[Major revision–posted 7/19/24 (replaces 2/13/18 edition)]
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Operating Policy and Procedure

OP 62.39: Fund Deficits

DATE: July 19, 2024

PURPOSE: The purpose of this Operating Policy/Procedure (OP) is to set forth policy for the periodic review of fund balances to identify deficits, establish correct action plans, and ensure compliance with budgetary control provisions set forth in Regents’ Rules 07.04.4.f., Budgetary Control. This policy does not apply to sponsored projects (21, 22, 23, and certain 11 or 12 state funds that may be awarded as a sponsored project), which are subject to TTU OP 65.09, Budgeting Sponsored Projects.

REVIEW: This OP will be reviewed every two years after publication by the Assistant Vice President and Controller, the Assistant Vice President and Chief Budget Officer with substantive revisions forwarded to the Associate Vice President for Financial & Business Services and the Senior Vice President for Administration & Finance and Chief Financial Officer (SVPAF/CFO).

POLICY/PROCEDURE

1.  Policy Statement

It is the policy of Texas Tech University (TTU) and Texas Tech University System (TTUS) Administration that all FOPs have a budget established prior to the payment of any expense or the encumbrance of any commitment. Budgets are automatically populated based on fund balance for agency funds (funds beginning with 81–87), gift funds (funds beginning with 24–25), scholarships (funds beginning with 15 and 25), and certain other funds as established by Accounting Services, which have a requirement of a positive cash position.

2.  Education and General Budgets

a.    Education and general budgets are established during the annual budget process. Cash transfers from the central fund(s) to operating funds are processed by Accounting Services consistent with approved budgets.

b.    Budget increases are not allowed to each respective FOP without a corresponding decrease in another FOP. The SVPAF/CFO must approve large changes overall, consistent with TTU OP 62.32, Budget Adjustments to the Annual Operating Budget, to ensure budget revisions are approved in accordance with the Regents’ Rules.

3.   Designated and Auxiliary Funds

a.    Designated and auxiliary FOP budgets are established during the annual process. Cash transfers from the central fund(s) are processed by Accounting Services, generally at the beginning of each academic term with certain deviations as established within internal procedures, consistent with approved budgets. For funds that operate on revenue, Budget & Resource Planning & Management reviews projected revenue for reasonableness.

b.    Requests to increase the overall budget are initiated in the Budget Revision System in accordance with TTU OP 62.32, Budget Adjustments to the Annual Operating Budget. Designated and auxiliary FOPs must have sufficient budget to cover all expenditures and encumbrances. In addition, these funds require sufficient cash to fund all expenditures by year end.

4.  Financed Capital Projects and Purchases

Budgets for financed projects funded through debt proceeds are established after appropriate approvals are obtained under authorities set forth in Regents’ Rules 07.05, Debt Management Policy. Cash transfers are processed by the TTUS Office of Treasury on a cost reimbursable basis.

5.  Payroll Expenditures

Payroll expenditures will always be processed regardless of budget availability and/or fund balance. Insufficient budget conditions that arise as the result of payroll action will result in the following actions:

a.    Budget & Resource Planning & Management notification to the fund financial manager.

b.    Budget deficits not cleared timely by the fund financial manager may be cleared by Budget & Resource Planning & Management from other funds available to the fund financial manager.

6.  Deficit Fund Positions

a.    At least quarterly, Accounting Services notifies fund financial managers of fund deficits. Deficits not cleared timely by the fund financial manager may be cleared by Accounting Services from other funds available to the fund financial manager.

b.    Quarterly, Accounting Services provides a listing of fund deficits of $500,000 and greater to the SVPAF/CFO. Exceptions to carry deficits of this magnitude forward to the next fiscal year must be approved by the SVPAF/CFO. In certain cases as requested, the financial manager must submit a corrective action plan to the SVPAF/CFO and the Assistant Vice President and Controller no later than October 31. The plan must include a reduction in the deficit in the current fiscal year and clearing of full deficit typically within four years.

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