Reserve Funds Policy
| Section: | Financial & Business Policies |
| Policy Name: | Reserve Funds Policy |
| Policy Owner: | Vice President of Finance and Treasurer |
| Responsible University Office: | Office of the Vice President for Finance and Treasurer |
| Origination Date: | June 1, 2024 |
I. SCOPE OF POLICY
The purpose of this policy is to describe the University of Delaware’s establishment and use of reserve funds.
II. DEFINITIONS
As used in this policy, the following terms shall have the meanings specified.
A. “University” means the University of Delaware or a subsidiary or entity controlled by the University.
B. “Reserve” Funds are held in Fund types 17 (reserves), 18 (service center), 19 (startups), and 21 (self-supporting). A Reserve Fund holds the revenues, expenses and net assets from a specific source or sources. The balance of the Fund remaining at the end of one fiscal year carries into the next fiscal year. There is no annual funding or budget replenishment in a Reserve Fund. Once the money is spent, it is gone.
C. “Financial Unit” represents a business unit with an ongoing business mission, with a responsible individual with fiscal authority over budget, resources and expenses, an identifiable group of employees, and generally physical space.
D. “Fund” is the high-level classification of the source of funds for a transaction and tracks restrictions and designations.
III. POLICY STATEMENT
Reserve Funds are established by Financial Units for one of two primary purposes. A Reserve Fund can be created to hold the income and expenses for a specific activity that occurs outside of the normal operating budget process. Other Reserve Funds are created to hold the general savings of a Financial Unit to be used in cases of unexpected events or to fund strategic one-time investments.
Reserves created to hold the income and expenses for a specific activity are typically for auxiliary services and recharge/service charge centers (Fund types 18 and 21). Each Financial Unit is responsible for ensuring sufficient reserves exist for the activity. These types of reserves are not covered by this policy.
Reserves created from general savings should be used to fund temporary problems or events and not structural financial issues. Just like any other expenses of the University, all income and expenses in Reserve Funds are included in the University’s total income and expenses. For example, if a Financial Unit accumulates a large amount of savings in its Reserve Fund and spends a significant portion of it in one fiscal year, the University’s financial reporting of its total operating expenses would include that large amount in that year. Therefore, to properly steward, project and report our financial activity, the University has established spending guidelines for Reserve Funds.
IV. POLICY STANDARDS AND PROCEDURES
A. General Standards – Fund Types 17 and 19
1. Any Reserve Fund spending is included in total operating expenses. It does not occur “off balance sheet” or outside of normal fiscal year financial reporting.
2. Financial Unit managers should plan and project their spending from these Funds with the same diligence used in projecting operating expenses.
3. Reserve Fund expenditures are University expenditures and are therefore subject to the same policies and procedures as all other University spending.
4. Examples of allowable Reserve Fund expenditures include:
a. Funding for capital projects;
b. Strategic initiatives;
c. Accreditation initiatives;
d. Temporary (short term period of time) or intermittent (i.e. bridge funding) salaries and wages for staff and students related to research and scholarly activities not otherwise covered by sponsored projects;
e. Faculty as agreed by Financial Unit with a documented end date;
f. Other temporary salaries and wages which are not expected to exceed 25%;
g. Salaries and wages for staff and students specifically allocated to 17S purpose codes;
h. Expenses for a specific activity from which income has been accumulated in the Reserve Fund (e.g. a conference); and
i. Funding for deficits in other Funds.
5. Reserve Funds cannot be used for the following types of expenditures:
a. Permanent employee salaries and wages. (Note: Temporary employees with a documented end date can be funded from a Reserve Fund.);
b. Continuing and/or deficit spending in support of staff and students or effort not otherwise covered;
c. Recurring annual expenses;
d. Expenses prohibited by other University policies; and
e. Expenses without an explicit University business purpose.
B. Budgeting of Reserve Funds
1. All spending on Reserves must be projected and budgeted for the next budget year by Budget Office deadlines.
2. These projections should be based upon the best estimate of programmatic activities.
C. Deficit Resolution
1. Refer to the policy on Financial Deficits for additional information.