On May 5, 2020, President Cross approved Interim Regent Policy Document Waiver #04: COVID-19 Financial Management of Auxiliary Operations- Transfers from Auxiliary Enterprises Waiver to provide campuses with greater flexibility in transferring fund balances between auxiliary operations and from auxiliary operations to other funding sources, to address financial needs resulting from the COVID-19 pandemic.
Revised: June 18, 1999
This paper establishes policies for the financial management of auxiliary enterprises.
- Section 20.285(1)(h), Wis. Stats., defines a separate appropriation to be used by the UW System for auxiliary enterprises. (See definitions in Section III below.) It provides the authority to transfer surplus moneys within this appropriation to appropriation 20.285(1)(kp) for the one-time fixed-duration costs of any student related activity. See Attachment 1.
- Board of Regents Resolution 7555 provides institutions with the flexibility to transfer surplus funding from one auxiliary activity to another; see Attachment 1.
- The Board of Regents policy on “Competition with the Private Sector” defines criteria to be used in evaluating the appropriateness of sales activities and establishes principles for pricing those products and services that UW institutions offer. It also establishes a process for reviewing new activities that may compete with the private sector as well as ongoing activities whose pricing or appropriateness has been questioned.
- Section 36.46, Wis. Stats., requires that the Secretary of Administration and the Joint Committee on Finance approve the accumulation of “auxiliary reserve funds from student fees” that exceed 15% of the previous fiscal year’s total revenues for the operations covered by this statute section. See Attachment 3.
- UW System Administrative Policy 320 (SYS 320), Internal Services Chargebacks establishes policies for accounting for inter-departmental transactions, including the sales of auxiliary enterprises to other institutional departments.
- UW System Administrative Policy 316 (SYS 316), Auxiliary Enterprises Support Services Chargebacks establishes policies for charging auxiliary enterprises for support services.
- UW System Administrative Policy 318 (SYS 318), Charging Fuels and Utilities – Auxiliary Enterprises establishes policies for charging auxiliary enterprises for utilities.
- UW System Administrative Policy 822 (SYS 822), Student Services Funding establishes policies for identifying and funding student services.
The National Association of College and University Business Officers (NACUBO) defines Auxiliary Enterprises as follows:
An auxiliary enterprise is an entity that exists predominantly to furnish goods and services to students, faculty, or staff and that charges a fee directly related to, although not necessarily equal to, the cost of goods or services. The general public incidentally may be served by some auxiliary enterprises.
Within the UW System the term “auxiliary enterprises” (or “auxiliary operations” or simply “auxiliaries”) is used at various times to refer to at least three different sets of operations:
Activity 8 auxiliaries: The “activity” definitions used by the UW System for budgeting and expenditure recording are based upon the definitions of expenditure categories contained in NACUBO’s Financial Accounting and Reporting Manual; this includes the definition of auxiliary enterprises cited above. In the budgeting and accounting systems, “auxiliary enterprises” are designated by Activity code 8 and are largely limited to housing services, food services, retail sales (including the retail operations of the student center and textbook sales) and parking.
Student fee funded auxiliaries: Section 36.46, Wis. Stats., deals with the accumulation of “auxiliary reserve funds from student fees.” The operations covered by this statute section are housing, food services and operations funded by student segregated fees. In the budgeting and accounting systems, housing and food services are coded as “auxiliary enterprises” while segregated fee operations are coded as “student services” (activity 0). Parking, which is an activity 8 “auxiliary enterprise,” is not included within the operations covered by this statute section. Student services operations are determined on the basis of program purpose under the provisions of UW System Administrative Policy 822 (SYS 822), Student Services Funding and UW System Administrative Policy 316 (SYS 316), Auxiliary Enterprises Support Services Chargebacks.
Appropriation 128 auxiliaries: The appropriation established in s. 20.285(1)(h), Wis. Stats., is for “auxiliary enterprises.” In addition to “activity 8 auxiliaries” and segregated fee funded operations, this appropriation is used to budget and account for internal service centers and a variety of other fee-based, self-sustaining operations. Section 20.285(1)(h) reads as follows:
Except as provided under par. (gm) and subs. (5)(i) and (6)(g), all moneys received by the university of Wisconsin System for or on account of any housing facility, commons, dining halls, cafeteria, student union, athletic activities, stationery stand or bookstore, parking facilities or car fleet, or such other auxiliary enterprise activities as the board designates and including such fee revenues as allocated by the board and including such moneys received under leases entered into previously with nonprofit building corporations as the board designates to be receipts under this paragraph, to be used for the operation, maintenance and capital expenditures of activities specified in this paragraph, including the transfer of funds to pars. (kd) and (ke) and to nonprofit building corporations to be used by the corporations for the retirement of existing indebtedness and such other payments as may be required under existing loan agreements, and for optional rental payments in addition to the mandatory rental payments under the leases and subleases in connection with the providing of facilities for such activities. A separate account shall be maintained for each campus, the center system and extension. Upon the request of the extension or any institution or center within the system, the board of regents may transfer surplus moneys appropriated under this paragraph to the appropriation and account under par. (kp).
For statutory reporting purposes, reserve funds (or reserves) are defined as cash on hand, less cash not earned (e.g., advance deposits) less commitments evidenced by outstanding purchase orders (i.e., encumbrances). Uses of reserve funds are described in Section IV, item 7.
The following provisions apply to all appropriation 128 activities:
- All auxiliary activities must be integral to the fulfillment of the institution’s instructional, research or public service missions or must meet one of the other four criteria specified in the Regent policy on competition with the private sector. That is, the product or service must be offered only if: i) there are compelling reasons of economic efficiency to do so; ii) the product or service is unavailable elsewhere in the community; iii) providing the product or service is a major convenience to the campus community or to members of the public participating in institutional activities; or, iv) offering the product or service is of major importance to maintaining the quality of the institution.
- Prices and rates should be established in accordance with the principles established in the Regent policy on competition with the private sector. See Attachment 2.
- Pricing/rates should be established in a manner that considers funding equity among successive cohorts of students/customers.
- Generally, revenues are to be expended for the auxiliary operation for which they were generated. Non-reimbursable transfers are subject to the criteria established in Attachment 1. Inter-program loans must be repaid with interest within a defined time period and must not adversely affect rates in the program making the loan during the period the loan is outstanding. The following additional management expectations pertain to student fee funded auxiliaries and to other appropriation 128 activities that are operated as a going concern and that have the need to accumulate cash for defined future needs such as equipment and facility replacement. Typically these additional management expectations apply to any appropriation 128 operation that has an annual activity level in excess of $50,000 unless special circumstances apply.
- Multiple year budget and program planning is essential to assure programmatic stability, fiscal soundness and funding equity among successive cohorts of students/customers.
- The use of generally accepted accounting principles is expected for effective fiscal management in order to ensure that revenues and expenditures are recognized and matched in the appropriate periods, that liabilities are fully recognized and that assets and their impairment are fully considered.
- Sufficient reserve funds should be accumulated to meet debt service requirements, to ensure that equipment and facilities can be maintained, replaced, remodeled or refurbished as needed, and to provide an operating cushion to offset short-term revenue losses or unanticipated expenditures. Institutions shall have a review process and multi-year plan in place to ensure that adequate but not excessive reserves are maintained. Reserve accumulations must be clearly linked to specific programmatic and operating needs. Anticipated ending reserve levels shall be projected as part of the annual operating budget. Funds in excess of appropriate reserve levels should be used to reduce rates in the next operating budget or, where appropriate, to smooth rates over the next several operating budgets. One-time surplus funds may be transferred to support other student related activities in accordance with the criteria in Attachment 1. See Attachment 3 regarding maximum and minimum reserve accumulations.
- For student fee funded auxiliaries, reserve accumulations that are anticipated to exceed 15% of the prior year’s revenue totals must be approved by the Secretary of Administration and the Joint Committee on Finance. See Attachment 4.
- Auxiliary rate increases are a part of the annual operating budget process and subject to the constraints established by Regent policy.
- Institution internal auditors will review the cash handling operations of major auxiliary operations on a regular cycle.
- Each institution will submit to System Administration – Financial Administration, in August, a report detailing its year-end fund 128 cash balance and providing sufficient information for System Administration to prepare the reserve plan required by s.36.46, Wis. Stats. The format and due date for this report will be prescribed in the annual year-end financial reporting instructions.
Institutions are responsible for ensuring the programmatic and fiscal soundness of their auxiliary operations and maintaining a written reserve plan.
System Administration will monitor the fiscal soundness of auxiliary operations through normal budgetary reviews and by means of the fiscal report submitted each August. In addition, System Administration staff assigned primary responsibility for the fiscal oversight of auxiliary operations will visit each institution on a regular basis to meet with institutional management and review auxiliary operations.