APPROVAL OF THE UNIVERSITY’S CAPITAL AND OPERATING RESERVES POLICY

WHEREAS, the University currently has a variety of capital and operating reserve policies that differ among individual departments and schools; and

WHEREAS, it is reasonable to believe that the overall financial strength of the University can be enhanced by more formalized operating and capital reserve policies, especially for some of the University’s business operations; and

WHEREAS, the University wishes to ensure, from a stewardship standpoint, that there is not a large deferred maintenance requirement for the institution and that the operations for each program are financially able to withstand a significant downturn in the generation of revenues;

RESOLVED that the Board of Visitors approves the University’s Capital and Operating Reserves Policy as follows: Financially self-sufficient programs will have these reserve requirements: (a) operating reserves equivalent to three months of operating expenses and (b) annual capital expenditures or contributions to capital reserves of at least 1.5 percent of replacement value of buildings and equipment. The exact percentage should be based on the capital requirements unique to the program. The Executive Vice President and Chief Operating Officer may approve alternative reserve policies where appropriate; and

RESOLVED FURTHER that institution-wide programs, such as self-insurance programs and the capital funding program, will continue to have unique reserve requirements that best meet the individual program’s needs.