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7.01 Budget Overview

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Policy Information

Policy Number: 7.01Effective Date: 7/20/2012
Responsible Unit: Office of Budget & PlanningLast Revised Date: 03/17/2026
Email: BDGT-Service@arizona.eduPhone: 520-621-1634

Purpose and Summary

To establish comprehensive guidelines for budgeting, Fund Balance management, and reserves at the University to ensure financial stability, prevent deficits, and maintain appropriate liquidity aligned with Arizona Board of Regents (ABOR) requirements.

Source

Arizona Board of Regents Policy, including but not limited to 3-401, 3-402, 3-403, 3-404, 3-407, 3-410 

Arizona Revised Statutes

Scope

This policy applies to all University departments, colleges, and units across all Fund Types and Planning Funds.

Definitions

Budget Authority: Permitted spending level, also called Expenditure Authority. Colleges/Divisions and departments are not authorized to spend more than the Budget Authority provided. Budget Authority is set by the President, CFO, and Provost for each college/division and loaded within the university’s budgeting systems for tracking of expenditures against the total authorized amounts. 

Carryforward: Budget Authority approved above the current year allocation within General funds or above current year revenues in Enterprise funds. Amounts loaded and authorized are based on all or part of the prior year’s ending Fund Balance and are designed to be used only for one-time strategic initiatives. 

Fund Balance: The accumulated difference between assets and liabilities, also known as net position or net assets.

Fund Types and Planning Funds: The Planning Funds hierarchy is an alternative reporting hierarchy from that presented in Policy 2.01. Whereas Policy 2.01 covers basic fund accounting principles and use of funds for external financial reporting, Planning Funds are used in the budget and planning tools to aggregate and report information for management reporting and simplified internal financial management. 

General Funds: General-purpose resources used to support university activities. 

  • Operating Funds (STA, ALC, SLI(1)): Resources received by and distributed from central administration at an institutional level.
  • Enterprise Funds (AUX, DES, CRS): Resources collected at the unit level through sales of goods and services or the direct assessment of fees to students or customers. 

Other Designated Funds: Funds designated internally for specific purposes, including:

  • Banner Funds (BAN, BNN): Banner Operating and Non-Operating funds 
  • Dean’s Tax (DNT): Revenues generated at partner hospitals and provided to the university to support medical and health education
  • Financial Aid (FIN): Revenues received and distributed for student financial aid
  • Service Centers (DR): Funds with the majority of revenues generated from charging federal and sponsored awards for goods or services used in research or other university services
  • Research Development Funds (IDCDEV): Revenues set aside from facilities and administrative indirect cost recovery to support research start-up and investment opportunities
  • Provost Investment Funds (PIF): Revenues from general funds set aside to support academic start-up and investment opportunities
  • Other Designated (ODE) Include:
    • Fixed Price Complete contracts (Sub Fund FIXEDP)
    • Trademarks & Licenses (Sub Fund TRDMRK)
    • Medical Education & Residency Programs (Sub Fund MEDPRG)
    • IDC Regents Funds (Sub Fund IDCREG) 

Restricted Funds: Resources with restrictions placed on them by external parties, such as donors, ABOR, or granting agencies, including: 

  • Federal Agriculture (Sub Fund FED)
  • Sponsored Projects (Fund SPN)
  • Technology Research Initiative (Fund TRF)
  • Gift, Endowments, and Other Restricted (Fund OTH) 

Reserve: A portion of the Fund Balance intentionally set aside for specific strategic purposes, contingencies, or emergencies, and/or to meet liquidity requirements established in accordance with this policy, ABOR policy, and all relevant Arizona Revised Statutes. 

Days Cash on Hand: The number of days the University could operate with available unrestricted cash, cash equivalents, and investments, calculated in accordance with ABOR requirements.

Policy

  1. Fund Balance Requirements

    1.1 No Deficit Positions: All departments, colleges, and Planning Funds must maintain positive Fund Balances at the end of each fiscal year.
    1.2 Monitoring: Units must review financial performance monthly and perform in-year forecasting quarterly. Reviewing performance includes monitoring and adjusting forecasts based on year-to-date performance against budget and prior year actuals. It includes estimating year-end revenues, expenditures, and changes in net position, as well as underlying drivers of performance, including sales activity and cost drivers, such as changes in operating expenses and personnel. Please consult the Office of Budget and Planning and associated forecasting and budgeting tool guidelines for additional information.

  2. Fund-Specific Reserve Requirements

    2.1 General Funds
    Academic Colleges
    • Reserve Target: Maintain a minimum Fund Balance of 10% of annual operating expenses, measured as the year-ending balance against prior-year actuals. Larger balances for some funds or accounts may be required, as determined by the CFO. Reserves beyond these minimum amounts are permitted as needed, to support college operations.
    • Purpose: Support strategic initiatives, faculty start-up costs, accommodate enrollment changes, and ensure academic excellence
    • Responsibility: Dean and Provost
    Support Units
    • Reserve Target: Maintain a Fund Balance of 5% of annual operating expenses, measured as year-ending balance against prior-year actuals
    • Purpose: Ensure continuous support services and adapt to evolving institutional requirements.
    • Responsibility: Unit Director and respective Vice President/Vice Provost
    Auxiliary Units
    • Reserve Target: Maintain Reserves of 25% of annual operating expenses, measured as year-ending balance against prior-year actuals
    • Purpose: Address service and product line demand fluctuations and support capital improvements
    • Responsibility: Unit Director and respective Vice President/Vice Provost
    • Capital Contribution: Each auxiliary unit will have annual capital expenditures, or contributions to capital reserves, of at least 1.5% of the replacement value of equipment
    2.2 Other Designated Funds

    2.2.1 Banner Funds, Dean’s Tax, Financial Aid, Fixed Price Complete, Trademarks & Licenses, Research Development Fund, Medical Education and Residency Funds, Provost Investment Fund

    • Reserve Target: Funds are managed on a cash basis, and deficits are prohibited. Budgeting tools are available to aid in fund management
    • Purpose: Support the designated purpose of the fund
    • Responsibility: Principal Investigator, Department Head, and Dean or Vice President/Vice Provost


    2.2.2 Service Centers

    • Reserve Target: Maintain a Reserve sufficient to cover service demand changes and other investments, not to exceed 90 days (25%) of annual expenses. Budgeting tools are available to aid in fund management. Service Center accounts with balances generated from revenues external to the university are permitted to exceed 90-day reserves as needed to support the operations of the units.
    • Purpose: Ensure continuous operation and regular equipment updates when the Service Center has been approved to establish an Equipment Reserve (See 5.00 Equipment Reserve in the Rate Studies Handbook).
    • Responsibility: Service Center Director and Dean or Vice President for Research Operations
    2.3 Restricted Funds

    2.3.1 Gift Funds

    • Reserve Target: No specified target exists. Funds are managed on a cash basis, and deficits are prohibited. Budgeting tools are available to aid in fund management if desired.
    • Purpose: Managed according to donor intent and University of Arizona Foundation policies.
    • Responsibility: Fund administrator and Dean/Director of the beneficiary unit
    • Transfer Process: Transfers from the University of Arizona Foundation (UAF) must follow the Foundation's policies, including quarterly forecast requirements for operational expenses exceeding $20,000. Please see the Foundation Fund Transfers section for more information. 


    2.3.2 Other Restricted Funds - Federal Agricultural Funds, Technology and Research Initiative Funds

    • Reserve Target: No specified targets exist. Managed on a cash basis, and deficits are prohibited. (Federal Agricultural Funds will not have a deficit at the end of the federal fiscal year.) Budgeting tools are available to aid in fund management.
    • Purpose: Managed according to stakeholder intent
    • Responsibility: Fund administrator and Dean/Director of the beneficiary unit


    2.3.3 Sponsored Funds (SP)

    • Reserve Target: Funds are managed on a budget basis, and deficits are prohibited. The Sponsored fund is managed by Sponsored Projects processes and budget practices. Please refer to Sponsored Projects for additional information.
    • Purpose: Managed according to sponsor intent
    • Responsibility: Principal Investigator (PI) and Vice President for Research Operations
    2.4 Institutional Reserve Requirements

    To align with ABOR Policy 3-407.03 guidelines for days of cash on hand:

    • Target Range: The University shall maintain days' cash on hand within plus or minus 25% of Moody's Median for the Higher Education sector. This target will be recalculated annually based on the current industry median.
    • Monitoring and Reporting: The Chief Financial Officer (CFO) shall report quarterly to the President and annually to ABOR on the status of institutional reserves, per ABOR Policy 3-407.

  3. Financial Reporting Requirements

    Per ABOR Policies 3-407 and 3-410:

    3.1 Quarterly Financial Status Updates: The University shall provide quarterly financial status updates to ABOR within 40 days of the end of each quarter, including:

    • Budget monitoring information
    • Liquidity monitoring information
    • Cash balance reporting


    3.2 Annual Financial Reports: The University shall provide audited annual financial reports to the ABOR Audit and Risk Management Committee each November, including:

    • Audited annual financial report
    • Ten-year financial ratio analysis

  4. Policy Review

    The Division of Finance and Budget shall review this policy annually to assess its effectiveness and recommend adjustments.

Compliance and Responsibilities

Board of Regents

  • Set overalld financial policies
  • Review institutional financial health

President and Executive Leadership

  • Ensure compliance with the policy
  • Approve exceptions to the policy when warranted

Chief Financial Officer

  • Oversee implementation of the policy
  • Report regularly on financial status
  • Review and approve the use of Reserve exceptions
  • Authorize expenditures from central reserves
  • Oversee University-wide financial health
  • Approve significant financial remediation plans
  • Provide strategic direction for financial management

Chief Budget and Fiscal Management Officer

  • Manage day-to-day implementation of the policy
  • Oversee financial monitoring systems
  • Coordinate quarterly reporting

Deans and Vice Presidents/Vice Provosts

  • Ensure unit compliance with the policy
  • Manage unit Fund Balances
  • Ensure proper forecasting and adherence to Budget Authority

Finance Officers, Department Heads, and Directors

  • Monitor departmental finances monthly
  • Maintain appropriate Fund Balances
  • Ensure proper forecasting 
  • Adhere to Budget Authority

Compliance Requirements

  1. Units with negative Fund Balances must develop a remediation plan within one year of incurring a deficit that enables them to achieve a positive balance over a timeline agreed upon by the Chief Financial Officer. 
  2. The Office of Budget & Planning will monitor compliance with this policy and report non-adherence to the Chief Financial Officer quarterly
  3. Repeated non-compliance may result in increased central oversight, restriction of financial authority, or disciplinary action

Exceptions

  1. The Chief Financial Officer may grant exceptions to minimum Reserve requirements based on documented strategic needs or extraordinary circumstances
  2. Requests for exceptions must be submitted in writing with justification and a plan to return to compliance
  3. Exceptions are granted for a maximum of one fiscal year and must be renewed annually if needed

Procedures

Budget Planning and Control Processes

Annual Planning Cycle

Annual Budget Planning (November-April):

  • Comprehensive multi-year planning process for all funding sources
  • Informs Budget Authority decisions for the upcoming fiscal year
  • Aligns resources with institutional priorities

Original Budget Development (April-August):

  • Annual Budget Planning forecasts into detailed operating budgets
  • Establishes expenditure authority at the college/division level
  • Units notified of their Budget Authority amounts via a memo from Chief Financial Officer
  • Office of Budget & Planning loads approved expenditure authority
  • Colleges/divisions distribute authority to departments by the established deadline

Original Budget Execution (July-June): 

  • Monthly expenditure plans submitted to the Office of Budget & Planning
  • Staffing plans developed under established authority
  • Regular monitoring of budget-to-actual performance

In-Year Forecasting Cycle:

  • Open July-December and March-June (closed during All Funds period)
  • Continuous process to project year-end financial results
  • Incorporates actual results and updated projections
  • Informs quarterly financial status updates to ABOR

Expenditure Control Framework

  1. Budget Authority Establishment
    • No unit of the university (college/division or department) is permitted to spend more than its Budget Authority. Budget Authority is defined by Planning Fund as outlined below.
    • General Funds: Based on established FY Expenditure Authority to include a combination of local sources, allocations, and Carryforward
      • Operating authority comprises institutional base allocations and one-time transfer allocations between units
      • Enterprise authority comprises revenues generated within the unit
      • Budget Authority is controlled and maintained centrally by the Office of Budget and Planning
      • Authority can be moved between units without an overall change in total university authority
      • Net change (revenues less expenditures) in Operating Funds is always expected to be zero or greater without express written permission from the CFO to utilize the reserve Fund Balance
    • Other Designated Funds and Restricted Funds: Based on a combination of current-year revenue and prior-year ending Fund Balance. Budget Authority is determined by the minimum reserve thresholds outlined above and the Fund-Specific Requirements for the unit and planning fund. Use of Fund Balance by an individual college or division will need prior approval from the Chief Budget and Fiscal Management Officer. If a unit wishes to expend a portion of these funds, an expenditure plan must be submitted as part of the annual budget planning process or mid-year, if unanticipated expenditure needs arise. All or part of expenditure plans may only be implemented after approval by the CFO.
    • No additional allocations without CFO authorization
    • Each college/division develops staffing and expenditure plans aligned with authority
  2. Authority Adjustments
    • Enterprise funds expenditure authority may be increased if revenue exceeds projections. CFO approval required if the increase exceeds $1M.
    • Operating fund authority will not be increased to cover local revenue shortfalls
    • Units must decrease expenditures accordingly if revenue falls short
    • Requests for additional Budget Authority for unforeseen needs must be submitted to the Chief Budget and Fiscal Management Officer
  3. Carryforward
    • Must obtain approval from the CFO for the use of Carryforward
    • Carryforward is to be used only to support one-time costs, not ongoing costs such as new positions
    • Fund balance is not automatically added to the annual expenditure authority as Carryforward
    • Once additional authority is provided, the Office of Budget and Planning will load additional spending authority from Fund Balance
  4. Monthly Monitoring
    • Regular review of financial performance against budget using Budget Balance and/or Income/Expense reporting
    • Identification of variances and corrective actions
    • Updated projections of year-end results
    • Quarterly reporting to senior leadership and ABOR
  5. Deficits
    • No deficits are permitted in either Operating Funds or Other Designated Funds.
    • If a deficit is incurred, it must be recovered in the next fiscal year.
    • If it is not feasible to recover an existing deficit within one fiscal year, then each Dean/Division leader must submit a multi-year plan for deficit recovery for review with the CFO and (if applicable) the Provost.

Foundation Fund Transfers

  1. Advance Planning: Following the University of Arizona Foundation (UAF) Policy, units should request transfers from the UAF in advance of need. If a UAF source backs a University gift account, transfers should always be initiated before spending occurs.
  2. Quarterly Forecasting: For operational expenses exceeding $20,000, units may only request funds needed for the upcoming quarterly period (next three months).
  3. Please see the UAF Policy for exceptions and documentation requirements for Capital project funding.

Budget Management Process

Per ABOR Policy 3-407.02, the University's financial management structures must provide:

  1. Centralized Planning: Employ a centralized, university-wide financial planning and budgeting process
  2. Transparency: Provide the Board with sufficient financial data and information to verify financial health
  3. Adaptability: Employ mechanisms to absorb or adjust for changes in the operating environment, maximize opportunities, and minimize risks between budget cycles
  4. Due Diligence: Exercise due diligence in monitoring and projecting financial outcomes at the unit and university levels
  5. Reserve Expenditure Control: A division, college, or other unit of the University must obtain specific written permission from the Chief Financial Officer to expend dollars counted in the University's unrestricted cash reserves

Frequently Asked Questions

  1. We manage a multi-year Dean/Faculty Start-up Commitment, and it is not always clear which fiscal year and, therefore, Expenditure Authority these expenses will occur in. How would you advise we manage this complexity?
    Where possible, these commitments should be planned over a multi-year time horizon and incorporated into submitted plans, budgets, and forecasts. When costs arise that are not in the plan, units may spend Fund Balance from Restricted or Other Designated funds so long as they have received prior approval from the Chief Budget and Fiscal Management Officer. An expenditure plan must be submitted as part of the annual budget planning process or mid-year if unanticipated expenditures arise. All or part of the expenditure plans may be implemented only after approval by the CFO.
     
  2. My college/division has ended the fiscal year in deficit in either General or Other Designated funds. It is not feasible that we will recover this deficit within a single year. What advice do you have for us? 
    Submit a multi-year plan for deficit recovery for review with the CFO.
     
  3. We operate an Auxiliary unit that is part of a larger academic enterprise and is subsidized by its revenues. Because of this arrangement, we are unable to maintain the requisite 25% reserve. What should we do?
    Submit a memo to the CFO outlining the nature of the subsidy and the request for an exemption to the reserve requirement outlined in the policy.
     
  4. Because of potential economic downturn, faculty commitments, or other factors, we would prefer to maintain a reserve above the thresholds listed – can we?
    The reserve thresholds listed for Academic Units/Colleges and Auxiliaries are recommended minimums. Units are welcome to and encouraged to maintain larger reserves. Non-Academic/Support Units are encouraged to stay close to the minimums provided. These balances may be returned to institutional reserves.

Related Information

  • Arizona Board of Regents (ABOR) Policy 3-101: Accounts and Fund Depositories
  • Arizona Board of Regents (ABOR) Policy 3-402: Detailed State and Local Fund Operating Budget
  • Arizona Board of Regents (ABOR) Policy 3-407: Financial Status Updates
  • Arizona Board of Regents (ABOR) Policy 3-407.02: Principles for University Financial Management
  • Arizona Board of Regents (ABOR) Policy 3-407.03: Liquidity Measures
  • Arizona Board of Regents (ABOR) Policy 3-410: Annual Financial Reports
  • Financial Services Manual
  • University of Arizona Foundation Financial Services Policies & Procedures Manual