Reasonable Expense Guide

The University is a public institution, and we are accountable as stewards of public funds. Every expenditure we make must add value to the institution and promote the core purpose, mission, and objectives of the University. This guide provides you with the basics of what should be considered before spending University funds.

Benefits of Reasonable Spending

Reasonable spending supports the University and our students through better use of resources, easier record keeping, and more accurate reporting. By following reasonable spending guidelines, you can streamline your approvals and reimbursements and lessen the chance of revisions or denials.

Every Dollar is a State Dollar

Every dollar that comes into the University is a state dollar. State dollars are considered public money, must be used for valid public purposes, and are subject to Arizona expenditure statutes, laws, rates, and policies. As state employees managing or spending these funds, we must adhere to the Code of Conduct for Employees Involved in Financial Activities in the State of Arizona Accounting Manual. As University employees, we must also follow our own financial policies, like the Misuse of University Assets Policy, which defines responsibilities for using and reporting the misuse of University property, including money.

It is crucial we think of our spending from the public perspective. Every purchase we make is paid for by tuition, state and federal funding, or other sources like grants, gifts, and sales. Our students, taxpayers, and other supporters depend on us to use our resources wisely. Additionally, every transaction is an audit record, and these audiences have a right to scrutinize University expenditures.  

Inappropriate spending can be catastrophic for the University in terms of media coverage and can lead to the potential removal of state and grant funding. Furthermore, individuals can be held liable for the repayment of funds and may be subject to administrative or disciplinary actions. If an individual intentionally misuses University money, they can also be referred for criminal prosecution. 

Reasonable Expenses

State and University requirements for purchases are based on a standard of reasonableness. This is defined under Policy 9.10 Requisitions/Reimbursements of the Financial Services Manual. What is considered a reasonable expense may vary by situation, circumstance, and even by person to person. Determining if your purchase is reasonable requires a thorough understanding of policy and standards and critical thinking. Use the information and suggestions provided below for support during this process. 

Before making any purchases, ask yourself these key questions:

How would others approach the situation, would they make the same purchase?

Your first step is to think about how another person, such as a taxpayer, would view what is purchased and the amount spent. An expenditure is considered reasonable “if the nature of the goods or services acquired and the amount involved reflect the actions of a prudent person under the circumstances.” To determine whether your potential purchase meets these criteria, try researching answers to these questions:

  • Has the purchase been made before in other departments under similar circumstances?
  • Are the costs comparable to past purchases of the same type of items within the University?
  • Does the price of your preferred source match those of others offering like goods or services?

Is the purchase appropriate for the University?

For an expense to be considered reasonable, it also needs to be appropriate and directly support the overall mission and purpose of the University. You can reframe this question using a realistic scenario. For example, ask yourself:

“If a journalist or auditor were to view this transaction, would they be able to clearly know how the purchase benefitted the institution?”

If the answer could be or might be no, go back and review why you want to make the purchase and whether you need it for your job. This is a good idea even if you think the answer is yes. For every purchase, always provide why the expenditure was incurred and how it benefited the University, otherwise, it may be seen as unreasonable or unallowable.

Is the purchase allowable?

Finally, you’ll need to verify the purchase you want to make is allowable. This is essential, because if the expense is not allowable, you cannot use University funds to make the purchase. If you do purchase unallowable items, you will not be reimbursed. If the purchase was made with a PCard, you are required to make a repayment to the University. This is a violation of policy and can result in the cancellation of your PCard. Expenditure requirements, including examples of allowable and unallowable purchases, are listed in Policy 9.10 Requisitions/Reimbursements. Additional information on restrictions, requirements, and limitations for purchases made with a PCard are listed under 8.1 Restrictions/Requirements/Limitations in the PCard Manual.   

Related Expense Requirements

Business Purpose and Documentation

All University expenses require a valid business purpose statement and documentation. A business purpose statement summarizes the details of and justification for an expense, including why it is considered reasonable. Refer to the Business Purpose Guide for a sample list of expense types and examples of appropriate and insufficient business purpose statements. Supporting documentation should be clear, accurate, and complete. What is needed and submission guidelines vary by expense type and purchasing method, as described within the sections of FSM Policy 9.0. Additional information can be found on our Financial Services website under the related service, for example the Guidelines for PCard Documentation and Disbursement Vouchers Notes and Attachment Guidelines for Purchasing or the Business Travel Guide for Travel.

Grants and Contracts (Sponsored Projects)  

Sponsored projects are subject to state and University policy, in addition to the specific policies provided by the sponsoring agency. The intersection of these policies represents allowable costs on a sponsored project. For example, while state policy may permit a certain expenditure, if the sponsor policy prohibits the expenditure, it may not be charged to the sponsored account. Similarly, sponsor policy or approvals for a certain cost do not override state or University restrictions on costs. Access sponsored project expenditure and policy information by visiting the Managing Projects on the Research, Innovation, and Impact website. 

Additional Resources