Manage Financial Resources
In this section:
- General Funds Budgets
- Earnings Operations
- General Requirements
- Budget Policies
- Rates Policies
- Accounts Receivable and Cost of Sales
- Cost of Sales Policies
- Other Earnings Policies
- Establishing a New Earnings Fund
General Funds Budgets
Policies, guidelines and procedures associated with the management of general funds budgets are the responsibility of Financial Planning and Analysis (FP&A). This is a direct link to the FP&A website.
Earnings operations are defined as campus entities that charge an approved fee for goods and services to university departments, faculty, staff or students, the general public, or research grants. Earnings units earn their own revenue and incur their own costs, both direct and indirect. Departments should refer to the Earning Operation policy for guidance on earnings operations.
- All revenue associated with the sale of goods and services must be deposited into an earnings fund. Revenue must not be deposited as a credit to expense in a non-earnings fund.
- Operations must be fully costed. Both the direct and indirect costs such as salaries, benefits, supplies, equipment, and university overhead must be included.
- Operations should be self-supporting. If it is determined that an operation cannot be fully self-sufficient, the department can support the operation from its general funds via a funds transfer.
- Operations must have start-up funding. Spending into a deficit until sufficient revenue is earned is not permissible.
- Operations must not use an external bank account. All financial activity must go through the university financial accounting system.
- A budget must be submitted annually to Financial Planning and Analysis during the annual budget process. Auxiliary operations and university services also must submit a cash flow statement.
- Budgets represent planned income and expense. Budgets should be reasonable, based on prior years' actual experience or marketplace demands.
- Budget variances from actual should be incorporated into the following year's budget. Budget revisions should be minimal.
- "Budget balances" on the income statement do not carry forward at year-end.
- Deficit budgets are not permitted unless the operation has sufficient cash to cover the operating loss.
- If a cash deficit does develop, it must be resolved within a two-year period and the budget should reflect resolution of the deficit.
- Rates must be calculated to cover all costs that are incurred in providing the goods or service. If necessary, departments may choose to use their general funds to subsidize the operation, thereby lowering their rates.
- Rates must not include unallowable costs as defined by A-21 regulations.
- Two different methods are available for calculating rates, depending on the type of operation: (1) full-cost recovery and (2) marketplace.
- Rates must be associated with customer types and operations must indicate who their customers are, i.e., federal grants, university departments, faculty, staff, students, corporations, and the general public. This information is important because different rate setting strategies and considerations apply to different types of customers.
- Rates must not be calculated to generate a surplus if (1) the operation is designated as a university service (recharge center), (2) the primary customers are university departments or federal grants and (3) a monopoly exits e.g. the Telephone Company.
- Rates (marketplace) calculated to produce an operating surplus are allowed if (1) the primary customers are the general public, a private corporation, or university employees or students acting as the general public (athletic events), (2) there is reasonable marketplace competition, or, as in the case of conferences, when it is stated on the registration form.
- Documentation associated with rate calculations must be maintained by departments and be available for internal and external audits.
Accounts Receivable and Cost of Sales
- It is the responsibility of each earnings operation to accurately reflect accounts receivable in the general ledger.
- All receivables must be promptly recorded.
- All returned checks and credit card drafts are receivables and are collected by the University Bursar Office.
- Interest assessed on unpaid account receivable balances must be in accordance with the Bursar Office.
- All operations must keep a record of the age of their accounts receivable.
- Policies and procedures information related to accounts receivable is available from the Bursar's Office.
Cost of Sales Policies
- Merchandise and services purchased externally for the purpose of resale and direct pass-through qualify as cost of sales.
- University overhead for operations with approved cost of sales is calculated on gross margin, i.e. total revenue minus approved cost of sales.
Other Earnings Policies
- Earnings operations that consistently do business in excess of $100,000 annually are charged a "physical plant assessment" (i.e. a central charge for utilities and maintenance costs associated with the space occupied by the earnings unit).
- Operations over $100,000 that pay physical plant costs also earn interest on their cash balances. Interest expense is charged on negative cash balances.
- Operations in excess of $100,000 that earn interest on their cash balances also earn interest on plant funds, usually equipment replacement reserves, associated with the earnings operation.
Establishing a New Earnings Fund
Guidance associated with the establishment of a new earnings fund in the Workday system can be found here.