UPPS 03.01.25 - Inter-fund Loans
UPPS No. 03.01.25
Issue No. 1
Effective Date: 4/30/2018
Next Review Date: 9/01/2023 (E5Y)
Sr. Reviewer: Treasurer
This document establishes policies and procedures for approving and reporting the status of inter-fund loans.
The administration of Texas State University utilizes inter-fund loans to provide interim financing for institutional strategic initiatives for which a gap exists between the date of acquisition or construction of the project and the timing of the cash receipts from the sources of funding.
Inter-fund loans provide a short- or medium-term financing alternative in a manner that does not detract from the overall university investment performance and liquidity requirements. All accounts should rely on their own regular sources of income, appropriations, or regular allocations from specific capital funds as their primary and permanent source of financing.
The vice president for Finance and Support Services establishes the amount allowed for the program.
Inter-fund loans are permissible in certain circumstances in order to advance the strategic plan of the university and require:
an authorized inter-fund loan note, completed and signed by the associate vice president for Budgeting, Financial Planning and Analysis (AVPBFPA); and
approval of the director of the department receiving the loan, the cabinet officer of department receiving the loan, and the vice president for Finance and Support Services.
Inter-fund loans of state-appropriated monies from the Educational & General (E&G) fund group (Fund 001) appropriated by the Legislature of the State of Texas are prohibited.
Inter-fund loans between bond funds (different bond series) are generally prohibited.
- Inter-fund loan – the movement of cash between designated method (lender) and another cost center (the borrower) with a definite plan to repay the loan, including any applicable interest charges, within a specified, short- or medium-term period.
PROCEDURES FOR APPROVING INTER-FUND LOANS
A written agreement detailing a fiscally responsible and achievable business plan in support of the timely repayment of the loan is required. The AVPBFPA will work with the department to identify the SAP account requesting to borrow and repay the inter-fund loan, the duration requested, and if installment payments are needed. A written agreement must be completed for all inter-fund loans regardless of interest being charged or not.
The AVPBFPA will receive the request and determine if interim financing is viable, the terms of the inter-fund loan, and if interest should be assessed.
The AVPBFPA will consult with the treasurer to determine if the funds are available to loan, and if interest is assessed, the interest rate and amortization schedule.
Notification of approved inter-fund loans will be given to the associate vice president for Finance and Support Services Planning, associate vice president for Financial Services, treasurer, AVPBFPA, and director of Accounting.
In the event that an inter-fund loan cannot be repaid by the end of the period specified in the loan agreement, a new loan agreement must be executed to extend the loan. Terms of the loan agreement may be evaluated and adjusted as appropriate.
PROCEDURES FOR INTEREST CHARGES
Once the project is deemed viable, the AVPBFPA will request the established rate from the treasurer.
No interest will be assessed for:
E&G-funded projects where bond financing is anticipated; or
any projects that are truly interim funding, which are defined as 18 months or shorter.
Documentation is required in both circumstances.
Based on the availability of funds, interest will be calculated as follows:
True internal loans 18 months to three years: The unit may choose one of the following:
a variable rate two-year note + 25 basis points which will reset each day on the anniversary date of the loan; or
a fixed rate that will remain constant for the term of the loan with a fixed rate two-year note + 100 basis points.
True internal loans greater than three years:
rate is 10 percent less than the prevailing bond rate (cost of borrowing) which is to match the liability length of repayment;
no issuance costs will be charged; and
no additional system overhead charges will be applied.
Interest will be charged annually on the anniversary date of the loan or the next available date if the date falls on a weekend or a holiday.
Interest charged will be posted by the General Accounting Office to 20000110xx Designated Method/1040130016 Inter-fund Loan Interest. This fund center will retain funds until the account has a balance sufficient to issue loans directly.
If bond financing is obtained for any inter-fund loans, the loan timeframe will end, and any outstanding principal will be paid from the bond proceeds.
PROCEDURE FOR REVIEW AND DISCLOSURE AT FISCAL YEAR-END
- Prior to closing the fiscal year, the director of Accounting shall report the status of any inter-fund loans. The status report will include the principal and interest, if any, repaid during the fiscal year and the principal balance outstanding for each inter-fund loan. The status of all inter-fund loans will be disclosed quarterly in an internal report to the vice president for Finance and Support Services and the treasurer.
REVIEWERS OF THIS UPPS
Reviewers of this PPS include the following:
Position Date Treasurer September 1 E5Y Associate Vice President for Financial Services September 1 E5Y Assistant Vice President for Budgeting, Financial Planning and Analysis September 1 E5Y
CERTIFICATION OF STATEMENT
This UPPS has been approved by the following individuals in their official capacities and represents Texas State policy and procedure from the date of this document until superseded.
Treasurer; senior reviewer of this PPS
Vice President for Finance and Support Services