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Policy: Monitoring Cash Balances and Resolving Deficits in Revenue Projects 


Date: 06/28/11 Policy ID: FIN-033 Status: Final

Policy Type: University
   
Contact Office: Treasury Management (Office of)
   
Oversight Executive: Executive Vice President and Chief Operating Officer
   
Applies To: 

Academic Division, the Medical Center, and the College at Wise.

   
Table of Contents:  Policy Statement
  1. Monitoring Cash Balances
  2. Unauthorized Cash Deficits
  3. Authorized Cash Deficits
  4. Responsibilities

Procedures

   
Reason for Policy: This policy establishes guidelines and expectations for managing revenue project cash balances in order to: (1) encourage the prudent management of cash; (2) maintain sufficient cash balances; and (3) further fiduciary responsibility of all departments.  The policy explains how cash balances are monitored, the actions taken with regard to unauthorized cash deficits, and the process for requesting authorization for cash deficits.
   
Policy Summary: 
   
Definition of Terms in Statement: 

Authorized Cash Deficit: Cash deficits that are within the dollar and time limits authorized in writing by Treasury Management.

Cash Balance: Operating cash balance before commitments as reported on the Discoverer workbook “GL_Revenue Reconciliation Reports,” not to be confused with budget balance.

PTAEO: The five-segment account structure to which expenses are charged that allows for enhanced reporting.  [P = project, T = Task, A = Award, E = Expense, O = Organization.]

Revenue Parent: A combination of Revenue Projects that has a project number beginning with the characters “RP” in the integrated system.

Revenue Project: Projects used for only non-sponsored programs to record revenue in the General Ledger. 

Unauthorized Cash Deficit: Any revenue project that is in deficit and either has not been authorized by Treasury Management or exceeds its authorized limit or permitted time frame.
   
Policy Statement: 

All revenue projects must have a cash balance of zero or greater before commitments.  If a revenue project rolls up into a revenue parent, then the revenue parent must have a cash balance of zero or greater before commitments.  The cash balance of the revenue parent will be monitored for a cash deficit.

Each dean or vice president is responsible for monitoring revenue projects or parents within his/her organization to ensure that cash balances are zero or greater or obtain authorization, where warranted, prior to incurring a cash deficit.  A deficit cash balance in a revenue project or parent is expressly prohibited unless the deficit is properly authorized. [Note:  Other agencies that have revenue projects in the University’s integrated system must adhere to these terms.]
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  1. Monitoring Cash Balances:
    Deans and vice presidents are responsible for ensuring their departments monitor cash balances and that cash balances remain positive.  Cash balances are monitored by running the Discoverer workbook “GL_Revenue Reconciliation Reports” and obtaining the operating cash balance before commitments.

This report is the basis for determining cash deficits for the revenue projects in an organization.  Individuals responsible for monitoring a department’s cash balances must receive training, including training on reconciliations, on how to use this report to manage and resolve cash deficits.
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  1. Unauthorized Cash Deficits:
    The Office of Treasury Management will monitor cash balances on a quarterly basis.  At such time as an unauthorized deficit occurs, interest charges may be assessed at a rate to be determined by Treasury Management.  Interest charges will be assessed to the unit’s identified “Other than Personal Services” (OTPS) suspense PTAEO.  Charges to the OTPS suspense PTAEO must be cleared each month.  Unauthorized Cash Deficits that exist, or are expected to exist, for an extended period of time may be converted into a loan by Treasury Management under the Internal Borrowing Program.

Treasury Management will notify as necessary, department personnel and the appropriate dean or vice president of any unauthorized deficit(s) and subsequent interest assessment(s).
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  1. Authorized Cash Deficits:
    Under extraordinary circumstances, the Treasurer may authorize a cash deficit.  Cash deficit authorizations are restricted to those University revenue projects for which the deficit is either acknowledged to be unavoidable due to error or operational/timing problems or determined to be in the best interest of the University.

Requests for cash deficit authorizations must be made in writing to the Treasurer and must be signed by the appropriate dean or vice president.  Authorizations for cash deficits will be granted, in writing, by the Treasurer. Authorized deficits will be granted for a limited period of time and for a specific amount. If the deficit extends past the authorized time limit, or if the deficit exceeds the authorized deficit amount, it is no longer considered to be an authorized deficit.
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  1. Responsibilities:
    Departmental employees charged with monitoring departmental cash balances are responsible for:
    • Running the Discoverer workbook “GL_Revenue Reconciliation Reports” in order to monitor cash balances;
    • Managing and reconciling cash balances; and
    • Notifying management of a cash deficit.
Treasury Management is responsible for:
  • Reviewing cash deficit balances on a quarterly basis;
  • Granting written authority to departments for cash deficits, where warranted;
  • Determining whether or not to assess interest charges on unauthorized cash deficits;
  • Providing departments with loans in place of long-term cash deficits; and
  • Reporting unauthorized cash deficits and subsequent interest assessments to the respective dean or vice president as necessary.
Deans and vice presidents are responsible for:
  • Monitoring revenue projects in their organizations such that cash balances are zero or greater;
  • Requesting in writing approval to incur and maintain a cash deficit prior to incurring the deficit; and
  • Assuring that individuals who monitor cash balances within his/her organization are adequately trained.
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Procedures: 

I.1-4, Monthly Review of GM Project or Award Activity
I.1-4A, Monthly Review and Certification of Sponsored Program Project or Award Expenditures
I.1-5, Monthly Review of GL Project Activity
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Related Information: 

FIN003, Management of Sponsored Program Awards in a Budget Deficit
FIN-022, Oversight of University Operating and Capital Budgets and Long-term Financial Plans
FIN-023, Reconciling Departmental Accounting Records
FIN-024, Internal Borrowing Program
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Policy Background: 
   
Major Category: Finance and Business Operations
   
Category Cross Reference: 
   
   
Process: 
   
Next Scheduled Review: 06/28/14
   
Approved By, Date: Executive Vice President and Chief Operating Officer, 06/28/11
   
Revision History: 
   
Supersedes (previous policy):  

II.E.3, Cash Balances and II.B.6, Cash Deficits