When transactions occur (items are purchased and paid for), the actual dollars spent are recorded in your account (fund/org). In choosing where that transaction should be recorded from an accounting perspective, it is important to choose an account code that reflects the true nature of the transaction. Accuracy in an account code selection is important to the integrity of the financial data. The financial data should be able to tell a story that reflects what we spent to carry out our goals and objectives. As part of our performance evaluation tool, we ask the following questions: How did we do as compared to what we planned? How does this inform what we should do in the future?
The definition of a budget is a quantification of an organization’s plan. In addition to a quantified plan, at SPU the budget represents the authority to spend. If this is the case, our departmental budgets should reflect our operational plan for the year. If your budget doesn’t reflect your operational plans, take time during budget planning, or at the beginning of the year, to tie your budget to your operational planning. The budget in each account line (revenue or expense line) should reflect what you plan to spend in those areas to accomplish your operational goals. Once this is done, you have created a financial plan, a communication tool and a performance evaluation tool. The communication plan tells others in your area and in the Controller’s Office what you are planning to do during the year. The performance tool allows you to measure how you are actually doing as compared with your plan, which also allows modifications as needed and provides information for ongoing decisions. Performance reports (detail ledgers) are available through Cognos or Finance Queries, detailing actual expenditures as compared to the budget.
With this perspective on budgets, moving budget around during the year within an individual departmental budget is no longer required from a control perspective but does become important from a management and planning perspective. If the budget is used to assess how you are doing as compared to what you planned, then if your plans change, your budget should reflect that change.
How does this new perspective fit into the University’s policy that budget availability requires confirmation for transactions over $2,000? While the budget is a plan and a communication tool, it also defines the amount of resources allocated to each department.
How do we bring the two closer together—the planning and communicating functions and the constraints—to give managers the most freedom to carry out their goals and objectives? The budget checking process has to be at a dollar level that provides a benefit, and the method of checking must enhance the performance evaluation tool. To encourage this, budget checking will occur on transactions over $2,000, and the checking will verify budget availability by three major categories: (1) salaries and benefits, (2) operations and (3) capital. This will reduce the need to move budget around during the year. The methodology of planning and monitoring creates a budget process that supports the manager’s responsibility to plan, operate, monitor, control and communicate to University management and leadership.
Budget Transfers (See Budget Change Request form)
Budget transfers move budget allocations from one line to another. In the purchasing process, if there is not enough budget money available within the designated range (salaries, operations and capital), a budget transfer needs to be processed before the transaction can be completed. Permanent budget transfers between designated ranges are discouraged, but if absolutely necessary they must have VP approval. For example, permanent transfers within the salary and benefit range require area VP approval, permanent transfers in and out of the salary and benefit range require area VP approval, and permanent transfers in and out of the capital range require area VP approval.
These policies are in place to ensure that individuals aren’t leaving positions open or leaving equipment needs unmet in order to fund other areas of the budget. When requesting these types of transfers, an explanation of why there is extra funding and a rationale for why the funding should be used for a different type of expenditure must be included.
Budget availability will be checked for transactions over $2,000 to create a feedback loop to departments on budget status and provide early warning of low budget availability. Budget availability is required before a purchase order (over $2,000) can be processed.
Departmental budgets are now segregated into three categories for budget check purposes: (1) salary and benefits, (2) operations and (3) capital. These categories are segregated using the following account number ranges:
Capital items are defined as items that are tangible assets, with useful lives of greater than one year, that are not consumed (supplies are consumed). All items that meet this definition and have a value greater than $2,000 are included in the fixed asset inventory and are tagged and inventoried at the end of each year. Capital items are purchased using the account code range 78xxx.
In addition to the special account treatment related to capital purchases, the University has specific standards for furnishings and fixtures, as well as computer technology. When purchasing these items, work with Facility Procurement and Computer and Information Systems in developing specifications to meet University standards.
All contracts and agreements for goods and services processed by SPU are required to be reviewed and approved by the assistant vice president for finance and budget. Contracts should have appropriate indemnification and insurance language whereby the individuals/businesses are responsible for their own insurance and indemnify the University (see Approved Indemnity Language). In many cases, the contracted individuals or businesses should also cover the liability of SPU while performing services for and at SPU. It is not the intent of SPU’s insurance to cover the liability of a contracted individual or business.
After review and approval, the contract will be sent back to the person who sent it for completion. Contracts should be sent for review well before the day the contract begins. Please allow one month for review. After a contract is completed and executed, a copy is sent to the risk management and insurance specialist for the University files.
No material (physical) gifts are allowed to be purchased for employees by department managers from University funds. Gifts that are part of a reward and recognition program may be purchased once the program has been approved. In no case should University funds be used to purchase personal gifts (birthday, anniversary, etc.).
All invoices should be sent directly to the payments department from the vendor (and then the PD will forward the invoice to the appropriate campus office). The payments department is responsible for maintaining the University’s good credit rating, ensuring any discounts are taken, and avoiding all late charges. All invoices received are monitored for prompt payment and processing by the PD.
Payments to Individuals
The University requires all payments to individuals, sole proprietors, partnerships, and LLC to provide an IRS form W-9. This form is mandatory even if the payment amount is below the required reporting threshold of $600.00. The Payments department will not process such payments without a W-9 in hand.
Printing and Mailing Services
University Services provides mailing, printing and convenience copying services. These services are contracted out through IKON, Kinkos and Copiers Northwest, respectively.
Purchase orders serve to create a contract between SPU and a vendor. They should be used when exact specifications must be met, and they should assure the vendor that SPU has committed itself to paying them. A purchase order also creates an encumbrance in the accounting system. An encumbrance is a place holder. It informs the manager and the Controller’s Office that SPU has an obligation related to a transaction that isn’t complete yet. In keeping with this philosophy, purchase orders are most beneficial at higher dollar levels (over $5,000) or where the required specifications are very precise.
All requests for rush checks are approved by the Director of Finance and Controller and will be ready the next day if received by the payments department by 5 p.m. The PD provides one rush check request per department per month. Due to the manual process required for rush checks, any additional requests carry a $5.00 processing fee.
Sales Tax and Use Tax
Sales tax is applicable on all goods purchased within Washington state. Use tax is applicable on goods purchased out of state. If sales tax is not evident on purchases, the University is required to self-assess this tax. The payments department will make the use tax calculation and add the charge to the request for payment or PO.
Sales tax is applicable on materials printed in Washington state. Use tax is applicable on materials printed out of state and sent to the University. Neither sales nor use tax is applicable on materials printed out of state for SPU that are then distributed to states other than Washington.
Signature Authority (See Signature Authorization form and full policy)
Management responsibility for achieving goals and objectives is assigned to various levels in the organization. Where the management responsibility lies, so should the budget responsibility. Once the budget is finalized, the area manager responsible for the budget has the authority to use the resources available to them to achieve their goals and objectives. Typically, this authority is at the dean and director level. As transactions occur and the payments department produces checks to pay vendors, they need to know that the person responsible for the budget approves the transaction. Many transactions are handled by someone other than the dean or director. As a result, the signature authority identifies who can authorize expenditures and allows the dean or director to assign some responsibility to others. This assignment of responsibility must be communicated to the payments department so they can perform their role. The signature authority levels are set up in an attempt to match responsibility for area management and operations with the dollar threshold. Therefore, all documents initiating expenditure of University resources must be approved according to the following schedule.
Sodexo is the food service provider on campus. Employees coordinating events on campus that require food service (catering) must grant Sodexo the first option of providing catering. The director of University Services must approve any exception.
Any single event with catering over $5,000 needs to have budget pre-approval (budget check prior to finalization of the event).
When entertaining at any of the Sodexo locations on campus, the business purpose for the entertainment must be provided at the time of purchase. This requirement is the same for entertainment off campus. Without a business purpose documented, the purchase becomes taxable income to the purchaser.
Stop Payments Policy
When a check produced through the payments department is lost, a stop payment can be placed on the check once a written statement is made by the recipient that they will not cash the check if it materializes. Please note: Written acknowledgement by the check recipient is required. Here’s an example of an adequate written statement:
Once the stop payment is received and acknowledged by the bank, a new check can be reissued by the PD.