25.02 - Controls Over Deficit Spending

Last updated August 3, 2005

A. General: This procedure is intended to prevent the accumulation of deficits from year to year. All fund types are subject to ‘Controls Over Deficit Spending’. In addition, this procedure is based on the principle of materiality and a defined “material deficit,” which directs the level of management oversight of the Responsibility Center Management (RCM). For further background please see Executive Council item EC 2003-0011. [Link TBP]

A-1. Fund Types Subject to Controls Over Deficits. All fund types are covered by this policy. Fund type generally is defined by its revenue source (e.g. appropriated revenue or local revenue). The method of control may vary depending on the fund type. Funds types include, but are not limited to the following:

i) U1, D1, D2, D8, General Education and other State Appropriations

ii) X1 and X2, Auxiliary Enterprises

iii) U3, Local Service

iv) U7, Special Local Service

v) U4, Gift/Donations orgs.

vi) D3, Scholarship, restricted

vii) D4, Grants and Contracts

viii) U5, Scholarship, unrestricted

ix) Z3, Agency

x) Px, Plant and capital

A-2. Definition of “Material Deficit” for Fund Types U1, D1, D2, D3, D4, and D8. The accumulation of deficits within appropriated and/or grant and contract funds are not allowed and thus a material deficit cannot exist. The UI Institutional Planning and Budget Office (IPBO) is responsible for oversight of appropriated funds and Business Systems and Accounting Services is responsible for oversight of grant and contract funds. [ed. 7-10]

A-3. Definition of “Material Deficit” for Fund Types Px, X1, X2, U3, U4, and U7. For purposes of establishing ‘controls’ over deficit spending, material deficits are defined for Prior Accumulated Deficits (existing as of June 30, 2002), and Current Period Deficits (any fiscal period after June 30, 2003). Specifically,

i) Material Deficits at June 30, 2002, (Prior Accumulated Deficits). At the RCM level, a single fund with an accumulated deficit of $25,000 or more is considered material. (See APM 25.03)

ii) Material Deficits after June 30, 2003, (Current Operating Deficits). A current fiscal year operating deficit is considered material if (a) it exceeds 5% of current year operating expenses; or (b) is greater than $9,999.99. (See APM 25.04)

iii) Scholarship and Agency Funds. Scholarship and agency funds (D3, U5 and Z3) are addressed in separate sections of the APM [Link TBP].

B. Process. Please reference APM 25.03 for instructions as to how to retire Prior Accumulated Deficits. Please reference APM 25.04 for instructions as to how to manage situations of Current Operating Deficits.

C. Information and/or Training Support. Upon implementation of new policies and procedures relating to controls over deficits, employee training will be provided for purposes of establishing controls over deficit spending. Recognizing that these policies and/or procedures are dynamic in their response to changing management practices, no specific training programs are outlined per se. The Division of Finance and Administration (DFA) and IPBO are responsible for delivering initial training programs, which will consist of, but not be limited to the following components.

Program training relating financial condition and stewardship and associated impacts of deficit spending.

Report interpretation (e.g., elements, math, and purpose).

Data mining, report generation, warehouse access, and Banner training.

Reporting timelines, due dates, etc.

Ongoing training and refresher sections.