Operating Overdraft Policy
Reasons for Policy
The purpose of this policy is to support the financial integrity of the university and assure that we are operating in a fiscally responsible manner.
Primary Guidance to Which this Policy Responds
There is no primary policy to which this policy responds. It is consistent with best practices.
Responsible University Office and Officer
The Office of Management and Budget (OMB) is responsible for the enforcement of this policy, and for responding to any questions. The Associate Vice President is the Responsible Officer
Who is Governed by This Policy
All University staff and officers involved in spending on operating accounts.
Who Should Know this Policy
Senior Executive Officers, Dean, Vice Presidents, Senior Administrative Officers, Departmental Administrators and other appropriate officers.
Exclusions and Special Situations
This policy applies to operating account overdrafts. For policies related to sponsored project overdrafts and plant funds overdrafts, see Cross Reference section below.
All units should budget balanced or positive results. OMB will not accept any budget which projects an operating overdraft (ie, the cumulative excess of expenses and other uses of funds over revenue and other sources of funds.)
Included in the monthly account detail file provided to all budget units is a tab showing operating account overdrafts. In addition, OMB produces an "operational overdraft by account" report for Total University to facilitate its review of all operating accounts in overdraft.
As part of the regular variance review with OMB any budget unit that projects a fiscal year-end operating account overdraft must consider an alternative to eliminate the forecasted overdraft and/or provide a plan for eliminating the overdraft during subsequent fiscal years.
In addition, each unit with actual operating budget overdrafts from prior fiscal years must provide a plan for funding those overdrafts. Updates on previous overdraft plans must be provided quarterly and as part of the budget and closing cycles of each fiscal year.
If during any regular variance review (January for mid-year update, April for 3rd quarter update and June for year-end), a unit projects an operating account overdraft for the fiscal year end, OMB will require a written plan to remediate the situation and may share this plan with Senior Management.
In the event that an operating account overdraft still exists at the end of the fiscal year and/or the unit is unable to meet the milestones within their own plan, they will be required to meet with OMB and the EVP, Finance to address the underlying business issues.
Operating Account Overdraft - The excess of expenses and other uses of funds over revenue and other sources of funds.