University System of New Hampshire
Financial and Administrative Procedures

A. SUMMARY OF ADMINISTRATIVE PROCEDURE

1. Definition of deficit spending. Each fund in the USNH general ledger (CUFS) is a separate accounting entity with a self-balancing set of accounts for recording assets, liabilities, fund balance (i.e., net assets), revenues, expenditures, and transfers. Each fund has a source of funding, whether it be revenue from external or internal sources, or a transfer of funds from another fund. In either case, the recording of the source of funds in CUFS must precede any expenditure. If the expenditures within a CUFS fund exceed the funding sources, a deficit occurs. In other words, a deficit results when the sum of current year-to-date revenues plus the beginning fund balance is less than the current year-to-date expenses. Stated another way, a deficit results when liabilities exceed assets.

2. Deficit spending is prohibited. At all times during the fiscal year, funds must maintain a fund balance of zero or greater. The funding source must be identified, secured and recorded in CUFS before expenses may be incurred. To do otherwise would cause the cash balance in the fund to be negative, similar to an overdrawn personal checking account. A negative cash balance in a fund causes a draw on USNH general equity, resulting in unauthorized interfund borrowing.

3. Exceptions for deficit spending. Auxiliary enterprise funds may, with proper campus CFO approval, incur temporary deficits during the fiscal year due to the business nature of their operations, i.e., they must often incur expenses before generating revenue. However, auxiliary enterprises must end the fiscal year with a positive fund balance. Internally designated funds may, with proper campus CFO approval, incur temporary deficits during the year provided that the CFO notes when the deficit will be corrected and identifies a specific Unrestricted Undesignated E&G fund-area-org-object that will absorb any remaining deficit at year end. Certain revolving funds will typically have a deficit fund balance since these accounts often represent prepaid expenses for summer session or inventory operations. Restricted sponsored projects and Plant fund capital manifest accounts will typically run deficits since most contracts require USNH to incur costs prior to seeking reimbursement from the agencies. All other funds require specific written permission as defined under section B. below to be in deficit position.

4. Responsibilities regarding deficit spending. Each campus CFO is responsible for assuring compliance with this procedure for all funds at his/her campus. The USNH Controller is responsible for the monitoring and periodic reporting of deficit spending to the Vice Chancellor for Financial Affairs, Chancellor and Board of Trustees, as appropriate. A quarterly report of auxiliary enterprise deficits requires campus CFO review/comment and is presented to the Financial Affairs Committee of the Board of Trustees. The Controller is responsible for all exceptions to this procedure.

B. DETAILED OPERATING PROCEDURES

1. How does CUFS FBAL work? The CUFS FBAL control, when set to zero, does not allow expenses to be encumbered or expended if the sum of the year-to-date expenses and encumbrances exceeds the sum of year-to-date revenue plus fund balance carried over from the previous year.

2. Fund balance controls are maintained within CUFS by the Controller's Office. The Controller delegates responsibility for determining the status of certain fund balance controls to the campus CFO and to the Office of Sponsored Research, Accounting Division. The Controller's Office maintains the only update capability to the CUFS Fund Balance table. Therefore, all requests for adjusting fund balance controls, after applying appropriate campus approvals as detailed below, must be made to the Controller's Office.

3. Unrestricted current funds (funds beginning with 1, 2 or 3, except Internally Designated funds) will be set to a fund balance control at any amount (negative or positive) upon written authorization from the campus CFO or his/her designee. (Unrestricted, undesignated E&G [budgeted operating] funds may not incur deficit spending at any time (see A.2. above) but negative FBAL control is necessary in order to encumber salaries and wages, fringe benefits and purchase orders at the beginning of the fiscal year.) It will, therefore, be the campus CFO's responsibility to maintain the CUFS negative fund balance controls in an amount he or she deems appropriate to manage campus funds, in accordance with all USNH policies and procedures. Adequate spending controls should be exercised through CUFS appropriation and expense budget mechanisms.

4. Internally Designated funds will generally be maintained at a fund balance of zero or greater. Exceptions may be allowed only when adhering to the following:
   
   
   1. The requesting department will document the purpose of the activity in this fund and the level of deficit being requested.

   2. A specific plan as to how the deficit will be eliminated prior to year end will be identified.

   3. An Unrestricted Undesignated E&G fund-area-org-object will be identified that will absorb any open deficit remaining in the fund at year end.

   4. The campus CFO authorizes all of the above, in writing, and submits it to the Controller's Office for approval.

   
   If the Controller's Office determines the deficit request to be permissible, it will establish the deficit control at the level requested. It is the responsibility of the Campus CFO to make certain any outstanding deficit is cleared at year end. Any deficit not cleared by the end of 13th month will be journaled by the Controller's Office to the Unrestricted Undesignated E&G fund-area-org-object identified in 4.c. above.

5. Restricted current funds, other than gifts and endowment income funds, (funds beginning with A through P) will be set to a fund balance control at any amount (positive or negative) upon written authorization from the campus CFO or the UNH Office of Sponsored Research, Accounting Division. It will be these individuals' responsibility to maintain FBAL controls appropriate for the prudent management of these funds, in accordance with all USNH policies and procedures. Adequate spending controls should be exercised through CUFS appropriation and expense budget mechanisms.

6. Plant fundscapital manifest accounts and certain auxiliary R&R projects are allowed to carry temporary deficit balances. Capital manifest accounts are large construction/improvement projects funded by the state. USNH incurs the expense and "bills" the state for reimbursement, so these funds will always be in deficit during the life of the project. Some auxiliary R&R projects, funded by Housing, Dining, etc., must be encumbered prior to the beginning of the fiscal year, and therefore require negative FBAL control.

7. All other funds in CUFS including loan funds, endowment funds, plant funds, agency funds, and restricted current fund gifts and endowment income funds (funds beginning with Q through Z), and internally designated funds require written application by the campus CFO for approval by the USNH Controller. These funds generally will be kept at a fund balance control equal to zero or greater. Rare exceptions may be considered where there is a documented plan in place to resolve the deficit in a very short time period with a guaranteed source of funds, but generally all other avenues will be pursued before consideration is given to removing FBAL control.
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