FIN-033: Monitoring Cash Balances and Resolving DeficitsDate: 06/28/2011 Status: Final
- Monitoring Cash Balances
- Unauthorized Cash Deficits
- Authorized Cash Deficits
- Compliance with Policy
This policy establishes guidelines and expectations for managing 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 units. The policy explains how cash balances are monitored, the actions to be taken with regard to unauthorized cash deficits, and the process for requesting authorization for cash deficits.
Authorized Cash Deficit:
Cash deficits that are within the dollar and time limits authorized in writing by Treasury Management.
The amount of money available to spend in a Revenue Project. It is calculated as revenue less expense plus net change in assets and liabilities. Cash balance is not the same as and should not be confused with the budget balance available, which is a calculation of the budgeted amount minus expenditures and commitments/encumbrances.
A project (in the UVa account structure) used to record expenditure activity (spending money) that must be funded by an Award.
A combination of Revenue Projects used to pool revenue from multiple sources (e.g., tuition or ticket sales) which can then be used to fund one or more expenditure projects. A Revenue Parent begins with the characters “RP” in the integrated System.
A Project used to record revenue in the General Ledger. A Sponsored Program is not permitted to be a Revenue Project.
Unauthorized Cash Deficit:
Any project that is in deficit and either has not been authorized by Treasury Management or exceeds its authorized limit or permitted time frame.
University Business Intelligence (UBI):
The University’s enterprise reporting environment.
All 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 projects or revenue 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 project or revenue parent is expressly prohibited unless the deficit is properly authorized. [Note: Other agencies that have projects in the University’s integrated system must adhere to these terms.]
- Monitoring Cash Balances:
Cash balances are monitored by using the University Business Intelligence (UBI) GL Cash Balance Summary Module and obtaining the operating cash balance before commitments.
This is the basis for determining cash deficits for the projects in an organization. Individuals responsible for monitoring a unit’s cash balances must receive training, including training on reconciliations, on how to use this report to manage and resolve cash deficits.
- 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 policy FIN-024, Internal Borrowing Program.
Treasury Management will notify unit personnel and the appropriate dean or vice president of any unauthorized deficit(s) and subsequent interest assessment(s).
- Authorized Cash Deficits:
Under extraordinary circumstances, the Treasurer may authorize a cash deficit. Cash deficit authorizations are restricted to those University projects for which the deficit is either acknowledged to be unavoidable due to error, 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.
Unit employees charged with monitoring unit cash balances are responsible for:
- Using the UBI GL Cash Balance Summary Module 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 units for cash deficits, where warranted;
- Determining whether or not to assess interest charges on unauthorized cash deficits;
- Providing units 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.
Deans and vice presidents are responsible for:
- Monitoring 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.