Adjusted Fund Balances and Over/Under Recoveries

Adjusted Fund Balance

The Banner Fixed Assets system does not directly interface with the General Ledger and Operating Ledger. In addition, depreciation is only calculated and booked in the General Ledger at a highly summarized level during the year end close process. Therefore, to reflect "correct" fund balances, the "Adjusted" Fund Balance must be calculated and used in calculating and monitoring fund balances and over/under recoveries. This is accomplished by completing the following adjustments:

• For assets purchased with services unit 3E funds, the "net asset value" must be calculated. Since the net asset value is normally a debit balance, the fund balance will be "credited" or increased to arrive at the adjusted fund balance.
• Adjust for items that should be considered when determining the financial position of the service unit (e.g. Non-3E Equipment, Termination Payouts, and External Revenue). Contact System Government Costing for assistance with this calculation.

Working Capital Reserve Limitation

Working capital reserve is specifically defined in the Federal Uniform Guidance, 2 CFR 200 Appendix V Section G.2 which states that, "A working capital reserve as part of retained earnings of up to 60 days cash expenses for normal operating purposes is considered reasonable." Unusual transactions/variances should be excluded from normal operating expenses for purposes of the limitation calculation. The 60-Day Working Capital Reserve Limitation is calculated by taking the last 12 months of cash expenditures divided by 6. This limitation is then compared to the service center's adjusted fund balance to calculate and monitor over recoveries. The adjusted fund balance of individual service activities must meet these limitations, unless an exception has been granted by the Senior Associate Vice President for Business and Finance or delegate. See the Calculations section of this policy.

Over Recovery of Costs

Service activities that accumulate an adjusted fund balance surplus in excess of specified limits (60 days of average cash operating expenses) must adjust future rates in order to meet the Federal break even requirements over a reasonable period of time. See the Calculations section of this policy for a sample analysis of over recovery of costs.

Under Recovery of Costs

Service activities that accumulate an adjusted fund balance deficit must adjust future rates in order to meet the federal break even requirements over a reasonable period of time. See the Calculations section of this policy for a sample analysis of under recovery of costs.

State Fund Balance Requirements

This policy is specific to federal fund balance requirements. However, the state reporting requirements outlined in 22 Self-Supporting/Revenue Generating Activities - Avoid a Build-Up of Excess Cash Balances must also be considered. To comply with State regulations, self-supporting funds are reviewed annually by University Accounting and Financial Reporting to determine if excess funds exist. This review is completed at fiscal year-end by accounting entity, which is a classification of self-supporting funds into similar and related groups defined by the System. Excess cash in self-supporting funds cannot be retained by units and must be lapsed to the University Income Fund. A general guideline is that units may retain enough cash in their self-supporting fund to cover their average monthly expenditures; however, the excess funds calculation is done on an entity-wide basis so an individual fund may have excess funds, but the entity may not. No funds are lapsed to the University Income Fund if the entity does not have excess funds.