How are department budgets funded and disbursed at undergraduate institutions?
(not US, but Europe)

Some money comes from the government, some comes from students, some comes from research grants (overhead, quite a big part of a grant, sometimes).

Overhead costs are department specific, that is, overhead at the physics department might be more than at the social science department.

Some of the money is to be distributed according to needs, but a lot will be up to discussions among the different boards along the hierarchies.

For purchases, most are done through grants that researchers/faculty obtained, general stuff (paper, pens, ...) is financed through overhead. There are also grants that can be used to buy special equipment exceeding "normal" amounts.

Another part is going to things ranging from cleaning personnel to journal subscriptions. Sometimes, universities have to rent the facilities they are using, some own them (country specific laws apply). This is financed through overhead, which also pays administrative staff.

Your university should have information for researcher/grant applicants, on overhead costs, and what it is used for. This might give you more details (and nightmares).