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July 1, 1982
I. REFERENCES
The Regents: Action approving a policy to distribute income earned by
the Current Fund Investment Pool to participating funds, May 22, 1964.
General Counsel Donald L. Reidhaar: Memorandum to President David S.
Saxon on Disposition of Short-Term Investment Pool (STIP)
Income-Restricted Funds, July 9, 1976.
President David S. Saxon: Delegation of Authority-Distribution of
Income Earned by the Short-Term Investment Pool, to the Vice
President-Financial and Business Management, April 1, 1980.
Vice President Baldwin G. Lamson: Memoranda to Chancellors on
Short-Term Investment Pool-Distribution of Income, January 22, 1981
and October 16, 1981.
II. INTRODUCTION
This Business and Finance Bulletin presents the procedures to be used
in the distribution of income of the Short-Term Investment Pool (STIP)
to campus funds.
The Treasurer of The Regents maintains a central bank account for the
University at the Bank of California in San Francisco into which all
monies received by the University are deposited. Monies received by
the campuses are deposited into campus depository bank accounts and are
transferred daily from the depository accounts into the central account
at the Bank of California. Disbursements are made from the central
bank account to reimburse campus revolving funds for payroll and vendor
disbursements made by the campuses, and to pay for the purchase of
securities for UCRS, the General Endowment Pool (GEP), and other
specific funds.
Any cash balance remaining in the central bank account not needed to
cover the above disbursements is invested in short-term securities.
These short-term securities plus any remaining uninvested balance in
the Bank of California central account constitute the assets of the
Short-Term Investment Pool. The participants or "customers" of STIP are
those University funds which own the cash which is invested in these
short-term securities.
A record of the cash balances of major participants in STIP is
maintained by the Investments and Endowments unit of the University
Controller's Office. This computerized record provides daily cash
balances for UCRS funds, GEP, endowment corpus funds, net revenue
funds, and campus and other Systemwide funds (as a group).
At the end of each quarter, investment income which has been earned by
STIP is distributed to the customer funds described above by prorating
income on the basis of dollar-day investment. This distribution results
in the assignment of an amount of income to campus funds as a group.
Since the detail of the campus funds which are comprised of thousands
of individual funds is recorded in the campus General Ledgers only, the
computerized record system cannot provide a daily cash balance
of each individual fund. The amount earned by the campus funds,
therefore, is distributed to individual campus funds based on their
average cash balances as recorded in the end month General Ledger for
each month during the quarter.
III. POLICY
In May 1964, The Regents approved the policy to distribute income
earned by the Current Fund Investment Pool (now known as STIP) to
the funds participating in the pool. The authority to approve the
distribution of the income earned by the pool was delegated by The
Regents to the President on February 18, 1966. That authority has
been redelegated to the Vice President-Financial and Business
Management.
On January 22, 1981, the Vice President-Financial and Business
Management announced a policy change in the distribution of STIP
income which had as its goal the equal treatment of all funds with
respect to interest earned and interest paid; that is, each fund (or
grouping of funds) should receive the investment income it earned or
pay the interest it owed. The first step toward achieving this
goal was for medical compensation plans and hospitals to begin
receiving or paying interest in July 1981.
In a letter dated October 16, 1981, the Vice President reiterated
the basic policy change in the distribution of STIP income, and
announced that the final accounting step to implement this change
would be to credit to each campus the interest income earned by the
respective campus's unrestricted funds.
IV. PROCEDURES
The procedures for distributing the STIP income earned each quarter
by campus funds include grouping funds for this purpose, and then
prorating the available income to the three-month average cash
balances of these groups. The groupings are as follows:
A. GROUP I - UNIVERSITY-WIDE BASIS FUNDS
Because of budgetary or accounting considerations, the cash
balances of certain funds will be determined on a consolidated,
University-wide basis, and the income earned by these funds will
be credited to these individual funds on the Systemwide General
Ledger (location J). This category of funds includes:
1. Current Funds
Educational Fee Fund
General Fund and Special State Appropriations
Endowments
Bond-Financed Auxiliary Enterprises
Self-Insurance Reserve Funds
2. Plant Funds
State Appropriations
Regents' and President's Funds
Transfers from Net Revenue Funds
Bond-Financed Construction Projects
Regents' Advances
B. GROUP II-GIFT FUNDS
STIP investment income will be credited to each individual gift
fund, as recommended by General Counsel to the President on
July 9, 1976. Any individual gift fund with a deficit cash
balance will be covered by the cash balances in the Campus
Unrestricted Funds (see Group V). For administrative simplicity,
any individual gift fund with a cash balance under $1,000 will
not receive any investment income. The cash balances of such
funds will be transferred to the Campus Unrestricted Funds
(Group V). Individual gift funds with cash balances of $1,000 or
more will receive investment income in their cash balances.
C. GROUP III-MEDICAL COMPENSATION PLANS AND HOSPITAL FUNDS
1. Medical Compensation Plans
For STIP purposes, the medical compensation plans will be
treated at each campus as one consolidated fund. The
consolidated medical compensation plans will receive STIP
investment income on their net cash balances. The investment
income will be allocated to the compensation plans in a
single amount. At their option, campuses may redistribute
the income to the different plans.
If in total the medical compensation plans have a cash
deficit, this deficit will be covered by the Campus
Unrestricted Funds (Group V). At their option, campuses may
allocate interest to plans with cash balances and charge
interest to plans with negative cash balances.
2. Hospital Funds
For STIP purposes, hospital funds are composed of hospital
current funds and hospital unexpended plant funds, as
reflected in the General Ledger. The cash balance or deficit
as reflected in the General Ledger is adjusted by adjustments
made by the campus in developing the hospital monthly
financial report. The amount of the adjustments should be
equal to the difference between the cash balance or cash
deficit, as shown in the General Ledger, and the monthly
hospital financial report. The hospital will receive STIP
income on any cash balance remaining after the adjustments.
If there is a cash deficit in hospital funds after the
adjustments, this cash deficit will be covered by the Campus
Unrestricted Funds (Group V).
The hospital is to pay interest at the STIP interest rate to a
fund designated by the Chancellor for the cash deficit
financed by the Campus Unrestricted Funds. At the end of the
following month the campus Accounting Officer is to provide
the University Controller's Office with a statement which
will show how the adjustments are to be allocated among the
different fund groups.
D. GROUP IV-FEDERAL FUNDS
Federal research funds play a very important part in the
University's research program. Because of the cost-reimbursement
contracts accepted by the University, campuses will normally
show a cash deficit in this group. This deficit must be covered
by the cash balance in the Campus Unrestricted Funds (Group V).
In the rare event that a campus has a positive Federal cash
balance, Federal regulations require that interest be paid to
the appropriate agency. To ease the burden on the campuses of
having to finance the full amount of the Federal cash deficit,
and also to provide an incentive to campuses to reduce the
Federal deficit where possible, each quarter an amount
equal to the interest cost of 75 days of Federal expenditures
not financed by letters of credit or advance payment programs
will be provided from President's funds. In order to reduce the
Federal deficit further, campuses should review on a periodic
basis their cost reimbursement contracts and grants not funded
by advance payment programs to determine whether the financing
of these contracts and grants can be converted to advance
payment programs.
E. GROUP V-CAMPUS UNRESTRICTED FUNDS
All campus funds which have not been assigned to Groups I, II,
III, or IV are included in this group. After making the
adjustments referred to in the above paragraphs, the net cash
balance of Campus Unrestricted Funds is used for prorating STIP
income.
The income amount is credited to an account which is under the
control of the Chancellor. As appropriate, the Chancellor may
instruct the campus Accounting Officer to credit interest
income to certain individual campus unrestricted funds, such as
Registration Fee, Summer Session, Service Enterprises, or
non-bonded Auxiliary Enterprises.
Appendix 1 displays examples of the five groupings for STIP income
distribution.
Appendix 2 provides examples of adjustments to the groupings, as described
above.
Appendix 3 provides an example of distribution of interest to campus funds.
APPENDIX 1
CASH BALANCES OF UNIVERSITY FUNDS
SORTED INTO FIVE
GROUPINGS FOR STIP INCOME DISTRIBUTION
I. Funds whose investment income is credited to funds at Systemwide:
Current
Educational Fee $ 11,657,800
General Funds and Special State Appropriations 42,300,999
Endowments 84,725,962
S & S of Bond-Financed Auxiliary Enterprises 9,549,333
Self-Insurance Reserves 25,393,760
Unexpended Plant
State Appropriations 12,581,781
Regents' and President's Funds 14,472,600
Transfers from Net Revenue Funds 4,041,375
Bond-Financed Auxiliary Enterprises (6,434,929)
Regents' Advances (534,891)
$ 197,753,790
II. Restricted Private Gift and Grant funds whose investment
income is credited to each fund:
Current $ 62,472,215
Loan 6,738,393
Plant 22,605,584
$ 91,816,192
III. Other funds whose investment income is credited to
specific campus funds:
Medical Compensation Plans (Current and Plant) $ 22,901,564
Hospital:
Current and Reserves: Renewal and Replacement (112,387,943)
Plant 23,861,794
$ (88,526,149)
IV. Federal funds (Current, Loan, and Plant) whose investment
income (if any) should be sent to the appropriate Federal
agency: $ (53,227,940)
V. Campus Unrestricted Funds whose investment income
is distributed at the Chancellor's discretion:
Current
Agency $ 678,141
S & S of Educational Departments (excluding Medical
Compensation Plans) (3,176,010)
Student Fees (excluding Educational Fee fund) 11,833,854
State Contracts (14,750,974)
Local Government Contracts 824,167
Private Contracts (1,688,482)
S & S of Auxiliary Enterprises (excluding Bond-Financed) 603,118
Reserves 20,733,698
Service Enterprises (7,003,723)
Other Sources (13,873,681)
Balance Sheet Items Without Fund Identification 131,344,336
Loan (excluding Gifts, Educational Fee, and Federal) 1,790,603
Plant (excluding funds in I, II, III, IV):
Unexpended 13,049,269
Reserves for Renewal and Replacement 4,061,858
Retirement of Indebtedness 97,843
$ 144,524,017
Grand Total $ 315,241,474
APPENDIX 2
CASH BALANCES OF UNIVERSITY FUNDS
ADJUSTMENTS TO GROUPINGS
II. Gifts and Private Grants $ 20,917,000
1,744,000 (1)-
550,000 (2)+
$ 19,723,000
III. Medical Compensation Plans $ 4,500,000
Hospital:
Current and Reserves $ (15,900,000)
Plant 1,715,000
5,700,000 (3)+
8,485,000 (4)+
$ 0
IV. Federal $ (7,500,000)
7,500,000 (5)+
$ 0
V. Campus Unrestricted Funds (CUF) $ 25,500,000
1,744,000 (1)+
550,000 (2)-
5,700,000 (3)-
8,485,000 (4)-
7,500,000 (5)-
$ 5,009,000
Adjustments
(1) Gift and Private Grant funds under $1,000 transferred to V. for
administrative simplicity.
(2) Gift and Private Grant funds with deficit balances are covered from
CUF.
(3) Cash (working capital deficit) adjustment made by hospitals in
developing monthly statement.
(4) Hospital or Medical Compensation Plans funds with deficit balances are
covered from CUF.
(5) Consolidated Federal funds when negative are covered from CUF.
APPENDIX 3
DISTRIBUTION OF INTEREST
AT 12.000%
JANUARY - MARCH 1982 DISTRIBUTION RATE
Adjusted Interest
Cash Balance Distribution
II. Gifts and Private Grants $ 19,723,000 $ 5919690
III. Medical Compensation Plans 4,500,000 135,000
Hospital: Current and Plant 0 0
IV. Federal _ _
V. Campus Unrestricted Funds 5,009,000 150,270
Plus: Payment from Hospital 254,550
$ 29,232,000 $ 404,820
TOTAL INTEREST CREDITED TO CAMPUS FUNDS $ 1,131,510
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