292.0 VIII-8.10-POLICY ON A SYSTEM FUNDED LOAN PROGRAM
(Approved by the Board of Regents, August 27, 1993)
(Paragraph 16 superseded by VIII-12.00, April 7, 1995)
Objective: To establish for all institutions an exclusive
mechanism to finance, over time, facilities and other capital costs
not financed through State capital budget appropriations, UMS debt
instruments or third party financing.
1. The Board authorizes and establishes a system-wide funding
mechanism, wholly internal within UMS, to finance, over time,
facilities and other capital costs (as defined in Board of
Regents Policy VIII-1.10), $250,000 or greater, not financed
through State capital budget appropriations, UMS debt
instruments, or third party financing ("Eligible Projects").
This funding mechanism shall be known as the System Funded
Loan Program ("Program").
2. The Program shall be the exclusive method of funding Eligible
Projects and no Institution shall finance Eligible Projects in
any other manner. Since the resources for the Program must be
managed effectively, this Policy applies to any funding of
Eligible Projects whether or not the funds for a particular
Eligible Project are available wholly within the cash
resources of the Institution requesting the funds.
3. The Program, for accounting purposes, is an element of plant
4. Funds made available through the Program may be used only for
Eligible Projects and only in accordance with this policy.
5. UMSA shall administer the Program and make funds available to
an Institution under the Program in accordance with this
Policy and procedures or processes adopted by UMSA from time
6. At any time, the funds then available (on a System-wide basis)
under the Program shall be in an amount not to exceed the
agreed upon cash reserves, which is defined as those funds in
excess of a 30 day requirement within self-support activities.
This amount shall be determined on a System-wide basis, and
not in respect to any one or more specific Institution. In
establishing the amount of funds to be available under the
Program, UMSA shall consider among other matters, use of
System-wide funds and resources, System-wide priorities among
Institution's needs, maintenance of adequate cash and
unreserved fund balance, and System-wide debt restrictions.
7. The Program is established as an extraordinary source of funds
for Eligible Projects. Institutions should not consider the
Program as a funding source available in the ordinary course
of business. Institutions shall conduct its activities so
that all expenditures can be met from cash resources available
and shall submit to UMSA annual cash flow projections for the
coming five year (fiscal year) period.
8. UMSA shall obtain the Board approval of an Eligible Project
and of funding under the Program if the cost is $1 million or
more, prior to making funds available for any Eligible
Project. Eligible Projects costing less than $1 million shall
have the approval of the Vice Chancellor for General
9. An Institution interested in funding an Eligible Project under
the Program shall make a proposal to UMSA. The proposal shall
(i) identify the Eligible Project, (ii) state the amount of
funds requested, (iii) state the period for which the funds
are requested, and (iv) identify the revenue stream from which
the Institution shall return the funds made available. It is
anticipated the Institutions shall submit proposals as part of
their annual capital budget process. However, in
extraordinary circumstances, UMSA may accept proposals at
10. UMSA shall evaluate proposals for funding under the Program
considering, among other matters (i) financial viability, (ii)
the Institution's overall development plan, (iii) System-wide
debt restrictions, (iv) fund availability under the Program,
and (v) competing demands for financing under the Program.
11. In the event funds to finance a particular Eligible Project
are charged against the cash resources of one or more
Institutions other than the one seeking funding, UMSA shall
make any and all arrangements and communications with the
12. Before UMSA makes funds available under this Policy for each
Eligible Project, UMSA and the Institution requesting the
funds shall enter into a Project Account Initiation Agreement
which binds the Institution to (i) a definition of the
Eligible Project, (ii) the budget and funding sources for the
Eligible Project, (iii) the revenue stream for return of the
Program funds, (iv) the applicable interest rate and (v) the
schedule for return of funds. It is anticipated that the
Project Account Initiation agreement will be agreed to before
UMSA requests the Board's approval for making Program funds
available for an Eligible Project.
13. The Institution shall comply with the terms of the Project
Account Initiation Agreement and shall maintain the records
defined in the UMS Financial Accounting and Reporting Manual.
These shall include quarterly reports that present a) the cash
position of the Institution's self-support activities; b) the
cash position of the System funded Loan Program at that
Institution; and c) other reports so that UMSA may monitor
project activity to ensure expenditures stay within budget,
debt is repaid on a timely basis, and the project begins and
is completed on a timely basis. On an annual basis, the
Institution shall prepare and submit to UMSA a report that
presents the cash position, revenues, expenditures and annual
debt service for each component of the self-support
activities, e.g. dormitories, dining halls.
14. UMSA will provide quarterly reports to the Institutions that
present a) the cash position of the System Funded Loan
Program; b) the cash position of UMS self-support activities;
and c) debt service ratios. UMSA will also prepare and
analyze an annual System-wide debt burden report that presents
the cash position, revenues, expenditures and annual debt
service requirements for each component of self-support
activities of each Institution.
15. Funds made available under the Program shall accrue interest.
The rate of interest shall, in the absence of other
arrangements, be adjusted monthly to equal the monthly rate
earned on cash balances invested by the State Treasurer.
16. ORIGINAL PARAGRAPH 16 SUPERSEDED BY CURRENT POLICY VIII-12.00,
POLICY ON DEBT CAPACITY.
17. "Bridge loans", i.e., short-term loans granted in anticipation
of receiving replacement funds, may temporarily exceed debt
affordability limits provided that the replacement loan is
within the limits.
18. Projects less than $250,000 are not normally considered part
of the Program. An Institution may internally finance such
projects only if sufficient self-support cash resources are
available, as defined in paragraph 6 above, at that
Institution. If sufficient self-support cash resources are
not available, the Institution may then request to use the
System Funded Loan Program.