the payment in USD as the corporation’s default functional currency. MGIC will use the Oanda rate, unless required by local jurisdiction to use a different forex source, to calculate the USD equivalent of invoices or requests that are denominated in foreign currency but are unable to be paid in that currency, at the time of payment processing.
4. In all cases where payment is made in a foreign currency, the Requesting Unit must agree with their payee as to which party will cover the cost of conversion. This must be clearly indicated on the contract instrument or in the payment request documentation. MGIC is not responsible for currency exchange losses to the payee or the Requesting Unit under any circumstances. MGIC is not responsible for fees charged to the payee by the receiving bank to receive USD or to convert received USD deposits into another currency.

Scope

This policy applies to all UMB personnel and affiliates who administer, manage, use, and account for payment services through MGIC.

Responsibilities

1. IO Finance staff: Comply fully with all aspects of this policy. Develop, implement, and follow appropriate standard operating procedures to ensure policy compliance, function efficiently, minimize risk to MGIC users and stakeholders, and maintain appropriate segregation of duties and standards of ethical conduct.
2. AVP-IO (in the capacity of MGIC VP – Policy & Administration): Approve or deny all complete and validated payment requests (MGIC PVF and standard supporting document package). Determine appropriate payment method/platform and currency conversion options based on analyses of risk, cost, and business efficiency. Create and maintain vendor records in MGIC financial institutions’ online banking system. Initiate or serve as secondary approver for all transactions on dual-approval enabled platforms. Authorize and manage user access to MGIC online banking platforms and approver functions for UMB and MGIC employees. Manage temporary delegations of approval authority. Approve policy exceptions for legitimate reasons only.
3. Designated IO Online Banking Approvers: Initiate and/or serve as secondary approver for all transactions, including single-approver enabled money transfer service platforms.
4. Requesting Units: Follow MGIC policies and procedures. Request Policy Exceptions for legitimate reasons only, and refrain from policy deviations unless and until an exception is approved by MGIC. Manage project and funding source budgets to account for potential currency exchange fluctuations, and collaborate with IO to minimize and appropriately balance risk to recipients, MGIC, and UMB/Affiliate Entities.

Procedures

See MGIC Standard Operating Procedures.

Documentation Requirements

• Payment Request supporting documents described herein
• MGIC Payment Voucher Form
• MGIC Release of Liability Form
• MGIC Policy Exception Form
• MGIC Payee Bank Information Form
• MGIC Payment Authorization Form (PAF)
• US Internal Revenue Service (IRS) Taxpayer Identification and Certification Form (e.g. W9, W8-BEN or W8-BEN-E)
• MGIC Foreign Source Statement (FSS)

References

• MGIC Policy on Banking and Money Transfers
• MGIC Policy on Financial Management Systems and Processes
• MGIC Policy on Non-PO Payments
• MGIC Policy on Tax Payment and Reporting
• MGIC Policy on Travel
• MGIC Table of Authorities