In the current fiscal year, only $3.7 million at the Lawrence Campus and $600,000 at the KU Medical Center can be considered "reserve" funds. This money is intended to be used for unexpected expenses, such as repairing damage from an October 2012 flood at KUMC’s Wahl Hall.
Funds in other accounts are committed to operations and projects that advance KU's mission of educating leaders, building healthy communities and making discoveries that change the world. Money in restricted accounts is collected for specific purposes and can only be used for those purposes. For example, federal research grants can only be spent on research, and money collected from the sales tax going into the Johnson County Education Research Triangle Fund, is restricted by statute. Meanwhile the General Fees Fund is used to maintain university operations, including paying employees and vendors during the summer before tuition payments are received in the fall.
It has been suggested by some that these funds be raided in order to offset proposed budget cuts. As these funds are already committed, that is simply not possible. And in its management of these funds, KU is following sensible and universally accepted business practices.
General Fees Fund
The General Fees Fund is tuition collections for the university. On July 1 of each year, the fund balance reflects commitments to pay for summer salaries, planned facility upgrades, operating expenses, scholarships and financial aid, and faculty recruitment expenses. The fund balance is maintained to ensure continuous operations at KU until the next tuition payments are collected in September.
Prior to 2010, the university maintained too small of a balance in the fund, which often led to problems covering payments until tuition collections in September. The university's current policy aligns with standard accounting practices of maintaining two months' expenses in the operating fund. Payroll on the Lawrence campus for July and August 2012, for example, was approximately $15.4 million.
Restricted Fees Fund
Restricted fees are collected from a variety of sources to pay for specific expenses. Examples of fees collected include Required Campus Student Fees, self-supporting programs like Continuing Education, and University Press of Kansas. Much like the General Fees Fund, a targeted balance of approximately $20 million would represent two months' expenses including salaries and other operating costs.
Money placed by campus units into the Restricted Fees Fund may only be spent on its designated purpose. Funding, therefore, is earmarked for a future expense prior to being collected. The Restricted Fee Fund is made up of several hundred different accounts, each of which have their own individual beginning balances, cash receipts, expenses, and ending balances.
Growth in the Restricted Fees Fund balances since FY2010 has been earmarked for network infrastructure upgrades, campus master planning, and commitments to new faculty hired in FY 2012 and 2013 as part of our strategic plan, Bold Aspirations.
For example, KU has committed $24M to support the $3 million state appropriation for the hiring of 12 Foundation Professors. The university will provide substantial research and start-up funding for these 12 hires. The university is also preparing to hire 30 new faculty to support the state’s investment in engineering education.
For the KU Medical Center, some specific examples include our cancer alliance programs, clinical programs on the Wichita campus, resident and physician programs with the Veterans Administration, some specific student fees, scientific core instrumentation and cancer center clinical trials.
In addition, positive cash balances are often the result of the timing of the receipt and expenses related to contractual agreements with outside entities. In many cases, the university requests funds in advance of providing services. As a result, positive cash balances may exist but the university has a contractual obligation to provide services.
Explanation of restrictions on other funds
Federal Sponsorships -- Grants & Contracts
This series of funds represents federally sponsored grants, contracts & student loan funds. These funds must be spent in accordance with approved federal award documents.
This series of funds represents funds established via state statute for specific projects/programs (e.g. JCERT fund used to track approved sales tax funds from Johnson Country Education and Research Triangle. The annual revenue and expense budget is approved by JCERTA Board).
State Financial Aid
Financial Aid programs administered by the Kansas Board of Regents. Balances must be used for financial aid.
Bond Funds (Pledged Revenues, Bond Proceeds, P&I, etc.)
This series of funds represents funds established in connection with revenue bond issuances. Series includes revenue funds pledged against bond issuances, bond proceed funds to be spent on the approved bond projects, bond principal and interest funds used for semi-annual payments, cost of issuance funds from bond proceeds, arbitrage funds & required surplus funds.
Funds with Specific Restrictions
This series of funds represents funds established for specific strategic purposes within the appropriations bills for KULC and KUMC. At KUMC, the restrictions are contractually imposed. At KULC, the funds, which for the most part are now closed, were for strategic construction or repair projects or for directed support of the Regents Center.
Auxiliaries -- Revenue & Expenses Limited to Auxiliary Mission -- Statutory Restriction
This series of funds represents legislatively recognized auxiliaries. Auxiliaries are expected to be self-sustaining and to maintain a 3-6 month cash flow reserve for operations. The reserve balance is necessary in the event demand for services declines.
This series of funds represents temporary clearing funds. The largest of these funds -- Temporary Deposit Fund -- is used for tuition prepayments that are received at the end of the fiscal year that will be split between general tuition & required campus fees at the beginning of the semester.