tices
Fund Allocation, Reallocation, and Retention


EXECUTIVE SUMMARY

In a continuing effort to most effectively use university fiscal resources,
procedures for fund allocation, reallocation and retention have been reviewed.
Particular areas of attention were practices for roll-forward balances and
distribution of interest earnings.

Procedures have been reviewed, documented and changed to:

Improve transparency of university finances by
o
describing the types and purposes of fund groups and,
o
more clearly identifying the intended purpose of budgetary and
cash balances.

Systematically reallocate unexpended budget and cash balances in
excess of operating requirements to university priorities.

Fund Retention and Roll-forward

In general, decentralized retention of unexpended operating balances
(budgetary or cash) will be limited to 1.5% of the current year resources.
After the close of each year, remaining balances that exceed 1.5% of annual
revenue (cash funds) or budget (general funds) will be reallocated to central
funds to be used for university priorities. Any balances within the 1.5% limit will
be de-centrally retained by colleges or divisions and rolled-forward.

This practice will be implemented in phases. Retention of unexpended fiscal
year 2006-07 balances (i.e., roll-forward into fiscal year 2007-08) will be limited to
3.0%. Retention of unexpended fiscal year 2007-08 balances (i.e., roll-forward
into fiscal year 2008-09) will be limited to 1.5%.

In some cases, thoughtful planning and prudent use of limited resources are
supported by decentralized retention of unexpended balances. To encourage
wise fiscal management and long-term planning, several accounting structures
and procedures have been designed to allow for fund retention in excess of the
general limit (3.0% for FY 07 and 1.5% for FY 08 1.5%). Conceptually, the
university has four types of fund retention:

1. Central funds that benefit the university as a whole and specially 5/29/2007 2
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designated funds retain balances from year to year.
2. Decentralized funds managed by colleges, schools, or other units retain
limited balances (3.0% in FY 07 and 1.5% in FY 08).
3. Funds with external or quasi-external restrictions retain balances from
year to year.
4. Project funds are used for major multi-year initiatives like capital
construction or property acquisition. These funds generally retain
balances for three years.

Examples of fund retention by major fund groups include:

General fund (state appropriated) -- 1xxxx funds
Retention of most general funds will be limited. If an activity typically
crosses fiscal years, funds may be segregated into specially designated
funds to allow for easier review and to permit 100% balance retention
across fiscal years. Examples include:

o
Tuition-funded facility repair and replacement
o
Faculty start-up packages
o
Research
incentives

Consistent with university priorities, general funds may also be transferred
to project funds with approval from the Provost and CFO.

Cash funds -- 2xxxx funds
Retention of most cash funds will be limited. There are some broad
exceptions for activities that have quasi-external restrictions or other
rationale for 100% balance retention. Examples include:
o
Student
fees
o
Extended
studies
o
Auxiliary
services
o
Other revolving funds as specifically approved by the Provost and
CFO.

Consistent with university priorities, cash funds may also be transferred to
project funds with approval from the Provost and CFO.

Central funds that benefit the campus as a whole, as well as adjustment or
clearing funds will not be subject to annual balance reallocation. Examples
include:
o
Fringe benefit pool
o
Net payroll clearing fund 5/29/2007 3
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Project funds 6xxxx funds
Fiscal managers are encouraged to save for major projects consistent with
established university priorities by transferring general or cash resources
to capital project funds. Transfers to these funds must be specifically
approved by the Provost and CFO. Capital project funds retain balances
which should be used within three years.

Restricted, Loan, Endowment, Capital, and Agency Funds 3xxxx, 4xxxx,
5xxxx, 7xxxx, 8xxxx funds.
These funds are subject to external requirements. All balances will be
retained in the funds from year to year.


Interest Allocation

In general, interest earnings will be allocated centrally and not to individual
fund balances.

Interest earned on general funds (1xxxx) will be commingled with other
general revenues for budget allocation.

Interest earned on cash funds (2xxxx) will be allocated to a central fund for
university priorities.

Interest earned on restricted or bond funds (3xxxx, 4xxxx, 5xxxx, some
6xxxx) will be retained if required, or allocated to the central cash fund for
university priorities.

The auxiliary service fund (28xxx) and auxiliary project funds (some
6xxxx) will retain interest earnings.

Interest earned on project funds, other than bond proceeds or auxiliary
service projects, (most 6xxxx) will be allocated to a central fund for
university priorities.

Agency funds (8xxxx) are not assets of the university but held for others.
Balances of individual funds are typically small. In exchange for
processing deposits and disbursements, the university will retain interest
earned on these balances. (Administrative overhead was formerly
charged on agency funds, but will be discontinued). If an individual
agency fund carries balances in excess of $10,000, a flat rate of interest
will be allocated to the fund.
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General Operating Fund 10000
Resources distributed to many
Organizations or cost centers.
Colleges & Divisions r<i>etain up to
1.5% of combined unexpended
budget
State Appropriated $
Tuition, COF stipends, Fee-for-
service, Misc. fees, Interest
Allocated & Controlled by Budget
University Priority Fund
Redistribute unexpended budget to university priorities as
set by the president in consultation with the provost, CFO
and President's Planning Council
Annual budget process results in allocation July 1
Designated Funds
Match, FRPB, Tuition-
funded R&R, Research
incentives, etc.
Retain 100% of
unexpended budget
Recapture unexpended
budget (exceeding 1.5%)
June 30
Transfers
approved by
CFO/Provost
Figure 1 - Resources allocated and controlled by
budget -- 1xxxx funds
Transfers to Capital
Project funds require
CFO/Provost approval.
See fig. 3.
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University Priority Fund
Redistribute cash balances to university priorities as set by
the president in consultation with the provost, CFO and
President's Planning Council
Recapture each fund's
cash balances
(exceeding 1.5%) August
31
Figure 2 - Operating resources earned, expended and
controlled by cash balances -- 2xxxx funds
Cash Revenue Streams $
Room & Board, Student Fees, External Sales, Extended Studies Internal Sales, etc.
Individual Funds
Cash
Internal Services
Retain up to 1.5 % of
ending cash balance
Individual Funds
Student Fees
Extended Studies
Central
** new Revolving**
Auxiliary Services
Retain 100% of cash
balances
Provost/CFO appoval
required to designate
"revolving" funds
Transfers to Capital
Project funds require
CFO/Provost approval.
See fig. 3.
Transfers to Capital
Project funds require
CFO/Provost approval.
See fig. 3.
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Figure 3 - Summary of other funds
Grantor and
Donor $
Restricted 3xxxx funds
retain balances and are
managed based on cash.
Federal and
Non-federal $
Loan 4xxxx funds retain
balances and are managed
based on cash.
Donor $
Endowment 5xxxx funds
retain balances and are
managed based on
expendable cash
Capital
Appropriations &
Bond Proceeds $
Restricted Capital 6xxxx
funds retain balances and
are managed based on
cash.
Other Non-
expendable
Asset/Debt 7xxxx and Agency
8xxxx -- not used for operating
or capital expenditures.
Unrestricted Capital
6xxxx funds retain
balances and are managed
based on cash.
Transfers from operating
funds for long-term
capital projects. See fig 1
& 2. 5/29/2007 7
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PURPOSE AND SCOPE

This procedure applies to all university fiscal resources and is intended to:
Improve transparency of university finances by
o
describing the types and purposes of fund groups and,
o
more clearing identifying the intended purpose of budgetary and cash balances.
Systematically reallocate unexpended budget and cash balances in excess of operating
requirements to university priorities.


BACKGROUND


Definitions

Chart of Accounts: A structure for capturing data and reporting information about financial
activity.

Fund: An element of the chart of th