Business Purpose(Justification)

Accounts Payable

Last Updated: Apr 9, 2026

The business purpose adequately describes and justifies the expense is necessary, reasonable, and appropriate to support the University’s mission of teaching, research, or public service.

Business Purpose Responsibility

Responsibility for providing a clear business purpose rests with all faculty, staff, and students who spend University funds, including grants, projects, programs, and gifts.

A business purpose is necessary for any expenditure of university funds, regardless of transaction type, including, but not limited to, expense reimbursements, credit card transactions (PCard or T&H Card), purchase requisitions, and supplier invoices.

The business purpose must be clearly documented and directly linked to a specific business need. This documentation supports the appropriate use of funds and helps ensure compliance with IRS regulations. A business purpose for an expenditure on a federal grant may require additional explanation due to the more restrictive nature of grants.

Drafting an Effective Business Purpose

A well‑written business purpose should clearly address five key questions:

Who is involved?

Identify the individual, department, or group connected to the purchase.
If it involves a specific person, list their name.
If it involves a department, provide the department name.
If it involves a group (e.g., faculty, staff, students, alumni, grant participants, or others), specify which group.

What was purchased?

Ensure the invoice, receipt, or supporting documentation includes an itemized description of the goods or services.
If the documentation does not clearly describe the purchase, add clarifying comments before submitting.

Where will the purchase be used?

Indicate the location where the goods or services were or will be used, consumed, or delivered.

When was or will the purchase be used?

The transaction date typically answers this question. If not, clearly state the date the goods were purchased or the date(s) the service was or will be provided.

Why does this purchase support university business?

The most critical component for justification; clarifying why the purchase was necessary.
Explain why the University is paying for the purchase and how it supports the University’s mission, operations, strategic goals or grant scope of work.

Why a Business Purpose Is Required

A business purpose is a clear, legitimate explanation showing how an expense directly supports the University’s mission, operations, or programs. It must be specific, necessary, and tied to university business rather than personal benefit.

A well-written business purpose ensures:

Audit Compliance: Provides transparent documentation so internal and external auditors can confirm that public, donor, or grant funds are used appropriately and in line with regulations.

Tax and Regulatory Compliance: Under IRS accountable‑plan rules, expenses without a bona fide business purpose may be treated as taxable income. Clear justification protects both the employee and the University from unintended tax consequences.

Risk Management: Reduces exposure to financial penalties, audit findings, and reputational harm caused by unsupported or inappropriate spending.

Funding Oversight: For grant‑funded purchases, a documented business purpose shows the cost is allowable, allocable, and directly benefits the sponsored project, as required by federal and sponsor regulations.

Best Practices for Writing a Suitable Business Purpose

Be Specific and Descriptive: Avoid vague or generic statements such as “meeting,” “supplies,” or “travel.” Provide enough detail for an independent reviewer to understand the context.

Avoid Acronyms: Spell out organizational names, programs, and technical terms. A business purpose must be understandable to individuals outside the department, including auditors and compliance reviewers.

Address Reasonableness: Demonstrate that the expense is necessary and that the amount spent is appropriate for the circumstances. The justification should reflect what a prudent person would consider reasonable.

Ensure the Purpose Stands Alone: The written business purpose must be complete on its own. It should not rely on attached documents, such as agendas, emails, or receipts, to convey the essential justification.

Keep It Concise but Complete: Provide all relevant details without unnecessary narrative. The explanation should be brief, clear, and focused solely on the business need.

Examples of Suitable Business Purposes

Inadequate Business Purpose	Information to Include	Suitable Business Purpose	Comment
AMA Conference Registration	Include the attendee, start and end dates of travel and an explanation of how the university benefits.	Jon Smith to attend the 2026 American Marketing Association Conference in San Francisco, CA, August 4-6, 20xx, for professional development.	A conference agenda is required.
Lunch meeting	Provide the purpose of the meeting, the date and location where the meeting took place, and how it benefits the university.	Lunch with guest speaker Dr. Smith to discuss planning for the upcoming Biology Symposium on May 1, 20xx.	All attendees must be listed. An itemized receipt is required.
Hotel rooms for the 2026 Inspire Conference	Provide the purpose of the conference, the date and location where the conference took place, and how it benefits the university.	Provided hotel rooms for the 5 guest panelists at the 20xx Inspire Conference hosted by UNI on Feb. 6, 20xx, for STEM students, faculty and professionals.	A list of guests and their affiliations to UNI are required. Attach a conference agenda showing their participation.
Supplies needed for Dr. Daniel’s Lab	Provide description of the supplies and how they will be used.	Focus 3ml 60 mg cartridge needed for analysis in the Chem 101 lab for the spring semester 20xx.	N/A
Membership dues	Must explain why the membership is necessary for the individual and how it benefits the university's mission.	Annual 20xx membership to the National Association of Collegiate Registrars that provides educational, advocacy and networking opportunities.	Note: Memberships are not normally allowed on grants so check with RSP first.
Golf Shirts	Provide the purpose of the item, where and when the item will be used, and how it benefits the university.	Purchased 12 shirts for men’s golf team to wear at golf meets during the 20xx spring golf season.	Must attach a list of the athletes who received the 12 shirts.
History Handouts	Provide the purpose of the item, where and when the item will be used, and how it benefits the university.	Printed 100 History Degree Handouts for prospective students attending student recruiting events between Jan 15-Apr 15, 20xx.	Provide a digital copy of the handout with the itemized invoice or receipt.
November Oasis House Event	Provide the purpose of the event, the date and location where the event took place, and how it benefits the university.	Provided bagels from Panera for finals week event in Dancer Hall - Oasis House for study breaks during finals week Dec. 10-15, 20xx.	Must attach either a list of residents who attended or flyer, announcement or invitation that clearly defines the invited audience.

For questions, please contact Business Operations at 319-273-2162, Option 3 or email obo-hub@uni.edu