Statutory Violations

Authority

This Policy is a State Controller Contract, Grant, and Purchase Order Policy under the State Fiscal Rules promulgated pursuant to C.R.S. §24-30-202 (the “Controller Statute”).  Any obligation that a State Agency or Institution of Higher Education (IHE) incurs that is not supported by a valid Commitment Voucher, as required by the Controller Statute and Fiscal Rule 3-1, shall be subject to this Policy.   
 

What Constitutes a Statutory Violation?

• Obligations Incurred Without a Valid Commitment Voucher.  A Statutory Violation occurs whenever a State Agency or IHE incurs an obligation where a Commitment Voucher is required but never executed or the agreement used does not qualify as a valid Commitment Voucher. Examples include, but are not limited to the following situations:
  • An employee or representative of a State Agency or IHE incurs an obligation on behalf of the State Agency or IHE without State Controller or authorized State Controller delegate approval or signature.
  • A State Agency or IHE incurs an obligation for goods or services that exceeds the scope of work for the Commitment Voucher.
  • A State Agency or IHE enters into an agreement, but that agreement fails to satisfy the statutory requirements of a Commitment Voucher. Examples include, but are not limited to, situations when a State Agency or IHE enters into an agreement using an unauthorized vendor agreement or when a State Agency or IHE use the incorrect type of Commitment Voucher.
• Obligations Incurred Outside of the Term or in Excess of the Maximum Amount of an Existing Commitment Voucher.  A Statutory Violation occurs whenever a State Agency or IHE incurs an obligation but either a Commitment Voucher was not in effect at the time the obligation was incurred or the obligation exceeded the maximum amount that was approved in an existing Commitment Voucher. A Commitment Voucher or modification to a Commitment Voucher may not be made retroactively by a State Agency or IHE in an attempt to avoid or remedy a Statutory Violation.  Examples include, but are not limited to, the following situations:
  • The State Agency or IHE incurs an obligation prior to the effective date of a Commitment Voucher, such as when an employee or representative of the State Agency or IHE directs work to begin, or orders goods, or accepts delivery of goods.
    • If the Commitment Voucher is for a Major Information Technology Project, then the Commitment Voucher is only considered executed if it has been approved and signed by the State Controller or State Controller Delegate, and if the State Agency is subject to the authority of the Governor’s Office of Information Technology (OIT), by the Chief Information Officer or a delegate.
  • The State Agency or IHE incurs an obligation that will be included in a future modification to a Commitment Voucher prior to the execution of that modification, such as when an employee or representative of a State Agency or IHE directs work to be performed that exceeds the original scope of work of a Commitment Voucher prior to the effective date of the modification to the scope of work.
    • If the modification is to a Commitment Voucher for a Major Information Technology Project, then the modification is only considered executed if it has been approved and signed by the State Controller or State Controller Delegate, and if the State Agency is subject to the authority of OIT, by the Chief Information Officer or a delegate.
  • The State Agency or IHE incurs an obligation related to a Commitment Voucher after the Commitment Voucher expires, such as when an employee or representative of a State Agency or IHE directs work to be performed past the expiration date of a Commitment Voucher.
  • The State Agency or IHE incurs an obligation related to a Commitment Voucher that exceeds the maximum amount of the Commitment Voucher for any State Contract period, such as when an employee or representative of a State Agency or IHE orders additional hours of work in a fiscal year that exceed the number of hours for which the Commitment Voucher had funding approval for that fiscal year.
  • The State Agency or IHE makes a retroactive adjustment to the rates of a Commitment Voucher that causes the total amount due for that retroactive period to exceed the maximum amount available for that period, such as when the State Agency or IHE executes a modification that increases rates for the prior fiscal year by some amount but the State Agency or IHE has already paid the maximum amount to the Contractor for that fiscal year.
• Obligations Incurred Under a Commitment Voucher in Excess of or Without an Appropriation.  A Statutory Violation occurs when a State Agency or IHE creates an obligation that exceeds the appropriation or the obligation incurred under the Commitment Voucher is not authorized by an appropriation. In the event of an appropriation over-expenditure, consult the Office of the State Controller (OSC).

When is an Obligation Incurred?

An obligation is incurred at the time that any of the following occurs:

• When an employee or representative of the State Agency or IHE directs or authorizes a Contractor to begin work or deliver goods for which the Contractor should reasonably expect to be compensated.
• When the State Agency or IHE accepts work or delivery of goods from a Contractor for which the Contractor should reasonably expect to be compensated.
• When an employee or representative of the State Agency or IHE executes a Commitment Voucher obligating the State to compensate a Contractor retroactively for an obligation predating the execution of the Commitment Voucher.
  • In the case of a Grant, if the State Agency or IHE is not obligated to reimburse a Grantee for any expenses incurred prior to the execution of the Grant, but chooses to allow those expenses for reimbursement under the Grant in its discretion, then the obligation is incurred when the Grant is executed that requires the reimbursement of the prior expenses.  Such reimbursement of prior expenses is permitted so long as federal award allows for reimbursement and the payment is approved by the federal funding agency.
  • Reimbursement of Grantees for obligations incurred prior to the effect date of a Grant is not allowed with State funds.

How Does a Statutory Violation Affects State Agencies and IHEs?

When a Statutory Violation occurs, it has all of the following effects on State Agencies and IHEs: 

• State Agencies and IHEs may not perform or fulfill an obligation that is created or included as part of a Statutory Violation without the ratification of the State Controller.  
• State Agencies and IHEs may not make any payment under a Commitment Voucher if any part of that payment is subject to a Statutory Violation, without the approval of the State Controller.  
• State Agencies and IHEs may not execute any modification or new Commitment Voucher that is subject to a Statutory Violation that increases the total obligation of that Commitment Voucher prior to the approval of the State Controller, except to the extent necessary to mitigate the continuation of that Statutory Violation.   i. In order to avoid dual payments, if the Statutory Violation occurred because an obligation was incurred in relation to a Commitment Voucher that expired, then the new Commitment Voucher executed to mitigate the Statutory Violation, may not contain any funding for any of the obligations incurred during the time period subject to the Statutory Violation unless approved by the State Controller. The ratification of the Statutory Violation by the State Controller satisfies the statutory requirement of having a valid Commitment Voucher in place; however, the State Controller may require a retroactive Commitment Voucher to legally bind a vendor and define deliverables and performance obligations of the parties.
• State Agencies and IHEs may not direct or authorize any further performance that would increase the State’s obligations, or that would cause an additional Statutory Violation or that would increase the amount of the Statutory Violation unless approved by the State Controller.
• State Agencies and IHEs may not approve a retroactive Commitment Voucher in order to avoid or remedy a Statutory Violation.  A retroactive Commitment Voucher may only be created with the approval of the State Controller and in conjunction with a ratification of the Statutory Violation.

What are the Required Elements of a Request for Ratification of a Statutory Violation?

When a Statutory Violation occurs, the individual or individuals responsible for the Statutory Violation, or the State Agency or IHE’s controller if the individuals responsible are unavailable shall develop a request for approval of the Statutory Violation that includes all of the information required on the approval request form issued by the State Controller.  At a minimum, this information shall include all of following: 

• A description of the obligation that includes all of the following:
  • A description of the goods that have been delivered and services that have been performed that resulted in the obligation.
  • The total dollar amount of the obligation.  The amount included shall not be reduced for any trade-in allowance or any amount that will ultimately be reimbursed by a party other than the State Agency or IHE.
  • The date or dates on which the obligation arose.
• An explanation of the circumstances that caused the Statutory Violation, including all of the following:
  • The name or names of the individual or individuals who caused the obligation.
  • The organizational unit(s) of the individual or individuals who caused the obligation and the name of the manager or supervisor responsible for that organizational unit(s).
  • A description of the existing internal controls that were in place to prevent the Statutory Violation and why those controls failed to prevent the Statutory Violation.  If similar Statutory Violations have occurred in the past, include a description of why previous corrective actions failed to prevent this violation.
• An evaluation of the Statutory Violation describing all of the following:
  • Whether or not there was any bad faith or fraudulent activity on behalf of either the State Agency or IHE or Contractor.
  • Whether or not the prices to be paid are fair and reasonable and the basis for that determination.
  • Whether or not the State procurement code was followed for the creation of the obligation.
  • Whether or not all other required approvals were obtained prior to incurring the obligation, such as approvals from OIT or approvals of a Certification of Personal Services Agreement.
  • Whether or not all required waivers were obtained prior to incurring the obligation, such as waivers from: Colorado Correctional Industries for furniture purchases; Integrated Document Services for printing services; and training waivers from the Division of Human Resources for external training. vi. Whether or not the Statutory Violation showed a willful disregard of the law on behalf of the individual or individuals that created the Statutory Violation, and whether or not the Statutory Violation happened accidentally or was inadvertently caused through no fault of the person who created the Statutory Violation.
  • Whether or not the State Agency or IHE is requesting permission to make payment without recovering the amount of the payment from the individual or individuals who created the Statutory Violation.
• Certification from the State Agency or IHE that the expenditure is within the unencumbered balance available for the purchase and that the State Agency or IHE has the funds to pay the obligation.  This may include a requirement to encumber funds to ensure they will be available to support ratification at the State Controller’s discretion.
• A description of the actions that the State Agency or IHE will take in the future to prevent the reoccurrence of the Statutory Violation.  
• Supporting documentation that relates to the Statutory Violation, including all of the following: 
  • Copies of any correspondence between the parties that defines the terms of the obligation.
  • Invoices showing all amounts due under the Statutory Violation and the specific goods accepted or services provided for which the State Agency or IHE is obligated to pay.
  • Any other documentation that the State Controller will need in order to be able to approve the Statutory Violation or that the State Controller has requested be included in the request for approval.

How Does a State Agency or IHE Request Approval?

Once a State Agency or IHE has developed the request for approval for a Statutory Violation by completing the “Request for Payment of Liability Incurred in Violation of §24-30-202, C.R.S.,” the State Agency’s or IHE’s controller or chief financial officer shall review the request.  If the State Agency’s or IHE’s controller or chief financial officer supports the request for approval, then they shall submit the request to the State Controller. If the State Agency’s or IHE’s controller or chief financial officer does not support ratification, it has the same effect as if the State Controller had denied approval of the Statutory Violation.

Who Can Approve a Statutory Violation?

Only the State Controller or individuals specifically delegated by the State Controller can approve Statutory Violations. As used in this Policy, the term “State Controller” refers to those individuals with specific delegation to approve Statutory Violations. It does not include individuals at Agencies or IHEs that are authorized to sign contacts on behalf of the State Controller. All Statutory Violations must be approved by the State Controller or by a member of the Central Contracts Unit who is specifically delegated to ratify Statutory Violations.

What Statutory Violations Cannot Be Approved for Vendor Payment?

The State Controller may approve or deny payment to a Contractor that is subject to a Statutory Violation in the State Controller’s sole discretion.  Regardless of the justification for the approval, the State Controller will not approve a request to make payment to a Contractor under a Statutory Violation if any of the following circumstances have occurred:

• The prices or rates for the obligation are not fair and reasonable for the work performed or goods delivered.
• The amount of the obligation exceeds the unencumbered balance available for the purchase or the State Agency or IHE does not otherwise have the funds to pay the obligation.
• There is evidence of bad faith or fraudulent activity on behalf of the Contractor to whom the obligation is owed.

What Statutory Violations Can Be Approved to Remove Personal Liability?

The State Controller, in the State Controller’s sole discretion, may approve or deny the request to release an individual or individuals from incurring personal liability who created a Statutory Violation.  Regardless of the justification for the approval, the State Controller will not approve a request to remove personal liability under a Statutory Violation if any of the following circumstances have occurred:

• There is evidence that there was a willful and bad faith disregard for the law on behalf of the individual or individuals who created the obligation that led to the Statutory Violation.
• The individual or individuals who created the Statutory Violation were at fault for knowingly or intentionally creating it and the Statutory Violation was reasonably avoidable.
• The State Agency or IHE has determined to hold the employee or representative of the State Agency or IHE liable for the payment by not requesting permission from the State Controller to make a payment to the Contractor to whom the obligation was owed without recovering payment from the person that created the Statutory Violation, unless the State Controller has determined that the State Agency’s or IHE’s failure to request a release of personal liability is unreasonable.

What Happens After a Request is Approved or Denied?

• If the State Controller approves a request to make payment that is subject to a Statutory Violation only, then the approval acts as a Commitment Voucher for the obligation and the State Agency or IHE may fulfill the obligation that was the subject of the Statutory Violation, but the State Agency or IHE must recover the amount of that payment from the individual or individuals that created the Statutory Violation as directed by the State Controller.
• If the State Controller approves a request to make payment for an obligation that is subject to a Statutory Violation and permits the State Agency or IHE to do so without recovering the amount from the responsible individual or individuals, then the approval acts as a Commitment Voucher for the obligation and the State Agency or IHE may fulfill the obligation that was the subject of the Statutory Violation in the same manner it would had the Statutory Violation not existed.  
• If the State Controller denies the request or otherwise fails to approve the request to make payment to the Contractor, then the Statutory Violation remains and the State Agency or IHE shall not fulfill the obligation that was the subject of the Statutory Violation as the State is not liable for the obligation pursuant to the Controller Statute. In this case the individual or individuals responsible for incurring the obligation are personally liable directly to the Contractor for the obligation. If the State Agency or IHE has already made a payment on an obligation that was the subject of the Statutory Violation and payment of that Statutory Violation is not approved by the State Controller, then the State Agency or IHE shall recover that payment from the individual or individuals responsible for incurring the obligation as required by the Controller Statute.

Violations Other Than Statutory Violations

When Statutory Violations occur, State Agencies and IHEs may have also  violated other rules or policies governing financial and contractual commitments under the authority of the State Controller. 

• Fiscal Rule Violations.  A Fiscal Rule Violation occurs whenever a State Agency or IHE incurs an obligation in violation of State Fiscal Rules, which are legally binding State Administrative Rules of the Department of Personnel and Administration and codified under the Code of Colorado Regulations §100-101. Fiscal Rule Violations may or may not occur simultaneously with a Statutory Violation. When a Statutory Violation is approved by the State Controller, any Fiscal Rule Violation related to the same obligation is automatically approved. Fiscal Rule Violations that are not also Statutory Violations shall be monitored and resolved by each State Agency’s or IHE’s controller delegate as part of the State Agency or IHE controller delegate’s responsibilities under the State Agency or IHE Controller delegate’s delegation agreement.  
• State Controller Policy Violations.  A State Controller Policy Violation occurs whenever a State Agency or IHE incurs an obligation in violation of an applicable State Controller Policy issued by the State Controller, which may or may not occur simultaneously with a Statutory Violation. When a Statutory Violation is approved by the State Controller, any State Controller Policy Violation related to the same obligation is automatically approved. State Controller Policy Violations that are not also Statutory Violations shall be monitored and resolved by each State Agency’s or IHE’s Controller delegate as part of the State Agency or IHE controller delegate’s responsibilities under the State Agency or IHE Controller delegate’s delegation agreement.
• Unauthorized Purchases.  Obligations that are Statutory Violations may also be simultaneous violations of the Procurement Code and the Procurement Rules. Approval of a Statutory Violation by the State Controller shall not be construed as an approval of any Unauthorized Purchase, as defined in Procurement Code Rule R-24-109-404-01. Unauthorized Purchases must be ratified separately in accordance with the Procurement Code and Procurement Rules.

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