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UW Policy Directory

APS 37.1 – Monitoring, Mitigating, and Resolving Fiscal Deficits

Table of Contents

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(Approved by the President by delegations of authority Administrative Order 9 and Executive Order 4)      

1.  Purpose

As a publicly funded state agency and a not-for-profit institution of higher education, the University of Washington and its administrative officials have a duty to steward the funds appropriated, allocated, generated, and donated to serve its missions. Funds provided to the University must be spent in compliance with University policy, and applicable local, state, federal, regulatory, and grantor laws.

All campuses, colleges, schools, medical entities, or other business units are expected to operate within their allotted resources. Administrative officials must exhibit effective fiscal management by actively monitoring, mitigating and resolving any fiscal deficits.

This policy outlines requirements and delegations of responsibilities for monitoring, mitigating and resolving fiscal deficits. The policy also outlines requirements for establishing interest periods and repayment terms for fiscal deficits.

2.  Scope

This policy affects all campuses, colleges, schools, medical entities, or other business units of the University, including legal subsidiaries or organizations where the University serves as fiscal agent.

3.  Definitions

Administrative Official—A University employee with fiduciary responsibilities for stewarding University financial resources for a campus, college, school, medical entity, or other business unit, e.g., chancellors, vice presidents, vice provosts, and deans. Administrative officials and principal investigators remain responsible and accountable for the management of funds entrusted to them, even if management has been formally delegated to staff.

Fiscal deficit—Shall apply to situations where:

  • An excess of expenditures are booked or projected over budget authority (Core Operating Funds), award (Grant/Contract), or revenue (all others) in a given period.
  • The University is owed funds from an outside party, and the accounts receivable is aged beyond their due date.
  • The University serves as the fiscal agent for another entity, related or unrelated. This term includes cash balances held by the University on behalf of the related or unrelated entity equaling less than the minimum specified by UW Finance in Agency Accounts.

Deficit Resolution Plan—A written plan containing the contents outlined in the procedure document related to this policy, approved by the administrative official and the Office of Planning and Budgeting (OPB), and when deficits must carry forward into a new fiscal year, the Executive Office of the President and the Provost, before being deemed sufficient to meet the requirements of this policy.

Enhanced Monitoring—Business units under a higher degree of activity monitoring and outreach by the OPB, including but not limited to: regular performance review and business outlook meetings with the business unit lead and responsible administrative official, regular detailed reporting to the Faculty Senate Committee on Planning and Budgeting (SCPB) and regular detailed reporting to the Executive Office of the President and the Provost.

Memorandum of Understanding (MOU)—In the case of a material fiscal deficit, incurred or projected, a formal document that outlines the strategies to be used by the business unit with the fiscal deficit to mitigate the actual or projected fiscal deficit and the terms of repayment. The document is signed by the administrative official and the Executive Office of the President and the Provost.

4.  Fiscal Deficit Mitigation and Resolution—Grant and Contract Budgets

In the case of fiscal deficits occurring in grant budgets, administrators and principal investigators are required to follow the Grant & Contract Deficit Procedures defined by Grant and Contract Accounting.

5.  Fiscal Deficit Mitigation and Resolution—Non-Grant or Contract Budgets

Deficits in non-grant or contract budgets, regardless of scale, must be resolved within 90 days, or for deficits arising in the last quarter of the fiscal year, by fiscal year end close. If an administrative official foresees that a deficit is unlikely to be fully resolved or mitigated within the 90-day or fiscal year end close timeframe, immediate contact should be made with OPB and a deficit resolution plan must be drafted by the administrative official within 30 days for OPB’s review, input, and written concurrence with strategy, targets, and resolution timeframe.

When a deficit must carry forward into a new fiscal year, a deficit resolution plan between the Provost and/or the President and the administrative official must be created. Administrative officials must review compliance with approved deficit resolution plans on a regular basis and ensure plans are carried out in a manner that will result in the resolution of the deficit as proposed.

If OPB or the Executive Office determines the deficit, incurred or projected, is material to the business unit’s activities or is of substantial risk to the University, an MOU will be drafted by OPB and executed by and between the administrative official and the Executive Office. An MOU does not replace the required creation of a deficit resolution plan; it is a supplementary level of approval and agreement with the proposed deficit resolution plan.

6.  Delegations of Responsibilities for Fiscal Deficit Monitoring, Mitigation, and Resolution

  1. Administrative Officials Administrative officials are responsible for:
    • Maintaining a financially sound organization and monitoring the financial operations of their unit.
    • Ensuring appropriate internal monitoring controls are in place and business units adhere to approved deficit resolution plans.
    • Ensuring that staff members delegated the responsibility of managing departmental resources are appropriately qualified and trained.
    • Creating or delegating the creation of financial forecasts or other financial information.
    • Creating and reviewing deficit resolution plans for the feasibility of mitigation strategies, timelines, and operational change.
    • Submission of complete and internally vetted deficit resolution plans to OPB in accordance with this policy.
    • Determining the appropriate funding source to be used to offset deficits in the event deficit resolution plan targets are not achieved.
    • Ensuring appropriate transfers or reclassifications to allowable fund sources occur in a timely manner so that deficits are addressed or mitigated within the timeframes outlined in this policy, deficit resolution plan, or MOU.
  2. Principal Investigators Principal investigators are responsible for:
    • Ensuring appropriate internal monitoring controls are in place to manage the fiscal operations of grants/contracts.
    • Ensuring that staff delegated the responsibility of managing departmental resources are appropriately qualified and trained.
    • Ensuring appropriate transfers or reclassifications to allowable fund sources occur in a timely manner so that deficits are addressed or mitigated within the timeframes outlined in this policy, deficit resolution plan, or MOU.
  3. The Office of Planning and Budgeting (OPB) The Office of Planning and Budgeting is responsible for:
    • Regular reporting to executive leadership of business units carrying a deficit at the time of reporting, operating at a deficit position in prior fiscal years or for whom a narrow operating margin exists.
    • Review of deficit resolution plans developed by administrative officials to ensure required components are included and feasible strategies are identified.
    • Collaborating with UW Finance and UW Facilities on the identification of incurred or projected deficits.
    • Recommendations to the Provost and/or the President, or delegate(s), on deficit resolution plans and MOUs submitted by administrative officials.
  4. The UW Finance Business Unit The UW Finance business unit is responsible for:
    • Regular monitoring of sponsored program financial activity for compliance with local, state, or federal law, sponsor requirements, and University policy.
    • Regular monitoring of agency financial activity for compliance with local, state, or federal law, sponsor requirements, and University policy.
    • Regular monitoring of UW Medicine clinical enterprise activity and working with OPB to implement deficit resolution plans, as appropriate.
    • Collection of the funds from an agency, or from the department sponsoring the agency activity, to eliminate deficit operations within the required timeframes.
    • Regular review and assessment of service/recharge center activity, rates, or scope.
    • Collaborating with OPB and UW Facilities on the identification of incurred or projected deficits.
  5. The UW Facilities Business Unit The UW Facilities business unit is responsible for:
    • Regularly monitoring capital project budgets to ensure overspending does not occur without an identified alternate source of funds during the course of a project.
    • Ensuring regular monitoring activities occur independently of employees responsible for daily oversight of project specific budgets to verify appropriate checks and balances are in place.
    • Collaborating with OPB and UW Finance on the identification of fiscal deficits.
  6. Executive Office of the President and the Provost The Provost and/or the President is/are responsible for:
    • Approving, denying, or otherwise modifying the terms and conditions of deficit resolution plans or related MOUs.
    • Ensuring direct reports are accountable for practicing sound fiscal management principles.

7.  Policy Administration and Interpretation

Except where a direct reporting relationship between the President and the administrative official would stipulate otherwise, the President designates the Provost to administer and interpret this policy and to recommend to the President any revisions and modifications necessary.

8.  Charging of Interest on Outstanding Deficits

In cases where a deficit resolution plan is required, the University expects repayment of the deficit in an expedient manner, as deficits represent “borrowing” resources from all operating units of the University. As there is an institutional opportunity cost when deficits occur, the following considerations for interest must be incorporated into all deficit resolution plans, and if appropriate, associated MOUs:

  • Interest-Free Period—A period where no interest is charged to an outstanding deficit in recognition that a unit is working toward financial stabilization.
  • Post Interest-Free Period—Outstanding deficits after the established interest free period shall be charged interest at the current Internal Lending Program (ILP) rate. The ILP rate applied will be the current rate at the time interest is calculated; interest shall be calculated and applied annually on the outstanding balance as of the beginning of the fiscal year. For purposes of proposing a deficit resolution plan to the Office of Planning and Budgeting, campus business units should assume the interest free period is three years. Final determination of the interest free period applicable to each situation shall be made solely by the Executive Office of the President and the Provost.

9.  Repayment Period

Administrative officials must prioritize repayment of outstanding deficits. The timing of repayment must be structured in order to facilitate enterprise resource planning. An administrative official’s deficit resolution plan shall lay out and justify the proposed repayment terms (including interest periods) and timeframe. The administrative official and the Vice Provost for Planning and Budgeting, or designee, shall reach an agreement on recommended repayment terms and timeframe. The recommended repayment terms and timeframe shall be incorporated into the administrative official’s deficit resolution plan prior to final approval by the Executive Office of the President and the Provost.

Repayment terms, even if previously agreed to within an approved deficit resolution plan, will be evaluated at least biennially. A review of repayment terms will consider the overall financial position of the unit, the adherence to terms defined within the deficit resolution plan, and the progress made toward repaying the accrued fiscal deficit.

10.  Exceptions

Exceptions to this policy must be approved by the President.

11.  Procedures

Procedures related to this policy can be found on OPB’s Budget Policies webpage. Procedures related to grant and contract funding can be found on the Grant & Contract Deficit Procedures webpage.

12.  Responsible Office and Additional Information

For additional information regarding this policy, please contact the Office of Planning and Budgeting.

13.  History

September 23, 2019.