Accounting Office / Accounts Payable

Allowable, Appropriate, and Documented:

Allowable Expenditures Can be Charged.

  • Defined in applicable state and federal laws, regulations, university and sponsor policies, and terms and conditions specified in contractual documents.
Appropriate Expenditures Should be Charged.
  • Necessary and beneficial to the University and to the sponsor (funding source).
  • Reasonable - As all disbursements are public documents, would you feel comfortable having a newspaper reporter writing a story about this expenditure?
  • Adequately documented - Includes who, what, when, where and why in the body of the document
  • For 4XX (Sponsored Programs) accounts, is the expenditure necessary to the work funded by the sponsor?
  • Does the expenditure have a business purpose?
Responsibility for Determining Allowability and Appropriateness:

Expenditures charged to all university accounts must be both allowable and appropriate. Department chairs are ultimately responsible for ensuring that charges to accounts are allowable, appropriate, and in the best interest of the department and the university as a whole. All funds administered by the university are considered public funds, and accordingly, must be expended only for items resulting in public benefit. Public benefit must be apparent on all transactions.

Documentation

One of the most important underlying principles for allowability and appropriateness is ensuring transactions are adequately documented. Adequate documentation includes an invoice or receipt that identifies:

      1. Who purchased it
      2. What was purchased,
      3. When it was purchased,
      4. Where it was purchased, and
      5. Why it was purchased.

If any of this information is not contained on the receipt or invoice itself, it needs to be included in the explanation on the reimbursement or written on the receipt/invoice. Requiring complete documentation for all reimbursements makes your job of determining allowability and appropriateness much easier. For example, group meals require more than the credit card slip showing a total; we also need the receipt itemization that would indicate if alcohol was included.

A review of reimbursements and vouchers revealed "why something was purchased or needs to be purchased" is the item most often missing. For example, assume an ISU employee buys books while at a conference and submits a Visa or MasterCard receipt, which shows the total charged to her credit card but does not include the itemization of books purchased. The Visa or MasterCard receipt shows where the purchase was made but does not indicate for audit purposes what was purchased or explain the business purpose (why). In this case, the payment will be delayed while the Accounting Office sends an e-mail to the department requesting this additional information.

Transfers of Property or Cash Through P-Card Purchases:

When property or cash is given out, rather than an ISU check, additional receipts and documentation are required. (Examples include gifts, gift cards, cash payments, or prizes.) In order to provide an adequate documentation trail, a signed receipt from the individual receiving the property or cash must be obtained to document the transfer.

If the transfer is equal to or greater than $100.00, the individual must not only sign a receipt but also complete a Property Receipt Form. The Property Receipt form, along with a copy of the signed receipt, must be submitted to the Accounting Office, 3606 ASB for tax reporting purposes. The original receipt and a copy of the Property Receipt form must be retained with the other P-Card documentation.

Special Process for Research Participants: If the transfer of property or cash is for payment of services to research participants, the University uses a separate Research Participant Research Form to maintain the confidentiality of the research participants. Information on this payment process and forms are available on the Controller's Department website.

If you have any questions, please contact Bill Cahill (294-5124) or Carole Gill (294-5181) in the Accounting Office.

Sales Tax:
In a study done by the Accounting Office, a surprising amount of money was being spent by some departments/colleges/units for the reimbursement of sales tax. Sales tax must be paid to a vendor when an employee makes a purchase with personal funds or a personal credit card. Since ISU is a tax-exempt organization, sales tax is not paid to a vendor when an employee uses an ISU Purchasing Card. It is recommended that ISU Purchasing Cards be used whenever possible to take advantage of our tax-exempt status. Reimbursement to employees for purchases made with personal funds or a personal credit card should only occur for emergency situations or for situations where the use of an ISU Purchasing Card is prohibited.

Authorization and Signature:
Please refer to the Signature Authority for Internal Transactions in the Policy Library.

Document Retention:
In general, most documentation related to accounting transactions is retained by the Controller's Department. However, with some payment processes, the department, unit or service center is responsible for the collection, audit of expenditures, and safekeeping of accounting source documents. Some examples of these processes where the department and/or unit retains the source documents are Purchasing Card transactions, deposits on-line, billings generated by service centers, and the Employee Reimbursement system. See the Document and Data Retention Schedule on the Controller's Department website.

Receipts:
Unless the vendor requires otherwise, the original receipts or other documentation must be imaged and uploaded with the KFS document or employee reimbursement, or included with the department's P-Card transaction documentation.

If an original receipt is not available, any of the following are acceptable: 1.) an image of the canceled check; 2.) an image of the bank statement (for ACH debits or checks that were not cleared through the Federal Reserve); or 3.) an image of the credit card statement showing that charge to the employee's account. Whenever the original receipt is not available, a written explanation is required for each unreceipted charge. For security and confidentiality purposes, we recommend that you blacken or otherwise hide personal credit card numbers on any receipts submitted to Accounting for processing.

Link to Allowability and Appropriateness Training Session Handout

Link to the Policy Library for Expenditure requirements



This page was last updated on August 16, 2016.



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