Carry-forward and Year-End balances Guidelines
Effective: 01/01/2025
Supersedes: Carryforward and Year-End balances Guidelines (issued 12/20/19)
Issuance Date: 02/20/2025 (published as a DRAFT)
Issuing Office: Budget Analysis and Planning
PURPOSE AND SCOPE
This document provides guidance to UC Santa Cruz principal officers and campus units regarding how to consistently and transparently manage and report on fund balances. This policy supports the campus’s commitment to be an accountable and responsible steward of financial resources.
There are four main concepts covered in this policy:
- Definition of terms and groupings of funds at UC Santa Cruz;
- What levels of reserves and fund balances the campus seeks to maintain;
- Annual review and accountability (as part of the annual budget development process); and
- Additional guidance/processes when campus-level reserves are below established thresholds.
WHY WE HAVE THIS POLICY
This policy framework:
- Establishes a baseline of financial resources to reasonably protect the university against disruption in the event of unexpected revenue shortfalls or unanticipated expenditures, while confirming to internal and external stakeholders that university resources are being used responsibly.
- Guides budget decisions to increase consistency and transparency, while recognizing the need for units to maintain flexibility to manage risks unique to their programs and operations (i.e. revenue volatility and expense profile).
The policy framework also defines management responsibilities for the monitoring/reporting of carryforward balances.
DEFINITIONS
Recurring Budget – Formally recorded projections of reliable recurring revenue sources (sometimes referred to as “permanent budget”) and intentions for spending that revenue within a defined time period (usually aligned with fiscal year). An approved budget provides authorization to spend so long as underlying projected revenue is realized.
Carryforward Balance (or carryforward funds) – The cumulative (positive or negative) balance at the close of the prior fiscal year and, if authorized, represented as the beginning balance as of July 1st of the current fiscal year. A year-end balance that is negative represents an operating deficit (or deficit) that must be addressed.
RESERVE AND FUND BALANCE GUIDELINES
UC Santa Cruz has established the following planning thresholds or target ranges for reserves and fund balances. The guideline thresholds cited represent flexibility that principal officers may build into their current-year budget planning and do not represent authorization to carry forward this level of funding.
Target Reserve Levels
- Campus and Auxiliary Reserves (generally in the range of 10% - 25% of annual recurring budget):
- UC Santa Cruz should aim to maintain reserve balances in the range of 10% - 25% of annual recurring budget across all fund sources. This is equivalent to about 1 - 3 months, or 30 - 90 days cash on hand.
Note that if Campus (“Center”) reserves fall below this threshold, campus leadership may limit the carryforward authorization for academic and support units.
- Divisional Core Fund Reserves (generally aim to maintain 5% of annual recurring budget):
- Academic Degree-Granting, Academic Support, and Administrative Support: As appropriate to their operations, each division should aim to maintain fund balances of 5% of annual recurring budget on Core funds.
- Division/unit operations supported on non-Core funds: Non-Core fund balances (and reserves) within school/division and support units should be responsibly deployed to support operating needs as appropriate and consistent with fund restrictions.
Any year-end balances should first be used to address budget deficits within the principal officer’s organization (e.g., at the department or divisional level). Note that any deficits will be carried forward automatically and must be addressed by the principal officer (e.g., as appropriate, covered by the next year’s allocations/revenues).
Restricted Activity
Year-end balances in “restricted” activities will be automatically retained by the unit. This includes all non-core activity, such as campus-based fee funds, contracts and grants, debt service, plant funds, etc. A list of core funds classified as “restricted” activity (under this policy) will be published on the Budget Analysis and Planning (BAP) website.
- Reserve guidance for other specific funds and activities: Exceptions to these general guidelines apply, for example, to units operating with restricted fund types. Please contact Budget Analysis and Planning for most current guidance on specific rules and exceptions.
Core Fund Carryforward Retention Above 5% Division Reserve
- Core fund carryforward retained (by the principal officer) above the 5% reserve threshold is dependent on the financial health of the campus and will be defined annually as part of the budget planning process. Effective with this policy, for balances beyond 5%, the carryforward retention targets to divisions are the following percentage of the balance remaining:
|
0% - 15% retained |
if the Campus has a projected Core funds shortfall in the upcoming fiscal year |
|
15% - 30% retained |
if the Campus Core funds budget is projected to be balanced, but Campus reserve balances are below the reserve target |
|
30% - 50% retained |
if the Campus Core funds budget is projected to be balanced and Campus reserve balances are projected to be at or above target |
Each year the Chief Financial Officer will establish the carryforward retention target in consultation with the Chancellor and CP/EVC. This information will be communicated annually in tandem with the distribution of budget planning guidelines, if not sooner.
One-Time Budget Request Process
Depending on the financial health of the campus, limited funding may be available for needs that exceed the principal officer’s funding envelope allocated through recurring and carryforward revenues.
- For one-time priorities that exceed divisional recurring budget and carryforward capacity, principal officers may submit one-time budget requests during the annual budget planning process via a written request (submitted through budget@ucsc.edu). This written request should describe
- The circumstances that led to the carryforward balance;
- The period over which the carryforward will be expended, planned uses, and expected outcomes;
- Why the planned use cannot be prioritized within the recurring budget and/or previously-approved carryforward balances; and
- How these uses/outcomes align with divisional and campus goals/priorities.
- The Working Capital Reserve (804xxx) process will be folded into the one-time request process.
ANNUAL REVIEW AND ACCOUNTABILITY
Following the close of the fiscal year, an annual carryforward and fund balances report will be prepared by Budget Analysis and Planning and shared with campus leadership, which will include year-end balances and carryforward returns (to the Center) by division, in alignment with policy.
In addition, as part of the campus’s annual budget development process, principal officers prepare multi-year resource plans and participate in tactical financial health meetings. During those meetings, the discussion will include the principal officer’s projection of anticipated carryforward balances, expected cash‐flow from operations, and one‐time resource needs.
RELATED INFORMATION
- UC Santa Cruz Policy on Interest Assessment on Negative Balances
- Reserve guidance for specific funds and activities (updated guidance posted on BAP website)
REVISION HISTORY
2019-12-20 New policy published
2025-02-20 Revision 1 of policy published (as a DRAFT) — please check the policy URL for updates
