Reasonable Expenses - Guidelines

State and University requirements for purchases are based on a standard of reasonableness. 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:

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 benefited 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.

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. Supporting documentation should be clear, accurate, and complete. What is needed and submission guidelines vary by expense type and purchasing method.

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.