Welcome to Expenditure Guide Chapter 6 Management Issues

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, in achieving department and UO objectives, and in effectively using resources to those ends.

In Chapter 6, Management Issues, you will gain an understanding of the most important management issues relating to decisions about expenditures at the UO. Some of the issues highlighted here are discussed in more depth in earlier chapters. 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 UO.

Decentralized Model

The business model at the UO is one where authority to expend monies rests with the departments, schools and colleges. We have distributed the authority for these kinds of decisions because we believe this model to be more effective and efficient. With this model comes a certain level of risk.

Risk can be defined as anything that may jeopardize the institution’s ability to meet its commitments and operate effectively. Specific risks that are associated with a decentralized purchasing model are: a) individuals may not understand their role or the constraints on their authority; b) purchases in violation of policy and procedures; c) resources may be wasted; or d) someone may act in an improper or unethical manner.

Risk is continually assessed at the institution level when establishing policies and procedures. Even in our decentralized model, many of our control activities are established and monitored centrally. Excessive controls may lead to increased bureaucracy, reduced productivity, increased complexity and may add little or no value. On the other hand, excessive risks may lead to a loss of assets, poor business decisions, increased instances of non-compliance, increased regulations or loss of public confidence. Establishing controls then becomes a balancing act between the level control that is needed with the level of risk.

This course is one of several strategies the Business Affairs Office (BAO) has designed to mitigate some of the risk associated with a distribution of authority. Specific risks associated with decentralized purchasing model are addressed throughout all chapters of the Unit Administrator Guide. Additional information regarding business operations and processes are available through the Administrator portal on the BAO website.

Ethics and Conflict of Interest

Unit Administrators at the UO have a fiduciary responsibility to act ethically and/or legally as a “caretaker” of the assets of the university. Those who make decisions or give approval for expenditures must ensure that 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. 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.

Unit Administrators set the tone within our organization as to the importance of conducting business in an ethical manner. When we make or approve expenditures that are not allowed or do not further the mission of the university, we weaken our control environment. Unit Administrators contribute to creating a strong internal control environment by staying within the limits of applicable policies, regulations, rules, directives, or procedures and stating the importance of doing so to those in their department. See also Chapter 3 Authority and Limits for a more detailed discussion.  

Decision-makers at the UO are held accountable to our customers for decisions made and actions taken. Our customers include past, present and future students who seek an education, citizens, vendors with whom we contract for goods and services, university supporters and contributors, and our employees. 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. See also Chapter 5 Accountability for a more detailed discussion.

Complexity of the Compliance Environment

It can sometimes be confusing, working in a complex environment like the public sector. Finding a way through the maze of regulations, policies and procedures can be time consuming or difficult for even the most experienced administrator. As administrators with authority to make decisions to expend UO resources, you are in fact held accountable for ensuring that each expenditure is made in accordance with all applicable policies, regulations, rules, directives, procedures and good business practices. Chapter 3 Authority and Limits provides a conceptual framework to help you find your way through the maze regulations may potentially impact expenditure decision at the UO.

 Sensitive Expenditures (When to Exercise Caution)

University of Oregon funds may be used for business-related expenses incurred in furtherance of the university’s mission. Certain expenditures are specifically disallowed by either internal or external policies, regulations, rules, or directives making a decision to expend funds relatively easy. Expenditure decisions become increasingly difficult when guidance provided is vague. Furthermore, in many instances the appropriateness of the expenditure relates to facts and circumstances surrounding the expenditure. In all expenditure decisions there is an element of individual judgment.

Chapter 4 Key Processes discusses the challenges of complex decision making by addressing some fairly straightforward questions, describing the elements programmatic, budgetary, and compliance approval, and identifying when it is important to exercise caution. Unit Administrators should familiarize themselves with the Expenditure Guideline Policy. 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.

Foundation Funded Expenditures

The UO Foundation is a legally separate entity that receives, invests and disburses gifts for and on behalf of the university. UO Foundation funds are private and are not subject to state rules policies, regulations, rules, or directives. In some instances, Foundation funds are used to support activities that cannot be supported with state funds. However, the UO has adopted an Expenditure Guideline Policy which is intended to promote proper stewardship of university funds by providing a broad statement addressing the appropriate and legal uses of UO funds in support of the university’s mission.In that policy UO funds are defined as all funds available to the university received from internal and external sources, including funds held at the University of Oregon. When incurring expenses to be paid from University of Oregon Foundation funds, the University of Oregon Foundation is responsible for ensuring that expenditures of foundation funds do not violate donor intent. University employees must ensure that expenditures are consistent with the university’s priorities and mission.

Tax Related Expenses

Certain expenditures paid by the university on behalf of employees, student employees or independent contractors may be subject to tax reporting depending on the circumstances. IRS Section 132 Computation of Taxable Income, outlines the types of payments to employees that may be excluded from gross income for certain fringe benefits. This is important in determining if payments to an employee are tax reportable or not. There are certain types of reimbursements that may have tax considerations that are not readily apparent even if they are not intended to be compensation to the employee. Examples include travel by spouses, moving expenses, rental of formal clothing for a university event, auto allowances or cash awards to employees. If you are not certain about how a specific payment should be treated for an employee or student employee, contact the Business Affairs Payroll Office. For independent contractors contact Business Affairs Purchasing Support.

Sanctions

Responsibility to adhere to existing policy and procedure rests with the departments, schools and colleges. The business model at the UO accepts the fact that there will sometimes be mistakes or errors in human judgment. When instances of non-compliance are noted Unit Administrators are primarily responsible for taking appropriate corrective action and follow-up. In addition, part of the overall mission of the BAO is to ensure that UO business transactions are conducted in accordance with all applicable regulations, policies, procedures, generally accepted accounting principles, and sound business practices. Therefore, the Director of Business Affairs has the authority to evaluate and impose appropriate sanctions with regard to non-compliance. See the BA02 General Sanctions Policy.

Where Can You Get Help?

For guidance on specific types of expenditures that may need to be evaluated on a case-by-case basis see the Business Affairs Expenditure Quick Reference with 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. (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!