Designated and Reserve Funds - 302.1
|University of Arkansas at Little Rock|
|Policy Name: Designated and Reserve Funds|
|Policy Number: 302.1|
|Effective Date: August 6, 2010|
Designated funds are for specified purposes that are facilitated by the option of carrying balances from one fiscal year to the next. Designated Funds are those current unrestricted funds that allow a carry forward of revenues over expenses from one fiscal year to the next. They are not to be used for grants, contracts, gifts, and Educational and General Operating Funds.
Designated funds are established from a variety of sources such as research support funds, grant salary release dollars, indirect cost income, and income-generating entrepreneurial activities and services.
A. General Policies
The following policies are for the purpose of encouraging use rather than accumulation of designated funds and for the purpose of promoting active management of designated funds.
- A service charge will be levied on balances that exceed the approved maximums in items B1, B2, B3, and B4 below at fiscal year-end if 15%. This service charge will be assessed after appropriate transfers have been made to reserve funds.
- On income-earning designated funds there will be a 16% service charge on income earned quarterly.
- Any balances in designated funds at year-end will be used first to cover deficits in corresponding Educational and General and Auxiliary accounts operated by the same unit/department. This should be done by the appropriate Vice Chancellor/Dean by June 15 of the fiscal year.
- Designated funds will be monitored by the appropriate Vice Chancellor during the course of the year. Mid-year deficits in designated funds will have to be justified. At year-end all deficits must be cleared by June 15 unless exceptions have been approved by the Chancellor. These will be covered from other sources by the appropriate department/dean/vice chancellor.
- At the beginning of each fiscal year, a budget (a plan for spending that includes allocations to salaries, fringes and maintenance, as appropriate) for designated funds should be established for any anticipated income. The budget approval form must be completed and signed by the appropriate Vice Chancellor. Include the 16% service charge as an expenditure.
- Designated funds with a balance of $100 or less will be swept at year-end.
- New faculty start-up funds must be spent within two years of first day of employment.
- Gifts are to be processed by Development office.
- All faculty excellence funds must be spent in one year.
B. Carryover Authority
The following are policies dictating the carry forward of dollars from one fiscal year to the next.
- Indirect Cost Income (Research Support Funds) – These funds, which originate from indirect cost recovery, will be allowed 100% carryover at year end up to a cap of $100,000 per college/school/Vice Chancellor. (IEA, IOG, MidSouth, APAC, and SBTDC will not be considered as part of Dean’s $100,000. They are also restricted to a carryover of $100,000.)
- Grant Salary Release – Funds accumulating from grant salary release will be allowed up to $50,000 in carryover.
- Generated Operating Funds – Generated dollars representing entrepreneurial efforts that fund ongoing salaries and other program costs are allowed to carry forward as a reserve, one year of hard dollar salaries, fringes and other program costs for the current year or up to $200,000, whichever is higher. Departments will have to document by June 15 to the Vice Chancellor for Finance that these are ongoing salaried positions and program costs.
Any of these operating funds whose primary activities occur in the summer months (example: MidSouth Summer School) and span two fiscal years or whose expenditures and revenue respectively occur in different years should spend the revenue within a twelve month period with no accumulation of revenue over multiple years over and above the reserve mentioned in the previous paragraph.
- Service Accounts – Those funds generated by charges for a service, such as, copying, but do not fund ongoing salaried positions. These units are allowed 100% carryover with a cap of $50,000.
Recommendations for exceptions to these caps may be made by the appropriate Vice Chancellor to the Chancellor, if the accumulated savings are for an approved university goal. Exceptions to the established dates can be made for contracts/units whose operations cross fiscal years, i.e., MidSouth Summer School.
C. Reserve Funds
Designated funds sometimes hold balances that are to be used as reserves for unanticipated expenses or to accumulate a balance for major projects. For reporting purposes these balances are considered unrestricted and therefore inflate institutional fund balances.
- Funds held for reserves should be classified as Renewal & Replacement funds (or Plant). Any designated funds that are not intended for expenditure within the current fiscal year should be moved to reserve funds. A fund grouping will be established to allow any university unit to set up a reserve fund.
- Reserve funds are intended to be held for major purchases rather than to be used for ongoing operating expenditures. Major purchases include equipment, renovations and other capital improvements.
- Transfers may be made from the reserve funds on October 1, January 1, and April 1.
- Before year-end, unused balances in Designated Funds that fit the definition for plant funds should be transferred into the appropriate reserve fund.
- No expenditures will be made directly from these reserve funds. Dollars for major projects to be funded with dollars from reserves should be transferred from reserves to the appropriate operating fund and expended according to an approved plan (budget).
Operating units may establish reserve funds with the approval of the Dean (or equivalent officer) and appropriate Vice Chancellor.
Source: University-wide Policy, December 7, 1995
Revised: April 5, 2005; August 6, 2010
Approved By: Dr. Joel Anderson, Chancellor
Custodian: Chief of Staff/Budget Director