Propriety of Expenses

This policy provides guidelines as to the propriety of expenses made using university funds.  It governs direct payment made to an entity as well as reimbursement paid to an individual or entity. This policy applies to all employees, associates, affiliates, and other individuals (including students).

1. Processing Expenses
   
   All expenses made using university funds must comply with the Tests of Propriety (see section II.E) and other requirements found in this policy and its related procedures.
    
2. Funding Restrictions on Expenses
   
   If more than one regulation or policy applies to a particular transaction, the more restrictive one must be followed.  For example, a sponsor cannot authorize the purchase of first-class airline tickets on a research project because University Fiscal Procedures and related university policies prohibit using university funds to purchase first-class air travel.
    
3. Approving Expenses 
   
   As indicated in APS 4014-Fiscal Roles and Responsibilities, all expenses made using university funds must involve at least two different employees: a requestor and an approver.
   
   Approvers may not approve their own transactions (e.g., personal reimbursement, travel expenses, or official functions), nor are approvers permitted to approve transactions that provide personal reimbursement to their supervisors.
   
   The approver must have sufficient knowledge to evaluate the transaction and the authority to challenge or seek further approvals for questionable transactions. For certain expenses, such as routine procurement card purchases, it is reasonable to conduct the approval process after the transaction has been completed. For others, such as a purchase exceeding $5,000, the approval must be done prior to incurring the expense. Whether the approval process is done before or after the transaction has been completed, it consists of the following four steps:
   1. The approver initially considers the Tests of Propriety (see section II.E) presented in this policy, policies set forth in other administrative policy statements, and Office of University Controller Finance Procedural Statements to evaluate whether or not the transaction is a proper expense of university funds.
       
   2. The approver next evaluates the expense for propriety with respect to other applicable policies, laws, regulations, and rules; and contracts, grants, and donor restrictions. The approver also evaluates the expense in terms of campus-specific or organizational unit-specific rules.
       
   3. The approver is expected to challenge any transaction that does not appear to be an appropriate expenditure of university funds.
       
   4. If the approver is uncertain that the propriety of the expense has been substantiated, the approver must refer the matter to the next higher level fiscal role (as defined in the hierarchy set forth in APS 4014-Fiscal Roles and Responsibilities) for further evaluation and approval.
       
4. Personal Responsibility
   
   As indicated in APS 4014-Fiscal Roles and Responsibilities, the individuals involved in a transaction may be held personally liable for a transaction that is made in violation of policies, laws, regulations, and rules; and contracts, grants, and donor restrictions, regardless of when the approval occurred.
   
   Employees, associates, affiliates, and other individuals (including students) responsible for making expenses using university funds have an obligation to stay up to date in their knowledge about, and act in compliance with, applicable policies, laws, regulations, and rules; and contracts, grants, and donor restrictions, regardless of when the approval occurred.
    
5. Tests of Propriety
   
   The Tests of Propriety are used to evaluate the appropriateness of an expenditure.  For an expenditure to be considered an appropriate use of university funds, the answer to each of the Test questions must be “Yes.”  If any of the following questions receive a “No” response, then the transaction is not an appropriate use of university funds.
   
   Is the transaction:
   1. for official university business?
       
   2. in the best interests of the university?
       
   3. the most effective way to accomplish official university business?
      
      Meaning that, without the expenses, would programmatic objectives be difficult or otherwise more costly to achieve?  Or would the impact, level, or quality of the achievement be reduced?
       
   4. in compliance with applicable policies, laws, regulations, and rules; and contracts, grants, and donor restrictions, including having the required approvals and authorizations by the appropriate fiscal role?
       
   5. within the available resources of the responsibility unit, taking into consideration all outstanding commitments and encumbrances?
       
   6. directly beneficial to the responsibility unit where it is being charged?
       
   7. reasonable?
      
      Meaning that the quantity and quality of goods or services being purchased is sufficient to meet the university’s identified need without exceeding it.
       
   8. in compliance with university conflict of interest provisions? 
      
      Meaning that, if an employee derives private gain, or appears to derive private gain, as a result of the transaction, then the transaction violates the conflict of interest provisions stated in regent law, regent policy, and in APS 5012-Conflicts of Interest and Commitment in Research and Teaching.

Evaluating the propriety of university expenses requires the exercise of a high degree of judgment and discernment. Therefore, consider the following when deciding whether or not a particular transaction is a proper use of university funds:

1. “Would a university outsider - such as your dentist, a teacher at the local elementary school, the clerk at your grocery store, or your neighbor – consider the expenditure to be a reasonable and necessary expense of public funds?
    
2. “Would you want others – such as newspaper, radio, television, or other media outlets – knowing and reporting about what you have decided?”

Think about whether an outsider, such as the general public or an auditor, would consider the expenditure a reasonable expense for university business and an appropriate use of university funds.

1. Related Administrative Policy Statements (APS) and Other Policies
   1. APS 4014-Fiscal Roles and Responsibilities
   2. APS 5012-Conflicts of Interest and Commitment in Research and Teaching​
2. Related Procedures
   1. Finance Procedural Statement Sensitive Expenses
3. Resources
   1. Educational resources including guides, training notifications, and newsletters are announced and available on the Office of University Controller and Employee Services websites.

Italicized terms used in this APS are defined in the APS Glossary of Terms.