OUS Fiscal Policy Manual
Accounting and Financial Reporting
| Section: Accounting and Financial Reporting | Number: 05.713 |
| Title: Service Center Working Capital |
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POLICY
The policy sets forth certain basic systemwide working capital standards for service centers (including specialized service facilities).
OUS seeks to ensure that the policies and procedures related to service center working capital are documented, communicated, clearly understood, and consistently applied. This is important from the perspective
sof financial management and in terms of compliance with cost principles set forth in OMB Circular A-21 since service centers charge federal grant funds for services provided.-
OAR 580-040-0005 - Delegation and Assignment of Responsibility
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IMD 6.001 - Finance and Business Affairs Accounting Policies - Assignment of Responsibility
.130 APPROVAL AND EFFECTIVE DATE OF POLICY
Approved by the Controller on July 11, 2005, with an effective date of July 1, 2005.
All Chancellor's Office and institutional personnel with financial management and federal compliance responsibilities should be knowledgeable of this policy.
Contributed Capital: Cash or other asset(s) transferred to a service center from a source external to the service center. Examples include a subsidy from non-federal other funds to cover a service center's operating deficit; a transfer of beginning balances from non-federal other funds at inception of the service center; the transfer or conversion of a non-federally funded storeroom inventory to a service center; or the purchase or transfer of equipment from non-federal other funds to a service center.
Service Center: A financially self-sustaining internal entity that exists primarily to provide services to others within the university (e.g., motor pool, computer services, printing, and telecommunications).
Specialized Service Facility: A highly complex or specialized facility operated by the University, as described in Section J of OMB Circular A-21.
Working Capital: Current assets minus current liabilities. Current assets represents the sum of cash and other assets that could be converted to cash in less than one year (e.g., accounts receivable, inventory, and prepaid expenses). Current liabilities represents the sum of all amounts owed and due within one year (e.g., accounts payable and short-term loans).
A. CHANCELLOR'S OFFICE
The Vice Chancellor for Finance and Administration or designee shall have oversight responsibility for this policy.
B. INSTITUTION
Each university Vice President for Finance and Administration or designee shall have oversight responsibility for institutional provisions set forth in this policy.
.170 WORKING CAPITAL STANDARDS
Working capital, as reflected in the official accounting records (Banner), will be monitored and analyzed on an annual basis at fiscal year end.
- Upper Limit: Working capital cannot exceed 60 days of cash expenses, which
excludes depreciation, amortization, or other non-cash allocations. For federal compliance purposes, the 60-day upper limit is calculated as the average operating expenses for the last year of
operation multiplied by .1667 (60 days divided by 360 days).
Excess balances will be reduced in one (or both) of the following ways:
- A rate reduction
- A refund to users
- Lower Limit: If working capital is in a deficit position equal to 5% or
less of total annual expenses, the loss will be eliminated in one (or both) of the following ways:
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A rate increase (during the next cycle for rate adjustments)
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A transfer of adequate funding to the service center (approved by the President or Vice President for Finance and Administration)
If working capital is in a deficit position greater than 5% of total annual expenses, a transfer of funds to the service center will be made prior to fiscal year-end closing, sufficient to bring the deficit equal to 5% or less of total annual expenses (approved by the President or Vice President for Finance and Administration). Any remaining deficit will be carried forward to the new year as an increase in rates (during the next cycle for rate adjustments) or an additional movement of funding in the future year (approved by the President or Vice President for Finance and Administration).
Any rate increase enacted pursuant to this provision must be sufficient to liquidate the working capital deficit within one year of implementation.
Any transfer of funds made to a service center will be accounted for as contributed capital and documentation related to the transaction that identifies the source, amount, date, reason, and authorization for the contribution must be retained for audit.
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- Exceptions: Any exceptions will be approved by the institutional Vice President for Finance and Administration, or designee and documentation justifying the exception will be retained for audit.
Institutions will prepare and submit a report of compliance with this policy to the Controller's Division as a part of the annual closing of the books process. This report will include:
- listing of all service center funds reconciled to the general ledger
- computation of compliance with limits
- notation of plans for eliminating excesses or deficiencies
- notation of any exceptions to the policy
The Controller's Division will report any material concerns to the Board.
Direct questions about this policy to the following offices:
Subject Contact General questions from institutional personnel Institution Office of Business Affairs General questions from institutional central administration and Chancellor's Office personnel Chancellor's Office Controller's Division 07/11/05 - Approved
Policy Last Updated 07/15/05
APPENDIX
None.
Appendix Last Updated: x/xx/xx
