Everyone in the Stanford community, including staff, faculty and students, is responsible for making sure that university funds are spent appropriately and that they act in accordance with Administrative Guide Policy 1.1.1: University Code of Conduct, including holding one another to a high standard of integrity and quality. Just the appearance of misconduct or impropriety can be damaging to the university’s reputation, impacting its relationships with donors or sponsors.
A number of considerations guide approving, reviewing and correcting transactions to ensure that resources are used appropriately, support the university mission, and comply with university policies, applicable laws and regulations, and sponsor or donor restrictions. Transaction requesters, preparers and approvers should all keep these considerations in mind as they complete their tasks.
Approvers are responsible for applying all of the following considerations before taking an action on a transaction. Approvers and those responsible for subsequent review of expenditures must consider whether costs are:
- Reasonable and necessary
- Consistent with established university policies and practices applicable to the work of the university, including instruction, research, and public service
- Consistent with sponsor or donor expenditure restrictions
Also set forth broadly across the university community is the responsibility to report any suspected unusual financial activity. Administrative Guide Policy 3.5.1: Financial Irregularities outlines the procedures to follow when suspicion or discovery of financial irregularities arises. Concerns can be reported confidentially or anonymously through the Ethics & Compliance Helpline.
Approvers act in a financial fiduciary capacity, with authority delegated down from the trustees, through the president to their business unit (see Administrative Guide Policy 1.9.1: Signature and Financial Approval Authority). When approving new purchase or payment transactions, approvers must:
- Ascertain that the cost is reasonable and that it is the right time to acquire the item
- Validate that charges are appropriately documented, including business purpose which provides the reason for the expenditure, explains how the expenditure supports Stanford business and relates to the PTA charged, clearly answers the five basic questions: Who, What, When, Where and Why, and includes explanation of allocation between PTAs when that occurs
- Confirm the accuracy of the transaction through review of receipts or other documentation
- Determine that the correct expenditure type was used. (Refer to Purpose and Use of Expenditure Types or Cost Principles), especially for unallowable costs
- Ensure the transaction is treated consistently with other similar transactions
- Verify that the expenditure is appropriate for the funding source, which means they must understand the fund type and any specific restrictions on the Award(s) being charged by referring to the sponsor’s terms and conditions or the fund purpose, and that funds are or will be available to cover the cost
- Examine and follow up on unusual transactions before approving them, considering:
- Patterns for this requestor, preparer or business unit
- How often the vendor is used and whether that is reasonable and appropriate
- If a sole/single source justification was submitted, whether the reasons to select the vendor are reasonable and appropriate
Approvers should use the Expenditure Transaction Approval Checklist (covering Requisitions, PCard, Expense Report, TCard, and Non-PO Payments) for assistance in carrying out this responsibility.
After-the-fact financial review is a critical internal control. It is often carried out through the expenditure reconciliation process or in comparing budgets to actual expenditures. If errors are detected they must be corrected quickly, and the resolution documented. In most cases, corrections are initiated through either iJournals or Labor Distribution Adjustments. Some (related to student costs) may also require a GFS correction. Approvers of correcting entries must:
- Keep in mind the same considerations for the proper use of funds as documented above for new transactions.
- Determine that the explanation of the correction included the reason why the error occurred in the first place and that the source system has been corrected for future costs.
Approvers should refer to the Cost Transfer Approval Checklist (iJournals or Labor Distribution Adjustments) for assistance in carrying out this responsibility.
- Administrative Guide Policy 3.1.1: Responsibility for University Financial Assets
- Administrative Guide Policy 3.1.2: University Funds
- Administrative Guide Policy 3.1.3: Expenditure Accounts (PTAs)
- Administrative Guide Policy 3.1.4: Cost Policy
- Administrative Guide Policy 3.2.1: Responsibility for University Funds
- Administrative Guide Memo 3.2.2: Cost Transfers
- FIN-PROG-0103: Approving Financial Transactions