Manage or Change a Purchase Order

Learn about the requirements and steps involved in managing or changing a purchase order at Columbia University. 

Already Know How?

Go to the ARC Portal to login to ARC to manage or change a Purchase Order.

Details

In order to modify information on a previously dispatched purchase order (PO), a change order should be initiated in Accounting and Reporting at Columbia (ARC).

While most change orders require University-level (central) approval, those meant to change POs for University-wide Purchasing Agreements (UwPA) and/or those meant to decrease a PO amount do not. 

Furthermore, financial change orders do not require the involvement of or approval from the Purchasing department because such modifications to encumbrances or other accounting information do not change either the value of the PO or its terms. Note that financial change orders are only allowed on Autosource POs. 


Financial Change Orders

A financial change order is a change order that does not alter the scope or terms of the PO, such as updating a ChartField or distribution. A financial change order bypasses approval by the Purchasing department and is reflected on the unit’s financial reports in ARC.


When to Create a Change Order

Change orders are the proper method for requesting the following changes to a purchase order:

  • Increase/decrease the value of a PO
  • Modify the Open Commitment of a PO
  • Change the distribution of funds between ChartFields associated with a PO and establishment of new ChartFields associated with a PO
  • Close a PO
  • Reconcile PO value to payment
  • Change contract dates
  • Change ship-to or bill-to information

There is an allowable tolerance for the total payment amount to be greater than the total purchase order amount. This variance allows for items such as shipping charges and small incidental fees that may not have been anticipated when the PO was originally created.  Above the tolerance thresholds, however, a change order is required to increase the value of the original PO. When a payment is entered in ARC, the system will indicate whether or not the payment is “within tolerance” and processing can continue. For more details on when tolerance does not apply and on thresholds, see the University’s Change Order Policy.


Definitions

PO Value
The current total amount of the PO, regardless of payments.

Encumbrance
In purchasing, an encumbrance is an amount for which there is a legal obligation to spend in the future. A purchase order is a typical encumbrance transaction. Once funds are encumbered, the department should make an entry on their budget so as not to overdraw.  Encumbrances are comprised of all approved and pending for approval requisitions, purchase orders, and supplier invoices.

Total AP Payments
AP Payments made to date plus all open invoices that are currently in ARC.

Financial Change Order
A financial Change Order includes any Change Order that does not alter the scope of the PO, such as updating a ChartField or distribution. A financial Change Order bypasses approval by the Purchasing department and is reflected on the department's financial reports in ARC.

Processing a Change Order
  1. When creating a new change order it is important to provide a clear and valid justification to assist the Purchasing Office in assessing the request to process accordingly; See Change Order Justification Requirements
  2. Once funds are encumbered, make an entry on the budget to reduce unallocated funds, so as not to overdraw
  3. When a PO has been overpaid, correct the value of the PO without increasing the Open Commitment; if the overpayment applies to more than one ChartString, fix the overpayment in each individual ChartString
  4. When a PO is no longer needed, clear the unused PO value and unspent dollar value (open commitment)

ARC Roles and Considerations

Requestor of the Change Order
Initiates change order by inputting information into ARC, providing explanations, and required supporting documentation to articulate a rationale for the transaction.

Department Approver
Approves the validity of the change order request in ARC, both from operational and financial criteria; and verifies that supporting documents provide sufficient detail

Central Purchasing Approver
Reviews the original purchase order and validates that the requested change is in compliance with the terms of the original purchase order and that supporting document(s) are sufficient; approve the change order request; convert the change order request to an updated purchase order.

Allowable Tolerances

There is an allowable tolerance for the total payment amount to be greater than the total purchase order amount. This variance allows for items such as shipping charges and small incidental fees that may not have been anticipated when the purchase order was originally created. Above these thresholds, however, a change order is required to increase the value of the original Purchase Order. ARC maintains a table of these tolerances. When entering a payment, the system will indicate if the payment is within tolerance and processing can continue. If the payment is not within tolerance, ARC will not allow payment processing to continue. This tolerance level does not apply to (and is not limited to):

  • Leasing
  • Catering (on-site)
  • Maintenance and repair services

Change Order Variance Thresholds

Change crder variance thresholds are as follows:

Please note: The lower of the two cap amounts between a % cap and a $ cap is what governs as the cap threshold, over which a change order is required.


Examples (non-Facilities):

Example #1

Original Purchase Order dollar value = $10,000

Submitted invoice = $12,000

Dollar Variance = $2,000

Percentage Variance = 20%

Next Step: A change order would be required to process this payment as the lower cap amount, in this case, would be 10% or $1,000 since the lower cap will indicate threshold.

Example #2

Original Purchase Order dollar value = $10,000

Submitted invoice = $10,500

Dollar Variance = $500

Percentage Variance = 5%

Next Step: This is OK to process through Accounts Payable without a change order as it is within 10% of the specific dollar range and this is the lower cap amount.

Example #3

Original Purchase Order dollar value = $100,000

Submitted invoice = $110,000

Dollar Variance = $10,000

Percentage Variance = 10%

Next Step: This is OK to process through Accounts Payable without a change order as it is within 10% of the specific dollar range and this is the lower cap amount.

Example #4

Original Purchase Order dollar value = $4,000

Submitted invoice = $4,600

Dollar Variance = $600

Percentage Variance = 15%

Next Step: A change order would be required to process this payment as the lower cap amount, in this case, would be 10% or $400 since the lower cap will indicate threshold.

Policies

For information on change orders, see the University’s Change Order Policy.


Documents

See Change Order Justification Requirements in order to provide a clear and valid justification to assist the Purchasing Office in assessing the request to process accordingly.


Training 

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