BUSINESS EXPENSES

Volume 3, Financial Management
Chapter 14, Business Expenses
Responsible Executive: Vice President for Financial Affairs and University Controller
Responsible Office: General Accounting
Issued: February 2000
Updated: February 2005
Revised: June 4, 2008
Errors or changes? Email us.

CONTENTS

REASON FOR POLICY

ENTITIES AFFECTED BY THIS POLICY

WHO SHOULD READ THIS POLICY

RELATED DOCUMENTS

CONTACTS

DEFINITIONS

OVERVIEW

Introduction
Who Is Covered By This Policy

 

CHARGEABLE BUSINESS EXPENSES

Cornell Allowable Expenses

Expenses Benefiting Faculty, Staff, or Students

Cornell Unallowable Expenses

STATE APPROPIATIONS

General Comments

Allowable and Unallowable Expenses

CHARGEABLE BUSINESS EXPENSES

General Comments

PROCEDURES

General Comments

Reimbursements and Payments to Vendors

Expenditure Documentation

Recording Business Expenses

Appropriate Review and Approval

Incurring and Paying for Business Expenses

Purchases From University Departments

Purchases Not From University Departments

Reimbursement for Purchases

Direct Charges, Journal Vouchers, and Corrections

Record Retention

TAX ISSUES

Introduction

General Issuses

FORMS

APPENDIX

POLICY STATEMENT

REASON FOR POLICY

This policy promotes the proper stewardship of university funds by providing general guidelines for the appropriate and legal uses of Cornell funds in support of the university's missions. The university receives, from a variety of sources, funds that carry with them fiduciary responsibilities. Inherent in these responsibilities is the requirement to operate the institution under guidance set forth by the Board of Trustees, to follow Generally Accepted Accounting Principles (GAAP), and to comply with all federal, state, and local rules and regulations.

ENTITIES AFFECTED BY THIS POLICY

Endowed Ithaca and Contract Colleges of the University (excluding the Joan and Sanford I. Weill Medical College)

WHO SHOULD READ THIS POLICY

WEBSITE ADDRESS FOR THIS POLICY

http://www.policy.cornell.edu/vol3_14.cfm

RELATED DOCUMENTS

University Policies

Other Documents

Cornell University Conflicts Policy University Policy 3.2.1, University Travel (Endowed Funded) University Policy 3.2.2, University Travel (Contract College Funded) University Policy 3.3, Corporate Card University Policy 3.5, Paying for Services (Independent Contractors/Consultants) University Policy 3.6, Financial Irregularities University Policy 3.7, Accounting System University Policy 3.12, Procurement Card University Policy 3.19, Telephone Usage University Policy 4.2, Transaction Authority University Policy 4.6, Standards of Ethical Conduct University Policy 4.7, Retention of University Records University Policy 6.6.13, Flexibility In the Workplace

APPS Training Manual Cornell University Purchasing Manual (specifically, Purchasing Policies #109, #205) Office of Management and Budget Circular A-21

Subject	Contact	Telephone	E-mail
Policy Clarification	General Accounting	(607) 255-6513	uco-genacct@cornell.edu
Charitable Donations Made By the University	Community Relations	(607) 255-4908
Federal Allowable Costs	Voucher Audit Indirect Cost	(607) 255-8179 (607) 255-2016	uco-vouchaudit-mailbox@cornell.edu uco-cost@cornell.edu
Federal Appropriations, Use of	Sponsored Funds Accounting	(607) 255-7990	uco-sfa-mailbox@cornell.edu
Procurement Card	University Procurement Card Coordinator	(607) 255-4548
Purchasing	Office for Purchasing Services	(607) 255-3804	uco-purch@cornell.edu
Reimbursements	Voucher Audit	(607) 255-8179	uco-vouchaudit-mailbox@cornell.edu
Sponsored Project Consulting Agreements and Subcontracts	Office of Sponsored Programs	(607) 255-5014
State Appropriations, Use of	University Budget Office	(607) 255-2039
Taxes	Tax Compliance Office	(607) 255-3581	uco-tax@cornell.edu

DEFINITIONS

Actual Expense	An expense that is verifiable, or per diem (when appropriate).
Approver	An individual with the authority to approve a business expense or transaction. Compare the term "Transaction Authority".
Business Expense	Charges for goods or services, whether paid, committed, or accrued, that foster or support the ongoing missions of the university. These charges may include expenses (expenditures), debt service payments, and capital outlays.
Business Meal	A meal attended by faculty, staff, students, which may or may not include individuals from outside the Cornell University community, at which a substantive and bona fide business discussion takes place.
Conflict of Interest	A situation in which an individual or any of his or her family or associates either 1) has an existing or potential financial or other material interest that impairs or might appear to impair the individual's independence and objectivity of judgment in the discharge of responsibilities to the university, or 2) may receive a financial or other material benefit from knowledge of information confidential to the university.
Cornell Allowable Expense	A valid and legal business expense for which the use of university funds will be permitted.
Cornell Unallowable Expense	An expense or item for which use of university funds will not be permitted.
Direct Designee	An individual specifically designated by a Dean, director, or department chair to approve business transactions.
Documentation	Original invoice, copy of cancelled check, original credit card receipt when applicable, and/or other documentation that describes and substantiates a business transaction (see the '"Expenditure Documentation" segment of this document).
Endowed Funds	Funds from an account in the endowed department series (A01-Z99).
Expenditure	See Business Expense.
Expense	See Business Expense.
Federal Allowable Cost	A cost identified in Section J, in the OMB Circular A-21, as reimbursable by the federal government, unless specifically superseded by the terms and conditions of a sponsored project. This term supersedes the term "recoverable cost".
Federal Appropriations	Federal government funds appropriated to the university.
Federal Unallowable Cost	A cost identified in Section J, in the OMB Circular A-21 as unreimbursable by the federal government. This term supersedes the term "nonrecoverable cost".
Fiduciary Responsibility	Responsibility to manage funds in a manner consistent with the university’s missions and the conditions specified by external sources, when applicable.
Flow-through Funds	Federally sponsored funds that are not directly received from the federal government, and are not identified with a federal source code, but received through a third party. Generally, these funds are identified with a federal CFDA number.
Generally Accepted Accounting Principles (GAAP)	Fundamental principles of accounting that are used as guidance in the preparation of the university financial statements.
Initiator	An individual who generates a business transaction.
Nonrecoverable Cost	See "Federal Unallowable Cost".
Object Code	The four-digit code used in each transaction to classify and describe the financial activity - allocation, expense, transfer or revenue.
OMB A-21	A federal circular establishing principles for determining costs that are applicable to grants, contracts, and other agreements with educational institutions.
Ordinary	Normal in the course of official university activities.
Preparer	An individual who prepares documents associated with a transaction, including, but not limited to, documents requesting payment for a transaction.
Reasonable	Not extreme or excessive. A cost may be considered reasonable if the nature of goods and services reflects prudent action.
Recoverable Cost	See "Federal Allowable Cost".
Reviewer	An individual who verifies information and ensures that a transaction complies with university policies and procedures, and other relevant external restrictions.
State Appropriations	State of New York funds appropriated to the university.
Contract College Funds	Funds from any account in the contract colleges series (100-999).
Stewardship	The careful and responsible management and protection of the university's resources, which includes ensuring that they are used appropriately to assist the university in accomplishing its missions.
Transaction	Any event that involves an exchange of funds between two parties. Examples are paying a bill to a vendor, collecting a fee from a student, and making an interdepartmental charge.
Transaction Authority	Authority, granted to certain representatives of the university, to review and approve transactions that commit the university to spend or receive funds, provide educational or other services, or otherwise utilize its resources.
Unit	A college, department, program, operating unit, or other university-affiliated entity.
University Funds	All funds received from internal or external sources and owned by the university, which carry with them fiduciary responsibilities. This includes, but is not limited to, discretionary funds, funds from salary recovery, restricted gifts, tuition paid by students, and funds from other sources.

OVERVIEW

Introduction

University Policy 3.14, Business Expenses, is intended to provide general guidelines for identifying expenses that may be charged to various university accounts and to ensure compliance with federal, state, and local regulations, while supporting the university’s missions of education, research, and public service.

uNote: Discretionary funds and funds from salary recovery are university funds, and are subject to the restrictions outlined in this document.

Caution: Colleges and individual units may have more restrictive policies and procedures, but in no case will any unit be less restrictive than this policy.

Note: Although the guidelines on allowability of costs and responsibilities within this policy apply to all university expenditures, there are specific policies and procedures that govern the types of transactions listed below. The table below will guide you to the correct contact for the types of transactions listed.

Transaction Type	Contacts
Charitable Contributions by Cornell	Community Relations Office
Payroll Expenses	Payroll Office
Real Estate Transactions	Real Estate Office
Investment Transactions	Investment Office

Who Is Covered By This Policy

This policy and these procedures apply to every individual who initiates, processes, reviews, approves, or records financial transactions on behalf of the university. These individuals also have the responsibility to comply with all other related university policies and procedures (see the "Related Documents" Section of this document).

CHARGEABLE BUSINESS EXPENSES

Cornell Allowable Expenses

University funds may be used for ordinary and reasonable business-related expenses that support the education, research and public service missions of the university. While such expenses are generally considered allowable by the university, certain funding sources may impose additional restrictions. For example, expenditures paid from federal and state funds or from restricted gifts are subject to added conditions. Furthermore, various university operating units may establish more restrictions on the use of funds. Such additional restrictions must be recognized when expenditures are being planned.

Federal Allowable Costs:

Federal allowable costs are ordinary and reasonable business expenses that support the missions of the university and are reimburseable by the federal government based upon rules defined in OMB A-21 (see the "Appendix" Section of this document), and by the university.

Federal Unallowable Costs:

Expenses that are not reimbursable by the federal government, under regulations identified in OMB A-21, are referred to as "federal unallowable costs" (see the "Appendix" Section of this document). Federal unallowable expenses must NOT be charged to accounts funded directly by or as a "flow-through" from a federal or state government, or to accounts that are used for cost-sharing (for more information, see University Policy 1.1, Cost-Sharing).

A federal unallowable cost must be identified in one of two ways, described below (for more information, see University Policy 3.7, Accounting: System Structure and Transactions):

uNote: A federal unallowable cost may be reimbursable by the university.

Federal unallowable cost identified by account (when all expenses for a university function are unallowable regardless of object of expense, e.g., public relations, fund-raising, and alumni activities)

In these cases, specific account attributes are assigned when the account is initially established, using a federal unallowable function code.

Example: An account specifically established for fund-raising expenses would be set up with an unallowable function code of 471.

Federal unallowable cost identified by transaction (when a university function generally is allowable, but certain objects of expense are not allowable)

In this case, a specific transaction character is assigned when the transaction is recorded, using a federal unallowable object code.

Example: For a meal reimbursement that includes alcoholic beverages, the cost of these beverages would be coded with an unallowable object code of 91XX.

Expenses Benefiting Faculty, Staff, or Students

The federal unallowable expenses identified below are allowable by the university. University funds may be used for these special purposes within the scope of responsible financial management, and must be reviewed on a case-by-case basis. These expenses must not be charged to sponsored projects, federal appropriations, or state appropriations. The expense must be identified using either a federal unallowable object code or a federal unallowable account. Additionally, they must have the approval of the Dean, director, department chair, or direct designee, in the form of an e-mail, letter, or signature on the proper payment form (see the "Tax Issues" Section of this document).

Cornell Unallowable Expenses

An expenditure with any of the following characteristics does not reflect the proper stewardship of university funds and is considered by the university to be "unallowable" regardless of the source of funds:

Note: This policy does not preclude faculty, staff, or students from giving personal gifts to their colleagues when university funds are not used for this purpose.

Note: Every effort must be made to ensure that institutional memberships, which are allowable, are associated with university positions or operating units rather than with individuals. Payment for allowable institutional memberships should be made by the university directly to the association.

7. It represents home office costs that are not part of an official "Flexplace" arrangement as defined in University Policy 6.6.13, Flexibility In the Workplace. For example, communication costs, (such as for dedicated telephone lines or internet service providers including "EZ Remote"), or home computers not associated with a "Flexplace" arrangement are generally not allowable.
Note: Home office costs not associated with a "Flexplace" arrangement may be considered allowable if necessary to meet the official job duties. In such cases, prior written approval must be obtained from the Dean, director, or department chair, or direct designee.

8. It benefits a select few on a frequent, recurring, and ongoing basis without documentation of a compelling reason that the event and expense are essential for accomplishing the business purpose.

STATE APPROPRIATIONS

General Comments

New York State provides appropriations to support the operations of the Contract Colleges at Cornell: College of Agricultural and Life Sciences, College of Human Ecology, College of Industrial and Labor Relations, College of Veterinary Medicine, as well as the Agricultural Experiment Station. The acquisition and expenditure of these appropriations are coordinated on behalf of the Contract Colleges by University Budget Office.

State Appropriations: Allowable and Unallowable Expenses

Expenditures on state appropriated funds must follow Cornell policies and the general rules and regulations contained herein (see the "Allowable Business Expenses" Section of this document). Below are additional restrictions on the use of these funds:

Allowable

1. Honoraria may be paid using state funds, but must follow specific SUNY regulations. For additional information or a complete copy of the pertinent documentation, contact University Budget Office and consult University Policy 3.5, Paying for Services (Independent Contractors/Consultants).

Unallowable

1. Federal unallowable costs (see the "Cornell Allowable Expenses" segment and the "Appendix" Section of this document).

2. Personalized items, such as letterhead, business cards, and gifts.

3. Moving costs.

4. Equipment leases.

5. Late payment fees, unless the vendor is a non-interest eligible vendor.

6. Federal or state tax, not including other taxes or surcharges on a vendor’s invoice, such as those typically found on various telephone bills.

7. Prepaid expenses with a length of service greater than one year.

Additional information on business-related expenses and state appropriations can be found in University Policy 3.7, Accounting: System Structure and Transactions. For questions regarding expenditures using state appropriations, contact the University Budget Office.

CHARGEABLE BUSINESS EXPENSES

General Comments

Certain individuals bear responsibility for different aspects of the process of transacting and classifying university expenditures. It is the responsibility of faculty, staff, and students to expend funds in a manner consistent with the missions of the university and the conditions specified by external sources, when applicable.

uNote: The Initiator and the Approver of a transaction must be different individuals, in order to ensure separation of duties.

uNote: In all cases, the personnel of the Division of Financial Affairs has the responsibility to audit and confirm the allowability of business expenses.

- Ensure that federal unallowable costs are coded to the proper university account with the proper object code.
Note: In some cases, when the appropriate authority has been granted by the unit, the Preparer may also have the responsibility to act as the Reviewer.

- There is no apparent conflict of interest on the part of the Approver or other individual involved in the transaction.

Note: Where a real or apparent conflict of interest does exist, additional approval is required (see the "Cornell University Conflicts Policy").

uNote: Business expenses must not be approved by a person solely benefiting from the business expense, or by this individual's subordinate.

uNote: University transaction authority thresholds, as designated in this university policy, may be further restricted by operating unit guidelines.

Note: Approval, which can be a signature or a secured on-line entry, validates that the expenditure furthers the university missions, and authorizes disbursement of payment(s).

PROCEDURES

General Comments

Operating units must identify who is authorized within each unit to initiate expenses on appropriate unit accounts. Units should also identify any processes, forms, or approvals required by the unit that are additional to or more restrictive than requirements defined by this or other university policies, and communicate this information to all relevant individuals within the unit. Operating units must have a written transaction authority plan in accordance with University Policy 4.2, Transaction Authority (for external transactions).

Reimbursements and Payments to Vendors

Whenever feasible, a business expense (except for a travel reimbursement) should be paid by the university directly to the vendor. Requests for payments to vendors for university business expenses must be submitted to the Division of Financial Affairs in time to meet the payment terms of vendor invoices (for more information, see the Cornell University Purchasing Manual).

uNote: For the purposes of tax reporting, a notation of citizenship and permanent address (not department address) of the payee must be included on all vouchers. For all U. S. vendors and most foreign vendors, a federal tax identification number must also be supplied.

Note: A request for expense reimbursement (including travel and extended work assignments away from the university) in excess of six months requires an additional approval by your unit Dean, director, or department chair, or a direct designee. An explanation of why the expense could not be submitted earlier must also be included.

Expenditure Documentation

Goods and Services

Documentation for the purchase of goods and services should provide support for the business purpose of the expenditure, and include an explanation of the business purpose. Appropriate documentation includes original receipt or original invoice containing the date of purchase, vendor name and address, description of goods and services, quantity, unit price, any other required approval documents, and grand total of expenditures.

Proper supporting documentation for reimbursement of purchases of goods and services made via the World Wide Web, includes a confirmation e-mail or web acknowledgement and a packing slip or some other documentary evidence that an actual purchase was made.

Travel

Refer to University Policy 3.2.1, University Travel (Endowed Funded) or University Policy 3.2.2, University Travel (Contract College Funded). Which of these policies is applicable depends upon the source of funds being used for expenditure.

Business Meals

Below are two examples of how expenses for business meals (other than individual meal reimbursement related to travel) are normally incurred. In both situations, an explanation identifying the business purpose of the meal and name(s) of individual attendees or a university-identified group/committee is needed. A Meals for Business Purposes form is available for documenting this information (see the "Forms" Section of this document).

l Option 1

Meals over $25 at a restaurant require a detailed receipt, when available, including restaurant name and address, date of meal, names of individuals served, agenda and purpose of meeting, and itemized list of food and beverages served.

Note: Any alcoholic beverages must be coded with the proper federal unallowable account number or by a federal unallowable object code.

Caution: Summary credit card receipts or tear tabs are not sufficient without supporting documentation, for purchases over $25.00.

l Option 2

Meals provided (on or off campus) by a caterer for a business event require an itemized invoice including caterer’s name and address, date of service, location of event, and list of food and beverages served. The caterer must also be approved as a university vendor for insurance purposes and IRS reporting (see University Policy 3.5, Paying for Services (Independent Contractors/Consultants).

Note: Any alcoholic beverages must be coded with the proper federal unallowable account number or by a federal unallowable object code.

Recording Business Expenses

Unit administrators, Preparers, and/or Approvers are required to ensure that expenses are properly coded with the appropriate accounting information (see University Policy 3.7, Accounting: System Structure and Transactions).

Appropriate Review and Approval

All expenses require the appropriate university processing form (see the "Forms" Section of this document), appropriate documentation to support the business purpose of the expense, and an approved transaction authority signature before submitting to the appropriate university office for purchasing goods and services or processing expenditure for payment. Each unit administrator (approver) is responsible for ensuring the expense meets the criteria of a business expense, has been received in a satisfactory condition and manner, and is recorded accurately in the university accounting system.

Incurring and Paying for Business Expenses

There are many methods used to purchase goods and services and to process payment for business expenses. In addition to more traditional methods, purchases may be made by telephone or through the internet. Use of the Procurement Card is encouraged (See University Policy 3.12, Procurement Card).

Note: Established university methods must be used to incur business expenses (see the tables below for examples). The authority to purchase some goods or services has been delegated by the Office for Purchasing Services to other university offices. These goods and services are identified in Purchasing Policy #205, and should be processed for payment after issuance of a direct invoice to Cornell University. In all cases, appropriate documentation and approval are required to process a business expenditure.

uNote: The department providing the goods or services is responsible for:

Purchases not from University Departments

The following table depicts some different types of business expenses made from non-university vendors:

Direct charges and journal vouchers may be used to process interdepartmental transactions, in the event that a Procurement Card is not feasible. The unit processing the transaction is responsible for both notifying another unit when affecting its accounts, and providing appropriate documentation of the charge.

uNote: The department providing the goods or services is responsible for:

- properly coding the income as internal sales;

- obtaining the authorization and valid account number to process the transaction.

A journal voucher is also used to correct the recording of a business expense. This form must contain appropriate documentation to support the correction of the expenditure.

Records Retention

Units must retain any supporting documentation or approvals not forwarded to central university offices to identify purpose, Initiator, and Approver of expenditures (see University Policy 4.7, Records Retention).

TAX ISSUES

Introduction

Tax issues affect many business expenses. Tax laws, regulations, and interpretations are both complicated and change frequently and, therefore, specific rules are not listed here. Those who review and approve business expenses must understand general issues and contact the Tax Compliance Office for guidance on specific transactions.

General Issues

Under tax law, certain transactions are not allowed. Others are subject to tax reporting, tax withholding, or both. Still others are subject to a variety of miscellaneous taxes.

Caution: Contact the Tax Compliance Office whenever a transaction involves a potential conflict of interest.

Note: Gifts of property (not cash) are exempt from tax if the value is minor (e.g., flowers, candy), or if the gift is in recognition of either length of service or safety and the value of the property does not exceed certain IRS thresholds (generally, $400).

5. Business expenses may be subject to miscellaneous taxes such as sales tax, excise tax, value added tax, gross receipts tax, etc. For additional information regarding the payment of these taxes, contact the Tax Compliance Office.

FORMS

Form	Use
Consolidated Bursar Billings	To process transactions (charges or credits) on a Cornell University student's Bursar account.
Accounts Payable Voucher	To pay for goods and services for non-Purchase Order items on Endowed funds.
Endowed Colleges Travel/Expense Reimbursement Voucher	To reimburse of University Travel Expenses on Endowed funds after trip completion. Reimbursement to individuals for goods and services for non-purchase order items.
Journal Voucher	Primarily utilized for cost transfers and allocations, corrections, reimbursements, interdepartmental debits and credits, etc.
Meals Purchased for Business Purposes	To document a meal purchase.
Purchase Order	To pay for goods and services requiring Purchasing Unit approval in accordance with Purchasing Manual Policies and Procedures (For exceptions, see Purchasing Policy #205. For on-line processing see APPS manual).
Request for Facilities Services	To request Facilities and Campus Services for items such as Building and Grounds Care, Architectural and Engineering Services and Trade Shops Support.
State of N.Y. Standard Voucher	To pay for goods and services on contract college funds for non-purchase order items.
State of N.Y. Travel Voucher	To reimburse university travel expenses on contract college funds.
Wire Transfer/Bank Draft	Payment for goods and services processed via wire transfers and bank drafts or foreign currency.

APPENDIX: EXAMPLES OF FEDERAL UNALLOWABLE AND ALLOWABLE COSTS

Below is a listing of some common federal unallowable costs taken from OMB Circular A-21. These costs cannot be recovered from the federal government, either as a direct charge to a federally funded account or through the application of an indirect cost rate. It may be permissible to incur these costs against university accounts (see the "Chargeable Business Expenses" Section of this document). For more information, contact the Indirect Cost area of the Division of Financial Affairs.

Caution: This list is not exhaustive. It is placed here for your reference only. For more detailed information, see OMB Circular A-21.