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22.2 Self-Supporting Excess Funds

Policy Statement

Units must work with University Accounting and Financial Reporting (UAFR) to ensure that excess funds accumulated from self-supporting fund (SSF) activities are properly lapsed to the University of Illinois System’s income fund on a timely basis.

Reason for the Policy

To ensure compliance with section 30 ILCS 105/6d of the State Finance Act.

Applicability of the Policy

All units who manage 3J and 3Q SSFs.

This policy does not apply to SSFs assigned with a 3E (Storeroom & Service Activities) fund type, due to governmental costing principles and federal costing guidelines. Refer to the Service and Storeroom Activities policy for further details.

This policy does not apply to SSFs assigned with a 3M (Auxiliary Enterprises Under Indenture) fund type, due to external bond indenture requirements.

Procedure

To ensure excess funds from 3J and 3Q SSF activities are properly accounted for in Banner, follow the guidelines and procedural steps below.

1. Understand the excess funds lapse process.
   1. Per Section 30 ILCS 105/6d of the State Finance Act, if SSF activities generate income that is not necessary to support, maintain, or develop the SSF operation, then that excess income must be lapsed to the system’s income fund. This analysis is performed at an entity level. Refer to 22.1 Self-Supporting Funds Overview  for further details regarding entity codes.
   2. To determine if a SSF entity has excess income (which is commonly referred to as excess funds), an annual calculation is performed by UAFR after the close of the fiscal year. This calculation must be completed on or before November 30 and is computed as shown below. If a positive balance is computed from this calculation, then that is the amount that must be lapsed to the income fund by November 30:
      1. Add: Cash and Cash Equivalents (account type 51) as of June 30 of the prior fiscal year
      2. Less: Accounts Payable and Accrued Expenses (account types 61, 65, and 6C) as of June 30 of the prior fiscal year
      3. Less: Deferred Revenue (account type 69) as of June 30 of the prior fiscal year
      4. Less: Two times Expenditure Control (account type 86) as of June 30 of the prior fiscal year*
         *Note: Expenditure control is deducted twice to allow for appropriate long-term financial planning, which would include the establishment of reserves for equipment, facilities, and accrued compensated absences.
   3. If this annual calculation determines that a SSF entity has excess funds, then an entry is recorded to Banner to lapse that amount from the applicable SSF entity to the income fund. Then, the SSFs within the affected entity are analyzed to determine which funds have the highest excess funds balance. After this review is complete, UAFR and the applicable budget office will determine which SSF(s) the income fund lapse will be allocated to.
   4. Once it has been determined which SSF(s) that the lapse will be allocated to, UAFR will record another Banner entry to debit the applicable SSF(s) for their allocated amount of the lapse. The affected unit will then be referred to the applicable budget office to begin the request and approval process for receiving temporary state budget in return for the lapse.
2. While the annual excess funds calculation is performed on an entity level, units also have the option of performing a similar calculation for an individual fund. If the SSF’s cash balance exceeds what is needed for the support, maintenance, and development of the SSF activity, then the fund may be eligible for a voluntary lapse of funds to the income fund. See below for further details:
   1. Before considering a voluntary lapse, units must ensure that the SSF has a large enough cash balance to cover both the short-term and long-term support, maintenance, and development of the SSF operation. Cash balances that are needed for these purposes should not be lapsed.
   2. In addition, the unit must ensure that any direct costs that were included in the development of the SSF’s rate calculation are being properly charged to the SSF before considering a voluntary lapse. If any of those costs have not been charged to the SSF, then those expenses should be reclassified to the SSF to allow for a more accurate analysis of the SSF’s cash balance.
   3. The SSF must be in compliance with the University Credit and Retail Sales Act (110 ILCS 115), which prohibits the system from operating any retail operation that could reasonably be expected to compete with private businesses within the local community.
3. If all these parameters in the previous step have been met, then it is allowable to request a voluntary lapse. Requests can be submitted at any time throughout the year, except during June, July, and August. Any requests received during those three months will be reviewed after August business concludes.
4. To request a voluntary lapse, send an email to UAFR at uas@uillinois.edu which outlines the following:
   1. The amount of the requested lapse, along with an explanation and justification of the request.
   2. The state C-FOP that the temporary state budget should be allocated to, if approved by the applicable budget office.
   3. Confirmation that all direct costs (including salary and fringe benefits) that were included in the SSF’s rate calculation have been charged to the SSF.
   4. A calculation that shows that the SSF has excess funds that equal or exceed the amount of the requested lapse. The calculation outlined below can be used as a guide to help determine the amount of the temporary lapse. However, units are not obligated to use this exact formula if the SSF operation is unique in nature and if a different type of calculation may be more appropriate. Contact UAFR for guidance if needed:
      1. Add: Cash and Cash Equivalents (account type 51) and Investments (account type 53) as of June 30 of the prior fiscal year
      2. Less: Accounts Payable and Accrued Expenses (account type 61, 65, and 6C) as of June 30 of the prior fiscal year
      3. Less: Deferred Revenue (account type 69) as of June 30 of the prior fiscal year
      4. Less: 50% of Expenditure Control (account type 86) as of June 30 of the prior fiscal year*
         *Note: The formula proposed above for the voluntary lapse slightly differs from the excess funds formula presented earlier, as the voluntary lapse formula only suggests deducting 50% of the expenditure control total as of June 30 of the prior fiscal year once (as opposed to twice the expenditure control, which the entity excess funds calculation does). By deducting only one-half of the prior fiscal year’s expenses, this provides more flexibility while also ensuring that the SSF has enough working capital present to prevent the SSF from going into deficit. However, as mentioned earlier, this voluntary lapse formula is only meant to be provided as a guide, and each SSF operation’s situation may vary and may necessitate a more individualized formula.
5. Once received, these voluntary lapse requests will be reviewed by UAFR, along with the applicable budget office. If approved, UAFR will notify the unit of the approval and will complete an entry in Banner to lapse the approved amount from the SSF to the income fund on the unit’s behalf. The unit will then be referred to the applicable budget office to request temporary state budget in return.

Related Policies and Procedures

22.1 Self-Supporting Funds Overview

Additional Resources

Reconciliation of Financial Activities

Self-Supporting Funds

Service and Storeroom Activities

State Finance Act

State of Illinois Legislative Audit Commission University Guidelines

University Credit and Retail Sales Act (110 ILCS 115)

First Published: February 2022 | Last Updated: November 2024 | Last Reviewed: June 2024