1510 - Treasury-Managed Interest Distribution Policy

The University’s operating cash balances are invested according to a mandate to prioritize, in order, safety, liquidity, and return. Balances are pooled together and invested in funds with short-term or intermediate-term duration. The investment pools are sized by the Office of the Vice President for Finance and Treasurer in accordance with the University’s anticipated liquidity needs. Unlike balances invested in AIF, the target duration for invested operating cash balances is less than five years.

University Schools, Resource Centers, and Auxiliary Enterprises receive interest distributions on the cash balances of all unrestricted funds and certain restricted funds which require interest on unspent balances. Interest distributions are based on one of two rates applied to unrestricted cash balances– a standard rate and a premium rate. The premium rate is reserved for balances in certain funds which align with General University priorities. All other unrestricted cash balances receive interest calculated at the standard rate.

Funds receiving interest distributions calculated at the standard rate include:

• Unrestricted funds with surplus cash balances
• Select Federal Student Loan Advance (3xxxxx) Funds: Interest will be distributed only on funds requiring interest on balances that have not been loaned.
• Select Designated Investment Income (4xxxxx) Funds: Interest will be distributed only to funds that cannot be invested in the AIF per donor agreement. New funds with such restrictions must be approved by the Vice President for Finance and Treasurer before acceptance.
• Select Sponsored Program (5xxxxx) Funds: Interest will be distributed only on grants and contracts requiring interest on unspent balances.
• Select Operating Gift Funds: Interest will be credited only to those funds where the donor agreement stipulates that interest will be paid. New funds with such restrictions must be approved by the Vice President for Finance and Treasurer before acceptance.

Funds receiving interest distributions calculated at the premium rate instead of the standard rate include:

• Renewal & Replacement (000005) Fund: Established for reserves to be used in the future for renewing or replacing capital assets. Responsibility Centers may accumulate reserves in this fund for renewal or replacement projects in existing facilities and large-scale equipment purchases. Fund balances cannot be used to support regular, ongoing operational expenses. Interest will be paid monthly on the cash balances of this fund to help offset renewal and replacement costs.
• Capital Gift (65xxxx) Funds: Interest distributions are intended to support the designated capital project.

The Finance & Treasury group within the Office of the Vice President for Finance and Treasurer sets the standard and premium interest rates annually. The “standard” and “premium” rates are informed by historical and anticipated returns on the University’s portfolio of invested operating cash balances and demands on General University resources. Accordingly, rates are subject to revision. The minimum standard or premium rate is 1 basis point (0.01%) for grant and gift funds requiring interest and 0 basis points (0.0%) for all other funds. The standard rate shall not exceed the premium rate.

Interest is calculated on the month-end cash balance and posted in the following month’s ledger. Interest income will be calculated and posted at the School/Center level. Should a School/Center’s aggregate unrestricted cash balance be in a deficit position, the School/Center will be charged monthly interest on the deficit balance equal to the premium rate. Monthly postings occur from August (based on the July ending balance) through the Adjustment (ADJ) period (based on the June ending balance). For Capital Project funds (000010), interim interest is calculated monthly throughout the year and posted to the School/Center’s General Unrestricted Fund at the beginning of the next fiscal year.