Financial Affairs Policies

UMB Policy on Unrestricted Fund Balances Use

VIII-18.00(A)  |  Financial Affairs  |  Approved September 9, 2020

Responsible VP/AVP: Dawn M. Rhodes, DBA, MBA

Revision History

Approved September 9, 2020.

Purpose

This policy establishes processes for the use of Unrestricted Fund Balances by the University of Maryland, Baltimore (UMB). This policy promotes the efficient use of funding, and aids in the formulation of spending plans that support the mission and goals of UMB.

This policy provides guidance and establishes a process for the use of accumulated resources within a planning and control structure that enables the Chief Business and Finance Officer (CBFO) and staff to have up to date information on commitments, claims, and likely obligations that need to be considered in evaluating spending proposals outside of planning parameters, such as expectations that schools/units manage their resources to ensure a particular change in Unrestricted Fund Balances.

Policy Statement

Annual Use of Fund Balance Requests

Unrestricted Fund Balances are accounted for and their use managed by each school and unit. A school and unit’s ability to use Unrestricted Fund Balances is constrained by UMB’s overall Fund Balance growth goal, which is set annually regarding the use or increase in Unrestricted Fund Balances.

An annual request for use of Unrestricted Fund Balance can be made by schools and units by identifying projects for the following fiscal year during the Budget Request Cycle each spring. The request is made by each Dean and Vice President, who will prioritize the submittals from their respective schools/units, and present them at the annual Budget Presentation to the President.

The Budget Request Committee will be responsible for assessing and reviewing these requests and making determinations and recommendations for their approval, based on UMB’s overall Fund Balance annual growth goal taking into consideration approved spending by the University System of Maryland (USM). On completion of the Budget Request Cycle and all presentations, the Budget Request Committee will make recommendations for the President’s consideration and approval. Decisions regarding the approval of Unrestricted Fund Balance use will be communicated to the respective schools and units as part of the annual working budget cycle.

Use of Unrestricted Fund Balance is restricted and may only be used for one-time expenditures. Unrestricted Fund Balance use for permanent Full Time Equivalent (FTE) positions or other long term obligations is not permitted unless prior approval has been given by the CBFO after reviewing long-term business plans for the school/unit.

Each school and unit will be responsible for monitoring approved and funded proposals and providing a quarterly status update to the Office of Budget and Financial Analysis. These updates shall be consolidated into quarterly financial report presentations. Throughout the year, additional requests to use Unrestricted Fund Balance in the current year will be considered by the CBFO. The quarterly status updates in conjunction with the Office of Budget and Financial Analysis net change in Fund Balance projection will serve as the basis for granting additional approval to spend Unrestricted Fund Balance.

Requests to carry forward unused approved Unrestricted Fund Balance to the following fiscal year should formally be made to the Budget Office as part of the third quarter forecasting process.

Requests to use Unrestricted Fund Balances are not required if the total change in current year Unrestricted Fund Balance is not in deficit. The individual Fund Balance elements (DRIF, Revolving Fund Balance, etc.) may temporarily fall into deficit, but only if total Unrestricted Fund Balances remain in surplus, and the school or unit has a payback plan.

Definitions

1. Fund Balances – the difference between assets, deferred outflows, and liabilities and deferred inflows. Also referred to as net position or reserves.
2. Unrestricted Fund Balances – the difference between assets not subject to external (external to both the institution and System) stipulations that govern or control how resources are expended, and associated Includes State-supported, Auxiliary, DRIF, and Revolving Fund Balances.
3. State‐supported Fund Balances – under State of Maryland budgetary practices, unspent resources derived from State‐supported activities such as teaching and instructional activities.
4. Auxiliary Fund Balances - An Auxiliary fund is used to account for the revenues and expenses of University self-funded and self-sustaining operations like Parking and Transportation Services. Income is used to support operations, including overhead, and all income is considered unrestricted.
5. DRIF – Designated Research Initiative Funds, which are allocated from indirect cost recoveries to support research initiatives.
6. Revolving Fund Balances - A Revolving Fund Project supports a special activity that must be self-supporting and continually maintain a positive cash balance.
7. Restricted Fund Balances – A Restricted Fund includes sponsored research projects, federal and State financial aid programs, and gift funds.
8. Budget Request Cycle – A budget process, which typically occurs from January to April each year, and includes information requests in relation to capital planning and other funding requests, culminating with a formal Budget Presentation to leadership.
9. Budget Presentation – A formal presentation to leadership that completes the Budget Request Cycle. A Budget Presentation typically includes: a brief summary of the highlights and challenges since the last presentation; identification of areas which may benefit from the support of the executive office and senior leadership; and identification of funding and/or expense issues together with impact on Fund Balance.
10. Budget Request Committee - The Budget Request Committee creates and maintains fiscal responsibility for the University. This committee represents the Executive Office and Senior Leadership, and consists of the President, Provost, and Chief Business and Finance Officer.
11. Office of Budget and Financial Analysis – An office within the Office of Finance & Auxiliary Services, in the Department of Administration and Finance. The Office of Budget and Financial Analysis supports the University by maintaining and providing operating budget information and financial analysis to the campus.