Policy Concerning Internal Funding Advances

Policy Concerning Internal Funding Advances

Abstract:
The university’s financial management structure permits each of the schools, University Hospital, and Auxiliary Services to maintain separate financial identities for internal accounting purposes.
Effective Date:
4/20/1989
Contacts:
None Assigned
Administrative Category:
Applies To:
Faculty, Staff
Material Original Source:

The University of Alabama at Birmingham

POLICY CONCERNING INTERNAL FUNDING ADVANCES AMONG MAJOR UNITS OF THE UNIVERSITY

April 20, 1989

 

Background

The University’s financial management structure permits each of the Medical Center schools, University College, the University Hospital, and the Auxiliary Services to maintain separate financial identities for internal accounting purposes. Often these units have fund balance(s) resulting from their operations.

When one of the schools, the Hospital, or one of the Auxiliary Services needs to expend funds for construction, major renovation, and/or extraordinary equipment purchases, several options exist for the institution. If the acquisition or renovation involves a large capital outlay, the institution may choose to obtain external financing. If external financing does not completely fund a project or acquisition, funding will become the responsibility of the unit. If the unit responsible for funding the project has sufficient fund balances, those can be used for these purposes. If the responsible unit does not have sufficient funds, another unit of the University or the University’s central administration may elect to advance funding for these purposes.

The institutional reserves are comprised primarily of interest income earned on the University’s available balances. To the extent that reserves are expended for plant acquisitions for a school or unit, the total available for future investment is reduced, and, consequently, future earnings are reduced. To help offset such a loss in this income stream, a "funds use fee" will be charged on these transactions.

 

Policy Statement

When internal funding advances are made, a funds use fee will be paid by the unit receiving the funding advance. This funds use fee on advances of institutional reserves to any unit will be equal to the average annual investment yield for the University on its pooled investments at the time the funding advance is made, rounded to the nearest whole percentage. The funds use fee on advances between any two schools or units (including the Hospital and Auxiliaries) will be negotiated between the units involved but may not be less than the applicable rate for advances from institutional reserves.

The funds use fee will be incorporated into the committed amount of return transfers. The maximum repayment period for all internal advances will be ten (10) years. A standard level monthly repayment schedule applies, unless specific exception is indicated by the University Treasurer and is approved as indicated below.

The internal funding advance and exceptions to the imposition of a funds use fee, the annual rate, the repayment schedule, or the repayment period require specific approval as follows:

-- If the funds are to be advanced from institutional reserves, Presidential approval is required.

-- If the funds are to be advanced from school/unit funds, approval by the appropriate senior academic vice president is required.

 

 Applicability

This policy applies to all advances made after the date it is signed by the President.

Funding advances which were made prior to the signing of this policy are not subject to this policy and will follow the payback schedule established at the time the funds were advanced.