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Annual Working Capital

Directive Statement

The University permits the equivalent of 2 months of annual operating expense (calculated based on prior fiscal year) to be retained as “Working Capital” by an Educational Business Activity (EBA).

Reason for Directive

All Educational Business Activities (EBA), no matter the size, are subject to the cost principles set forth in the U.S. Office of Management and Budget Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards 2 C.F.R. §200 Subpart E §200.468 (“Uniform Guidance”).

Units must go through a rate development process to ensure an accurate composition of allowable costs on a cost recovery basis.  Although units may vary in size, complexity, and services provided by the units, they are required to follow common administrative practices.

Who must comply?

All educational business activities.

Acquiring Working Capital

EBA’s can acquire working capital by using an existing surplus, adding surcharges to external users, or transferring funds from non-federal sources.  Units cannot acquire working capital by increasing rates to internal users.

The EBA fiscal management must calculate the amount of working capital to be retained by unit.  Example: To calculate the maximum working capital the EBA is allowed to retain, take an average of two months of operating expenditures over the past fiscal year.

Total Expenses for the fiscal year ending 06/30/yy $150,000.00
Allowable Expenses Calculation ($150,000/12 months*2 months)
Total maximum allowable Working Capital $25,000

Definitions

Educational Business Activity

Revenue-generating activity from the provision of goods and/or services.  Such activity enhances, promotes or supports the University’s instruction, research, public service and campus support functions, and other educational and support functions in order to meet the needs of students, faculty, staff, and members of the public participating in University events and programs.

Working Capital

Working capital is an amount of expenditures the service center can retain to fund operations during fluctuations of revenue and expenditures.  This is the maximum balance the service center can retain in its operating budget at any given time.

Last Reviewed

05/01/2020: reviewed content

Resources

OMB Uniform Guidance, Subpart E, §200.420 through §200.475

EBA Authoritative Guidance

Contacts

Educational Business Activity/Auxiliary Accounting: (352) 294-7236

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