Justification standards help ensure that the benefit to the institution and compliance with regulatory requirements is clearly documented and can be understood by both internal and external reviewers (e.g., managers, auditors, IRS, the public) for all financial and accounting transactions.
University faculty and staff initiating, preparing, completing or approving any sponsored or non-sponsored financial transactions must comply with the justification and documentation standards established by this policy, all other associated policies, procedures and job aids.
Units must ensure that the transaction justification and supporting documentation includes complete and transparent information about the transaction, to include:
- WHO initiated the transaction and who are the affected individuals or units?
- WHAT is the transaction for?
- WHERE did/will the activity take place (if applicable)?
- WHEN did/will the activity take place (if applicable)?
- WHY the transaction is being completed and how does the transaction relate to or benefit the account affected or charged?
Units need not repeat information in the justification that is already included in the transaction or supporting documentation. Rather to comply with policy, the justification must provide an explanation about the allowability, allocability, reasonableness and benefit to the project/University not already apparent within the transaction or supporting documentation.
Units must record transactions accurately, in a timely manner, and completely within financial system guidelines and applicable external agency rules (including federal agencies funding University programs, the Internal Revenue Service, and the Minnesota Department of Revenue). Accurate recording includes adequate descriptions of transactions, as well as the correct use of chart of account codes and all other chart fields.
Reason for Policy
University financial transaction documentation for sponsored and non-sponsored activity must consistently meet and comply with legal, governmental and auditing requirements. Providing thorough and complete transaction justifications and supporting documentation protects and benefits the University in the following ways:
- Minimizes the risk of penalties and fines due to unsubstantiated business expenses.
- Ensures compliance with legal and regulatory requirements.
- Establishes adequate and consistent documentation standards for all financial transactions.
- Provides an independent and efficient source for obtaining transactional information.
- Complies with tax regulations that specify requirements for nontaxable reimbursements under an accountable plan versus reimbursements taxable to employees.
- Minimizes reputational risks and adverse public perception.