| Effective Date: |
July 20, 2012
|
|---|---|
| Last Revised Date: |
April 29, 2026
|
| Responsible Unit(s): | |
| Responsible Unit Email(s): | |
| Manual: | |
| Status: |
Active
|
Purpose and Summary
To establish comprehensive guidelines for budgeting, Fund Balance management, and reserves at the University to ensure financial stability, prevent deficits, and maintain appropriate liquidity aligned with Arizona Board of Regents (ABOR) requirements.
Scope
This policy applies to all University departments, colleges, and units across all Fund Types and Planning Funds.
Definitions
Budget Authority: Permitted spending level, also called Expenditure Authority. Colleges/Divisions and departments are not authorized to spend more than the Budget Authority provided. Budget Authority is set by the President, CFO, and Provost for each college/division and loaded within the university’s budgeting systems for tracking of expenditures against the total authorized amounts.
Carryforward: Budget Authority approved above the current year allocation within General funds or above current year revenues in Enterprise funds. Amounts loaded and authorized are based on all or part of the prior year’s ending Fund Balance and are designed to be used only for one-time strategic initiatives.
Fund Balance: The accumulated difference between assets and liabilities, also known as net position or net assets.
Fund Types and Planning Funds: The Planning Funds hierarchy is an alternative reporting hierarchy from that presented in FPM 2.1. Whereas FPM 2.1 covers basic fund accounting principles and use of funds for external financial reporting, Planning Funds are used in the budget and planning tools to aggregate and report information for management reporting and simplified internal financial management.
General Funds: General-purpose resources used to support university activities.
- Operating Funds (STA, ALC, SLI): Resources received by and distributed from central administration at an institutional level.
- Enterprise Funds (AUX, DES, CRS): Resources collected at the unit level through sales of goods and services or the direct assessment of fees to students or customers.
Other Designated Funds: Funds designated internally for specific purposes, including:
- Banner Funds (BAN, BNN): Banner Operating and Non-Operating funds
- Dean’s Tax (DNT): Revenues generated at partner hospitals and provided to the university to support medical and health education
- Financial Aid (FIN): Revenues received and distributed for student financial aid
- Service Centers (DR): Funds with the majority of revenues generated from charging federal and sponsored awards for goods or services used in research or other university services
- Research Development Funds (IDCDEV): Revenues set aside from facilities and administrative indirect cost recovery to support research start-up and investment opportunities
- Provost Investment Funds (PIF): Revenues from general funds set aside to support academic start-up and investment opportunities
- Other Designated (ODE) Include:
- Fixed Price Complete contracts (Sub Fund FIXEDP)
- Trademarks & Licenses (Sub Fund TRDMRK)
- Medical Education & Residency Programs (Sub Fund MEDPRG)
- IDC Regents Funds (Sub Fund IDCREG)
Restricted Funds: Resources with restrictions placed on them by external parties, such as donors, ABOR, or granting agencies, including:
- Federal Agriculture (Sub Fund FED)
- Sponsored Projects (Fund SPN)
- Technology Research Initiative (Fund TRF)
- Gift, Endowments, and Other Restricted (Fund OTH)
Reserve: A portion of the Fund Balance intentionally set aside for specific strategic purposes, contingencies, or emergencies, and/or to meet liquidity requirements established in accordance with this policy, ABOR policy, and all relevant Arizona Revised Statutes.
Days Cash on Hand: The number of days the University could operate with available unrestricted cash, cash equivalents, and investments, calculated in accordance with ABOR requirements.
Policy
Fund Balance Requirements
1.1 No Deficit Positions: All departments, colleges, and Planning Funds must maintain positive Fund Balances at the end of each fiscal year.
1.2 Monitoring: Units must review financial performance monthly and perform in-year forecasting quarterly. Reviewing performance includes monitoring and adjusting forecasts based on year-to-date performance against budget and prior year actuals. It includes estimating year-end revenues, expenditures, and changes in net position, as well as underlying drivers of performance, including sales activity and cost drivers, such as changes in operating expenses and personnel. Please consult the Office of Budget and Planning and associated forecasting and budgeting tool guidelines for additional information.Fund-Specific Reserve Requirements
2.1 General Funds
Academic Colleges
- Reserve Target: Maintain a minimum Fund Balance of 10% of annual operating expenses, measured as the year-ending balance against prior-year actuals. Larger balances for some funds or accounts may be required, as determined by the CFO. Reserves beyond these minimum amounts are permitted as needed, to support college operations.
- Purpose: Support strategic initiatives, faculty start-up costs, accommodate enrollment changes, and ensure academic excellence
- Responsibility: Dean and Provost
Support Units
- Reserve Target: Maintain a Fund Balance of 5% of annual operating expenses, measured as year-ending balance against prior-year actuals
- Purpose: Ensure continuous support services and adapt to evolving institutional requirements.
- Responsibility: Unit Director and respective Vice President/Vice Provost
Auxiliary Units
- Reserve Target: Maintain Reserves of 25% of annual operating expenses, measured as year-ending balance against prior-year actuals
- Purpose: Address service and product line demand fluctuations and support capital improvements
- Responsibility: Unit Director and respective Vice President/Vice Provost
- Capital Contribution: Each auxiliary unit will have annual capital expenditures, or contributions to capital reserves, of at least 1.5% of the replacement value of equipment
2.2 Other Designated Funds
2.2.1 Banner Funds, Dean’s Tax, Financial Aid, Fixed Price Complete, Trademarks & Licenses, Research Development Fund, Medical Education and Residency Funds, Provost Investment Fund
- Reserve Target: Funds are managed on a cash basis, and deficits are prohibited. Budgeting tools are available to aid in fund management
- Purpose: Support the designated purpose of the fund
- Responsibility: Principal Investigator, Department Head, and Dean or Vice President/Vice Provost
2.2.2 Service Centers- Reserve Target: Maintain a Reserve sufficient to cover service demand changes and other investments, not to exceed 60 days (17%) of annual expenses. Budgeting tools are available to aid in fund management. Service Center accounts with balances generated from revenues external to the university are permitted to exceed 60-day reserves as needed to support the operations of the units.
- Purpose: Ensure continuous operation and regular equipment updates when the Service Center has been approved to establish an Equipment Reserve (See 5.00 Equipment Reserve in the Rate Studies Handbook).
- Responsibility: Service Center Director and Dean or Vice President for Research Operations
2.3 Restricted Funds
2.3.1 Gift Funds
- Reserve Target: No specified target exists. Funds are managed on a cash basis, and deficits are prohibited. Budgeting tools are available to aid in fund management if desired.
- Purpose: Managed according to donor intent and University of Arizona Foundation policies.
- Responsibility: Fund administrator and Dean/Director of the beneficiary unit
- Transfer Process: Transfers from the University of Arizona Foundation (UAF) must follow the Foundation's policies, including quarterly forecast requirements for operational expenses exceeding $20,000. Please see the Foundation Fund Transfers section for more information.
2.3.2 Other Restricted Funds - Federal Agricultural Funds, Technology and Research Initiative Funds- Reserve Target: No specified targets exist. Managed on a budget basis, and deficits are prohibited. (Federal Agricultural Funds will not have a deficit at the end of the federal fiscal year.) Budgeting tools are available to aid in fund management.
- Purpose: Managed according to stakeholder intent
- Responsibility: Fund administrator and Dean/Director of the beneficiary unit
2.3.3 Sponsored Funds (SP)- Reserve Target: Funds are managed on a budget basis, and deficits are prohibited. The Sponsored fund is managed by Sponsored Projects processes and budget practices. Please refer to Sponsored Projects for additional information.
- Purpose: Managed according to sponsor intent
- Responsibility: Principal Investigator (PI) and Vice President for Research Operations
2.4 Institutional Reserve Requirements
To align with ABOR Policy 3-407.03 guidelines for days of cash on hand:
- Target Range: The University shall maintain days' cash on hand within plus or minus 25% of Moody's Median for the Higher Education sector. This target will be recalculated annually based on the current industry median.
- Monitoring and Reporting: The Chief Financial Officer (CFO) shall report quarterly to the President and annually to ABOR on the status of institutional reserves, per ABOR Policy 3-407.
Financial Reporting Requirements
Per ABOR Policies 3-407 and 3-410:
3.1 Quarterly Financial Status Updates: The University shall provide quarterly financial status updates to ABOR within 40 days of the end of each quarter, including:
- Budget monitoring information
- Liquidity monitoring information
- Cash balance reporting
3.2 Annual Financial Reports: The University shall provide audited annual financial reports to the ABOR Audit and Risk Management Committee each November, including:- Audited annual financial report
- Ten-year financial ratio analysis
Policy Review
The Division of Finance and Budget shall review this policy annually to assess its effectiveness and recommend adjustments.