Wallace has carried out a 120-day review into the Glasgow giants' books and decided the club can afford to sign new players ahead of next season's Championship campaign.
That's despite the club burning through over £67million in the last two years.
Wallace claims he has re-jigged the club's chaotic business model and has now put them on a three-year route aimed at reclaiming the Scottish title from Celtic.
McCoist has been linked with several targets in recent weeks - including former Light Blues striker Kris Boyd, Motherwell defender Shaun Hutchinson and St Mirren's Kenny McLean - and Ibrox chief Wallace has now given him the green light to go after them.
He said: "Ally and I are in constant dialogue about his assessment of what the squad needs and from my side, the financial capability to be able to support that.
"He will have funds available, he will be able to strengthen the team and he will be looking at where he wants to make those changes to make the squad competitive."
However, Wallace has criticised the decision to allow the first-team manager to sign nine new players last summer.
In his review document, he claimed predecessor Craig Mather and the then board "should have known that it could not afford" so many new arrivals and the £10.4million it has paid out in player wages in the 18 months up to December.
It adds that some of the contracts handed to the Ibrox squad are "generous and poorly structured".
Even so, the club have made £2million of annual savings without trimming McCoist's budget.
According to the three-year plan to put Rangers back at the top of Scottish football, McCoist will be expected to lead the club to promotion from the second flight next year, land a top-two finish the season after before making a bid for the title in season 2015/16.
Wallace has promised to ensure that Rangers employ a "more structured and planned" signing policy in future and also hopes to see the 54-time Scottish champions form alliances with top foreign clubs in order to access talented youngsters.
A new chief football operations officer will also be hired to finally reinstate the scouting department missing since the Light Blues were liquidated, while cash will be ring-fenced to for youth development ensure the club is able to unearth and rear rising stars.