GOVERNANCE AND ORGANIZATION

Reserve Funds

In recognition of its fiduciary responsibility, the Board of Trustees will exercise control over the administration of Colby Community College funds, services, and property. The Board will establish policies that provide oversight over the financial stability and security of the College while providing management discretion required to handle day-to-day operations of the College.

Scope

Colby Community College reserve funds (unrestricted net assets) are subject to this Policy. Reserves are defined, for the purpose of this Policy, as audited year-end unrestricted net assets, including such sources as general fund, tuition, fee revenue and auxiliary revenue, but not including the reserves for compensated absences. Further, sources of funding that are for pass through (e.g., Kansas Board of Regents), for Federal or other special purpose grants, or are associated with long-term KPERS pension and KPERS health care liabilities, are not included in the reserve calculation or subject to this Policy. The reserves of the College will accumulate through management of revenues and not by annual allocation of resources through the Board approved budgets.

Minimum Reserve Requirements

The Board hereby establishes a minimum unrestricted net asset balance to be held in reserve by the College equal to 6% of the prior fiscal years audited average operating expenditures for the fiscal year. This calculation shall exclude the following: depreciation, non-Student Financial Aid federal program expenses, disbursements for the Area Vocational Schools and the Local District Colleges, and long-term KPERS pension and KPERS health care liabilities. Beginning in FY 2020-21, and all fiscal years thereafter, the minimum unrestricted net asset balance to be held by the College shall increase to 7.25%. Reserve levels shall be calculated for the College as a whole based on audited financial statements for the fiscal year most recently closed.

Use/Expenditure of Reserves

Any use of reserves for capital projects or operating expenses above the expense threshold where Board approval is required must be included in the College’s master plan and/or program plan and be presented to the full Board in an agenda item for approval. Capital projects, for the purpose of this Policy, are defined as those requiring a program plan by the management of the College.

Colby Community College has the discretion to expend reserves unless the following conditions exist:

1. Spending would drop the reserve balance for the College below the minimum required by this Policy;
2. Spending from reserves would result in a commitment to ongoing costs and expenditures that cannot be supported, or which would affect the overall budget allocation to the College; or
3. The College has not yet achieved the minimum reserve required by this

When any of the above conditions exist, reserve spending must be approved by the President or the Board, as appropriate, prior to expenditure.

The President may approve expenditures below the required reserve balance in the following situations:

1. The College incurs an emergency that requires immediate action. In such circumstances, other sources of funding shall be sought
2. If such funds are not available, the President will immediately notify the Board Chair of the situation giving rise to a need to expend below minimum reserve requirements, but is authorized to permit expenditures that reduce the reserve below the required
3. The College has an opportunity that enhances the quality of programs or services provided but that requires up-front investment. The President is authorized to permit expenditures that reduce the required reserve level to not less than 3% of audited average annual operating expenses. The President is required to consult with the Board Chair in advance of issuing approval of such expenditures. The College is required to submit in writing a cost benefit analysis of the opportunity investment and a plan with timelines for restoring the reserve to the required

The President Reserve dollars shall only be used to assist the College faced with extreme financial circumstances. The Board shall be notified in advance of any such use of these reserves for this purpose.

Reporting

After fiscal year-end close and the completion of the financial audit, the College Controller shall report to the Board the reserves (unrestricted net assets) for the College for the fiscal year just completed based on audited Financial Statements. If the College has unrestricted net asset levels that equal more than half of the Colleges’ prior fiscal year audited operating expenditures, the President shall include a report to the Board that outlines the future uses of these funds.

For any use of reserve for capital investment as outlined above or for any situation in which the President has authorized an expenditure from reserves that reduces the level below the Board established Policy, the President shall report in writing to the Board at the next meeting of the Board the situation that gave rise to the need to take reserves below the required level.

Procedures

The President shall promulgate such procedures as may be needed to implement this Policy.

 

[Updated January 2020; November 2020]