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Business and Financial Policies and Procedures

1.1.1 How the University Measures the Financial Health of Units

Units have the primary responsibility for monitoring and evaluating the financial health of their unit to be sure University financial resources are managed properly. OBFS relies on the unit's financial information to gain an accurate picture of the University's overall financial condition. Mechanisms to do this include:

  • The Unit Annual Financial Report - Campus budget offices prepare the Unit Annual Financial Report for the previous fiscal year. The Office of the Provost/OBFS distributes the Report to the units. If needed, the Office of the Provost/OBFS meets with the unit to discuss the unit's financial health. OBFS provides a summary report of all units for University officers.
  • The FCIAA Questionnaire - This is the mechanism the University uses to report its internal control compliance. For additional information, consult the OBFS webpage on Fiscal Control and Internal Auditing Act (FCIAA).
  • Biennial Inventory - Each unit must ensure completion of the biennial moveable equipment inventory and prompt follow-up and disposition of unreconciled moveable equipment items according to the steps in Biennial Inventory.

The Unit Annual Financial Report summarizes the unit's financial performance as measured against the four standards below:

  • Cash Standard - Is the unit solvent or insolvent?
  • Equity Standard - Does the unit have equity in its current assets or is it in an unfavorable financial position?
  • Revenue and Expense Standard - Does the unit generate operating revenue equal to or exceeding its operating expenses?
  • Balance Reporting Standard - Does the unit maintain a positive cash balance in each fund type?

Cash Standard

The Unit Annual Financial Report measures net fund balance, utilizing the "net flexible funds" amount at the end of the fiscal year. A net flexible cash balance indicates the unit is solvent. A net flexible cash deficit indicates the unit is insolvent.

The Unit Annual Financial Report also displays the unit's net flexible funds cash balance as a percent of total fiscal year expenditures. For details on fund types used to calculate net fund balances, consult 1.1.2 How the Unit Annual Financial Report Calculates Flexible and Inflexible Fund Cash.

Revenue and Expense Standard

Operating revenue generated by a unit in the fiscal year should generally equal or exceed its operating expenses. Operating revenue includes state and institutional funds allocated to the unit, gifts, endowments, grants, contracts, and other revenue generated by the unit. A unit meets the revenue and expense standard if:

  • The unit has an operating gain for the fiscal year

  • OR
  • The unit has sufficient carry-forward funds from prior fiscal years to cover an operating loss for the fiscal year and the operating loss was the result of planned expenditure of funds accumulated in prior years for a specific purpose.

Balance Reporting Standard

Each unit should have and maintain a positive balance in each of its operating funds and on a roll-up basis for its institutional funds.

In addition, OBFS reviews inactive funds (that is, funds with no activity in the current fiscal year), requests that units review the continuing need for inactive funds, and closes inactive funds that are no longer necessary.

The use of cash balance and/or equity (fund balance) standards in the determination of overdrafts for individual fund sources is at the discretion of each campus chief business officer or the Senior Associate Vice President for Business and Finance for University of Illinois System Offices units. Each year, units with a deficit of $10,000 or more are notified by the Provost and/or OBFS and provided with forms, instructions, and a deadline for submitting the required remedial business plan.

You may not have to file a business plan to eliminate a deficit of $10,000 or more if one of the following exceptions is met:

  1. You knew you would have a planned deficit which could be a mechanism for overall University or campus funds management purposes, if you:
    • Have prior written approval of your campus chief business officer or designee (the Senior Associate Vice President for Business and Finance for System Offices units)
    • Have other University funds available to cover the deficit or a June 30 deficit is inherent in their business cycle
  2. University storeroom and certain departmental activity funds approved by the campus chief business officer (the Senior Associate Vice President for Business and Finance for System Offices units), where all the following apply:
    • The inventory of goods available for sale is equal to or greater than the amount of the cash deficit.
    • The inventory is not more than 10% of the annual revenue or an amount determined to be appropriate by the campus chief business officer (the Senior Associate Vice President for Business and Finance for System Offices units).
    • The University funds have a positive fund balance.
    • The cash deficit for the fiscal year is approved in advance in writing by the campus chief business officer (the Senior Associate Vice President for Business and Finance for System Offices units).

    The campus chief business officer (the Senior Associate Vice President for Business and Finance for System Offices units) may grant a renewal of the approval of the cash deficit under the same terms and conditions, provided the cash deficit meets the goals mutually agreed upon in the business plan.

  3. University clearing funds with a deficit where all the following apply:
    • The nature and the fund is to periodically have a deficit.
    • The deficit has the prior written approval of the campus chief business officer (the Senior Associate Vice President for Business and Finance for System Offices units).
    • The fund is functioning as intended and being reconciled as a clearing mechanism.
  4. Sponsored project deficit balances are excluded. Contact your campus Grants and Contracts office for information about overdrafts on sponsored projects.
  5. The measure for state deficits is at the unit level. Unit state deficits at the end of a fiscal year are carried forward as F & A or state deficits in the next fiscal year.

Additional Resources

 

 

 

 

 

Last Updated: January 24, 2017 | Approved: Senior Associate Vice President for Business and Finance | Effective: July 5, 2016

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