25.04 - Operating Deficits – Current Year
Last updated August 3, 2005
A. General. This policy and procedure addresses (1) Individual organization (Org) deficits that occur within the fiscal year, (2) Reports used for executive level monitoring and oversight, and (3) The process for resolving operating deficits. This section applies to all current year operating deficits, in contrast to APM 25.03, which addresses the retirement of prior accumulated material deficits.
A-1. Current Year Operating Deficits. Current year operating deficits are not acceptable for any Fund within any Fund Type. Nevertheless, operating deficits may occur during the operations of a fiscal year. Exception reports will be created for monitoring by Responsibility Center and Executive level managers.
A-2. Expense Patterns. Since current year operations are dynamic, expense patterns of each Fund are used as the benchmark for identifying and reporting current operating deficits. There are two reporting thresholds:
i) Current-year operating deficits exceeding 5% of current year operating expenses.
ii) Any deficit less than 5% of current year operating expenses, but greater than $9,999.99, i.e., $10,000.00 and greater.
B-1. Non-Sufficient Funds (NSF). NSF checking through Banner is available for all Organizations and will continue to be the primary tool for checking expense budget availability. If expense budget is not available, the expenditure may not be allowed. Banner’s capability for performing this check is facilitated through the Budget Office.
B-2. Exception Reporting. Exception reports are created based on criteria identified in the following sections and are available based on Organization. security from Banner at anytime. No further action is required if a Fund is not reported as an exception.
i) Exception Reports are not created for appropriated and grant funds (Fund Types U1, D1, D2, D4, D8). Appropriated funds are controlled by the Institutional Planning and Budget Office (IPBO) and by definition cannot be overspent. Business Systems and Accounting Services (BSAS) is responsible for grant and contract funds oversight. [ed. 7-10]
ii) Fund Balance Reporting, (Fund Types X1, X2, D3, U3, U4, U7). Individual fund balances will be monitored to assess each Fund’s financial condition. This process compares current year actual revenues to actual expenses, which results in either a positive or negative contribution to the prior year ending fund balance. Only those meeting the 5% or $10,000 threshold will be reported, (the exception). (Note, encumbrances are treated as expenses.)
iii) Revenue Monitoring, (Fund Types X1, X2, D3, U3, U4, U7). In addition to NSF checking and Fund Balance Reporting, these fund types, (auxiliary and local service), will have revenue budgets monitored against actual cash receipts. This process provides a clear view of revenue activity and whether enough revenues are being generated to support budgeted expenses.
B-3. Impact of Reporting Inventory. Units that book and carry a physical inventory, (e.g. Idaho Press & Chemistry Stores), may not recognize inventory as cash (liquid) for purposes of these reports.
B-4. Remedial Actions. The following actions are required for current operating deficits:
i) Correcting Deficits. RCs are expected to correct deficits without additional administrative action. RC’s can decrease expenses or increase revenues, freeze the activity or take other actions within their control to eliminate a deficit.
ii) Bridging Fiscal Years. Any RC that has a revenue-timing situation in which revenues lag expenses and is expected to span fiscal years; must report this in the status report identified below.
iii) Exception Reports. All RCs for which an exception report (See B-2(ii) above) has been generated shall prepare a report regarding the RC’s plan to eliminate the deficit by year-end. The report shall include the following elements:
a. Purpose, a brief description of the activity
b. Specific action, (e.g. decrease expenses or increase revenues)
c. Other courses of action including cessation of operation
d. Plan to carryover deficit, (receivables to cover, should be booked)
e. Include other supporting documentation as necessary
iv) Report Reviews. Reports are submitted to BSAS and IPBO who are responsible for reviewing RC reports on material operating deficits. BSAS and IPBO will appoint two member teams to meet with each responsibility center manager or designee to discuss remedial actions prior to forwarding to the Finance and Business Affairs Committee with recommendations. [ed. 7-10]
B-5. Clearing All Deficits. In addition to material current year operating deficits, all deficits, regardless of size, (those under 5% or $10,000), must be cleared by fiscal year end.
C. Sample Form. See attached Remediation Report – Current Year Operating Deficits.
D. Information. For additional information regarding current year operating deficits, either IPBO at (111) 111-6718, or BSAS at (111) 111-2719. Also, see Executive Council item EC 2003-0011. [ed. 7-10]