Welcome to Expenditure Guide Chapter 2 Key Concepts

Welcome to the "Expenditure Guide", one of several courses about financial management and business transactions at the University of Oregon (UO.)As administrators at the UO, one of the most important decisions you will make is to commit funds for expenditures of goods and services. This responsibility requires that you become informed of requirements and act ethically. You are the steward of dollars that flow to the UO from a variety of sources. The Expenditure Guidehas been developed to assist you in exercising stewardship, achieving department and UO objectives, and effectively using resources to those ends.

In Chapter 2, Key Concepts, you will gain an understanding of the most important concepts relating to decisions about expenditures.   If you choose, you may test your understanding of this chapter by taking the online quiz. You will receive immediate feedback on your answers and where to find related information.

Thank you for your interest in learning about good expenditure decision-making.

Key Concepts:

Fiduciary Responsibility is a crucial frame of reference in making all business decisions, including whether to make a given expenditure. A fiduciary relationship exists when someone (the fiduciary) acts in the capacity of a “caretaker” of another’s rights, assets and/or well being. The fiduciary has an ethical and/or legal obligation to carry out this responsibility with discretion, intelligence, honesty and impartiality. Those who make decisions or give approval for expenditures must ensure that the funds are expended responsibly, reasonably, and in compliance with the intentions, rules, law and concerns of the provider of the funds.

Conflict of Interest is a term that describes the potential or real conflict between what is beneficial to an individual or individuals (fiduciaries) and what is beneficial to the organization, i.e., the department, school, college or university. An individual must not engage in activity that has the potential of impairing his or her independence or impartiality in making business decisions on behalf of the UO. An individual may not receive a financial or other material benefit from his or her role at the UO.

State of Oregon Employee Code of Ethics is a set of laws and policies that describe the appropriate conduct for all state employees. It is vital that administrators be aware of and adhere to this code. The code applies to all expenditures made, no matter what the funding source.

Test of Reasonableness is a tool for evaluating judgments and decisions. It is commonly held that reasonable means moderate and fair, not extreme or excessive. The test of a good decision then, is whether a prudent individual with the same information, and within the same context, would arrive at the same decision (or agree that the decision made was reasonable.) When making a decision about an expenditure, administrators may apply this test in “fast-forward thinking” mode and try to anticipate what others would do in these circumstances. Auditors and reviewers may apply this method to decisions made after the fact. In any case, the test of reasonableness is essentially an evaluation made by comparing the action taken with judgments made by others in similar circumstances.

The test of reasonableness is discussed in more depth in Chapter 4 Key Processes.

Would you like to use another tool to evaluate your skill in judgment making? See the Expenditure discussion forum for an opportunity to compare your judgment making skills with those of others.

ApprovalIt is common to speak of approvals in a general way; however, it is important to distinguish between the three different types of approval, in order to make good decisions, and to be confident that all aspects of the decision have been carefully considered. When expenditure decisions are reviewed after the fact, (as in the case of an audit), it is important to distinguish the type of approval in order to identify and resolve problems, or better yet, to prevent problems in the future. Three types of approval are described in the following paragraphs.

• Programmatic approval indicates that the proposed expenditure has a related business purpose and meets objectives related to department, college, school, and university mission. Programmatic approval is primarily the responsibility of Unit Administrators and their designee's. Institutional executive management and appropriate central offices may provide guidance.
• Budgetary approval indicates that the proposed expenditure is a priority, and that sufficient funds are available to incur the expense. Budgetary approval is primarily the responsibility of Unit Administrators and their designee's. Institutional executive management and appropriate central offices may provide guidance.
• Compliance approval indicates that the proposed expenditure has met all applicable laws, regulations, policies, and procedural requirements; and that the expense is incurred using good business practices. Compliance approval is primarily the responsibility of Unit Administrators and their designee's. Institutional executive management and appropriate central offices may provide guidance. In addition, central offices are responsible for reviewing selected departmental transactions for compliance.

The different types of approval are discussed in more detail in Chapter 4 Key Processes.

Authority Authority relates to the responsibility for making decisions. At UO, Unit Administrators have been delegated the authority to make expenditure decisions. In Chapter 3 Authority and Limits, we discuss the framework necessary for making resource expenditure decisions effectively.

Accountability Accountability is how decision-makers demonstrate that they have met their fiduciary responsibility. It is how we show that we are using our resources wisely and responsibly. While trust is an important foundation in the UO community, we are obligated to be accountable in a public manner. In Chapter 5 Accountability we discuss in more detail how Unit Administrators and employees can demonstrate accountability by implementing effective internal controls and providing adequate documentation.

What Did You Learn?

Test your comprehension by taking the online quiz. It only takes a few minutes, and you will receive immediate feedback for “your eyes only.”

Where Do You Go Next?

This course is designed to be a stand-alone, self-directed tutorial. That means you are in the pilot seat as far as how much and in what order you explore the information. Review the list of chapters.  Thank you for your interest in making sound expenditure decisions at the University of Oregon!