Accounting

Appendix 6: Frequently Asked Questions Regarding Use of Discretionary Funds

Reference: Policy Statement 10: Special and Institutional Trust Funds
Memo: Guidelines on Use of Discretionary Funds (Adobe Acrobat Reader Required)

1. What account ranges can discretionary accounts be found?

1XXXXX; 3XXXXX; 9XXXXX. Though discretionary accounts are located in these ranges not all accounts in these ranges are discretionary. Any accounts outside of these ranges are not discretionary accounts.

2. Can I do anything I want with discretionary funds?

NO, NO, NO. Non-profit organizations such as the University and Foundations are governed by Federal Rules that require all expenses to meet the following requirements:

Business Connection - expenses paid by the organization or incurred by the employee must tie back to a business purpose to the organization.

Substantiation – the employee must substantiate the amounts paid by the organization.

Failure to follow and document these requirements puts both the University/Foundation at risk of IRS audit findings that could result in penalties, interest and loss of tax–exempt status. In addition individuals could be subject to penalties and interest if they personally benefited from the transactions. This is in addition to the negative press that would be received.

3. I have overhead receipts accounts in the 1xxxxx range. These accounts receive their funding from indirect cost on grants. My understanding is that these are discretionary and as long as I follow the rules above, I can use these for what I want. Is that true?

Legally, these accounts can be used for discretionary items, however, the argument was made by the Office of the President that these funds are necessary to advance research at the institutions and that these funds should be kept by the Universities for this purpose and not be reverted to the State as they were in the past. The understanding is that these funds will be used for direct and indirect research related activities.

4. We have discretionary funds in our Dining Services range 3107xx, can we use these funds to buy furniture for the Dean of the Medical School?

No. Discretionary funds generated within service organizations need to be used for related discretionary activities in these areas. In some cases, use of these funds for other purposes could be a violation of bond covenants.

5. My department Chair wants to be reimbursed for dinner that included a bottle of wine. The dinner was part of the interview process for a new faculty position. Can we reimburse this from our discretionary funds?

Yes. This is a reasonable expense.

6. I was at an educational conference where I ran into a couple of friends in my field that I have known for years. We decided to meet in the lounge after dinner, have a few drinks and talk about old times. A good part of the conversation had to do with a research project my friend was working on. Can I be reimbursed for the drinks from our discretionary funds since this was mainly talking about business?

This could be reimbursed from Foundation discretionary funds if justified. However, this should not be reimbursed from university discretionary funds.

7. We are sponsoring an event for the new State senator. Can we use our discretionary funds to pay for this?

Political expenses are not to be paid for with any state funds, including university discretionary funds. This would need to be paid for from the Foundation discretionary funds.

8. My secretary’s father just passed away. I have bought flowers to send to the funeral home. Can I be reimbursed for this expense from discretionary funds?

From Foundation discretionary funds - yes. From University discretionary funds – no.

9. I want to buy some office furniture that is not on state-term contract. Can I buy these from discretionary funds?

With some exceptions for Medical Faculty Practice Plan funds, all university discretionary funds must buy off of state-term contracts. Foundation discretionary funds are exempt from this requirement.

10. The waitress serving us dinner did an outstanding job. Even though we were required to tip 18%, I decided to provide her with an additional $20 bringing the tip to about 26% of the meal. Can I expect to be reimbursed for the additional tip over the required amount from my discretionary account?

No. This was a personal decision that would need to be funded by the individual.

11. I am the vice-president of Communications for the User Board of the Travel Organization Managers, TOM for short. TOM is a non-profit organization that is related to universities in that it highlights travel issues and their solutions for Institutions of Higher education. The organization sells subscriptions and software to universities. The User Board is made up of volunteers from University institutions and networks on travel issues to feed back to the company for the benefit of all university members. I have promised to take care of all organizational printing and copying for the User Board activities. Can I use university resources - funding and equipment - to accomplish this task?

Maybe. Provided this activity is related to the University, has a written contract and is agreed to by the Department Head or the boss of the person making the commitment, then discretionary funds can be used. If this activity is not approved, then neither university or foundation discretionary funds are to be used.

12. Is it true that Foundation discretionary funds are more flexible then University discretionary funds?

Yes. Foundation funds are not considered “state” funds and are not subject to the state procedures. An example of this is buying furniture off of state contract where this is permitted with Foundation funds or paying for political expenses. As noted in #2 above, the expense must still have a business connection to the Foundation and must be substantiated.

Questions about the ECU Business Manual may be directed to: Leslie Craigle Director of Marketing for Business Services Division of Administration and Finance (252) 328-6468, ext. 4 e-mail: craiglel@mail.ecu.edu