CORPORATE RESERVE POLICY/CODE

Section 1

Purpose

1.01

The following Reserve Policy provides criteria for the management and Boards of the Associated Students and the staff of the University to measure the adequacy of the A.S. Corporate Reserves, lease arrangements, mandatory fee rates and to guide in allocation from Corporate Reserves for repair, replacement, facility modification and other projects.

1.02

The Associated Students shall maintain local reserves in four categories: Equipment Replacement; Future Facility; General/Working Capital and Program. In addition, three additional Aztec Center related reserves are held by the Chancellor's Office in Long Beach. They are: The Bond, Interest and Redemption account; The Major Repair and Replacement Account; and the Operating Revenue Fund.

Section 2

Equipment Replacement Reserves

2.01

Equipment Replacement Reserves shall be maintained in each managed program division for each program area to provide a method to spread costs for replacements and major repairs evenly across budget years and reserve for anticipated future equipment replacement needs. Reserves shall be funded annually through an allocation from the operating budget based on average annual costs for projected repair and replacement needs. All equipment replacement and major repairs (in excess of $1,000, but less than $10,000) shall be funded from the appropriate equipment replacement reserve by an offsetting "reserve allocation." As part of the annual budget process, the Five-Year Repair and Replacement Schedule shall be updated.

Section 3

Program Reserves

3.01

Each A.S. Division and major program shall maintain a program reserve. These reserves shall be used for emergency operating expenses, to offset unexpected shortfalls in anticipated income, and to purchase new equipment, as appropriate. These reserves shall be funded from net budget savings, if any, from the corresponding division or major program area.

3.02

Minimum reserve balances shall be five per cent of the current year's operating budget. Only emergency allocations shall be made from program reserves with balances below the minimum. Programs with reserves below minimum shall submit to the Finance Board a plan to return Reserve to minimum. Maximum reserve balance shall be ten percent of the current year's operating budget. Funds in excess of the maximum individual program reserve shall be transferred to the Future Facility Reserve.

Section 4

General/Working Capital Reserves

4.01

The Associated Students shall maintain General/Working Capital Reserves in the General Activities and Aztec Center Funds. These reserves shall be used to provide working capital, produce interest income for operating expenses, and serve as the "Program Reserve" for the "non-Program" budgets of the Corporation including the Business Office, Executive Director's Office, Government Office, Operations, Program Support and Information Booth Budgets.

4.02

When a motion is made to make an allocation for any purpose from the General Reserves, the motion is required to be prefaced by stating: "I move that we make an exception by allocating.... For.... from the General Reserves..."

4.03

Allocations from General Reserves must be approved by 2/3 majority in Finance Board and A.S. Council.

Section 5

Future Facility Reserves

5.01

The Associated Students shall maintain a Future Facility Reserve to be used to fund facility expansion and major modification (in excess of $10,000). Allocations from this reserve shall be made in accordance with the Facility Master Plan approved by the Associated Students Council and the University President and shall include an approved financial plan for reimbursing the fund preferably within 24-36 months. Funds from this reserve may, upon approval, be transferred to Equipment Replacement Reserves for unanticipated repair or replacement needs and reimbursed as specified above.

5.02

Original funding in 1987 for this reserve was provided by several facility-related funds held by the Associated Students. This historical reference is provided with the intent of assuring appropriate consideration by campus/Associated Students decision-makers for capital projects that previously might have been funded before the reserves were centralized. Reserve balances at the time the Reserve Code was established (86-87) are listed below. Reserve balances for the most recent year ended June 30th are attached as "Exhibit A".

Aztec Center Future Development $39,323
This reserve was funded from net budget savings from the Aztec Center Division in excess of that designated for the Aztec Center Working Capital Reserve.
Concessions $178,050
This reserve was funded from net earnings from the A.S. Concessions activities.
Monty's Den Equipment Replacement $122,681
This reserve was funded from a percentage of rentals from Aztec Shops for Monty's Den. $10,000 was transferred from this reserve to an Equipment Replacement Reserve (see above) specifically for repair and replacement of existing Monty's Den equipment.
Open Air Theatre $74,727
This reserve was funded from net revenues from the Open Air Theatre (produced from rental paid by promoters). $10,000 was transferred from this reserve to an Equipment Replacement Reserve (see above) specifically for repair and replacement of existing Open Air Theater Equipment.
Student Recreation Facility $662,405
This reserve was funded from net revenues from the Open Air Theatre (produced from rental paid by promoters). $10,000 was transferred from this reserve to an Equipment Replacement Reserve (see above) specifically for repair and replacement of existing Open Air Theater Equipment.
Racquetball Reserve $80,119
This was a sub-account of the Student Recreation Facility Reserve and was funded from a percentage of user fees at the Racquetball Courts.

Section 6

Aztec Center Reserves

6.01

The Bond, Interest and Redemption Account

Basically, this must contain an amount equal to 125% of the projected debt service requirement the following fiscal year, and is retained in the State Treasury.

6.02

The account balance must be maintained at approximately 10% of the original bonded debt or $300,000. Annual transfers into this account of $20,000 will need to continue until the fund together with any earned interest, achieves the desired fund balance. These funds are also retained in the State Treasury.

6.03

Aztec Center Operations

The excess of revenues placed in the Operating Revenue Fund, after required transfers to the Bond Interest and Redemption and the Major Repair and Replacement account, are made available during the ensuing fiscal year for the support of Aztec Center Operations. The Aztec Center's local operating account has been maintained by the Associated Students. This account is budgeted separately, and the sources and use of funds are separately accounted for.

6.04

Reserve Requirements

Required funding through Operating Revenue Fund for bond interest and redemption.
1. The terms of the Operating Revenue Fund are controlled by the bond indenture as long as any of the bonds are outstanding. If the bonds are paid off in serial fashion, as is presently scheduled in the bond indenture itself, this will occur in the year 2006. In the meantime, it is necessary to transfer to this account all sources of pledged revenue.
2. Disposition or use of this account will be made by the State, first to the reserve for Bond Interest and Redemption account. This reserve is administered in accordance with the terms of the bond indenture through the remaining life of the issued bonds.
3. The indenture requires that the assets in this fund be maintained at a level at least equal to 125% of the funds required to meet scheduled bond interest and redemption for the next year. The amount required for bond interest and redemption varies from year to year throughout the life of the bonds. For example, the principal amount due annually is $70,000. This increases in 1989 to $80,000, in 1993 to $90,000, in 1997 to $100,000, in 2000 to $110,000, in 2003 to $120,000, and finally, the principal due in the year 2006, $130,000. Interest payments due each year are in addition to the amount of the principal.
Required funding through Operating Revenue Fund for major repairs and replacement.
The required balance for major repairs and replacement is $300,000 as defined by the bond indenture, and is funded through the operating revenue fund after commitments for bond interest and redemption have been met. As initially funded in 1968, and considering current inflation rates, this reserve would provide only limited resources for major repair or replacement needs. As previously mentioned, we are contributing $20,000 annually to this fund.

STANDING COMMITTEE CODES