Welcome to Expenditure Guide Chapter 4 Key Processes

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 Guide has been developed to assist you in exercising stewardship, in achieving department and UO objectives, and in effectively using resources to those ends.

In Chapter 4, Key Processes, you will gain an understanding of the key processes in making expenditures at the UO. 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 learn where to find additional related information.

Thank you for your interest in learning about good decisions relating to expenditures at the University of Oregon.

Overview of the Decision Process

A fundamental part of making UO expenditures is the decision process. The particular circumstances of a given expenditure decision may be simple, straightforward, complex or problematic. The decision process follows this same pattern. Some expenditure decisions are relatively easy to make. This is particularly the case in instances where very clear guidance has been provided. On the other end of the spectrum unit administrators at the UO are often faced with expenditure decisions that are difficult to make. This can be the case when the guidance provided is vague.

In all expenditure decisions there is an element of individual judgment. The challenges of complex decision making can be met by addressing some fairly straightforward questions. The elements of the decision process are described in the paragraphs that follow. These elements relate to the test of reasonableness and three types of approvals: programmatic, budgetary, and compliance.

Programmatic Approval

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.

In evaluating the programmatic purpose consider these elements by asking the following questions.

Element	Questions
Benefit	What is the purpose of this expenditure? Who benefits from the expenditure and how? Is an individual the sole beneficiary of the expenditure?
Relevance	Is there a legitimate business purpose for the expenditure? How does this expenditure relate to program goals and objectives? Is this expenditure consistent with department and university values?
Risks	Are there special programmatic concerns or issues relating to making the expenditure? What are the programmatic consequences of not making this expenditure?

If there is not a legitimate business purpose, or if an individual is the sole beneficiary of the expenditure, i.e., there is not a benefit to the UO, then the expenditure should not be made.

Budgetary Approval

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.

In providing budget approval consider these elements by asking the following questions.

Element	Questions
Availability	Are there sufficient funds to make this expenditure? Is timely and accurate financial information available? Are there future financial uncertainties that might impact this decision? If so, can the decision be delayed?
Priority	What is the relative importance of this expenditure? Can the university or department mission and objectives be met if the expenditure is not made? Will this expenditure have to be made to the detriment of other planned expenditures?

The individual giving budget approval must have the necessary information. It is not enough to merely have available funding, especially when resources are scarce, as they often are. It is important that administrators who give budget approvals have a plan for expenditures, and know the department’s priorities.

Compliance Approval

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 elements of compliance approval include:

Element	Questions
Requirement	Does this expenditure meet all applicable requirements of: Law Applicable Policy Procedure Funding Source Restrictions Does this expenditure require the approval of any other entity or individual?
Principle	Does this expenditure meet the standards of fiduciary responsibility and ethics? Is there an apparent or actual conflict of interest?

Fiduciary responsibility 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.

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.

In some cases, identifying all the applicable requirements can be difficult. Reviewing Expenditure Guide Chapter 3 Authority and Limits may help. Chapter 3 Authority and Limits also discusses the State of Oregon Employee Code of Ethics, 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 which applies to all expenditures made, no matter what the funding source. If you are still uncertain seek expert advice.

Test of Reasonableness

Regardless of the type of approval being given, expenditure decisions must pass the test of reasonableness. 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.

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.

When to Exercise Caution

As mentioned above, expenditure decision can range from simple to complex. Unit administrators at the UO are often faced with expenditure decisions that are difficult to make. The elements described above are intended to aid in the decision making process, but in all expenditure decisions there is an element of individual judgment. Key to making judgment calls is recognizing when to exercise caution. Caution is needed when:

• An individual appears to benefit with little or no benefit to the institution

• An individual appears to benefit because of their position

• There is an apparent or actual conflict of interest

• The expenditure is in conflict with UO values

• There is no clear fit to mission

• There are competing priorities for scarce funds

• It is unclear whether the expenditure is allowed

• The benefit to the university is not clear

• The type of expenditure is of special concern to one or more of our publics

• Funding source restrictions may apply

If any of the above factors apply, decision-makers should take extra care to document the decision process in order to justify the choice that has been made. If in doubt seek advice.

Where Can You Get Help?

For guidance on specific types of expenditures see the Business Affairs Expenditure Quick Reference that provides illustrative examples and links to relative rules, regulations, policy and procedures. It is always good to seek advice and get second opinions from peers and/or technical experts. See some illustrative decision making examples.

(Link out to actual experts and contacts – placeholder)

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!