Approved: Earlham College Board of Trustees, October 18, 2013
Jump to: Debt | Capital | Endowment | Gift procurement | Investment policy | Reporting | Audit committee | Asset protection | Other
The following financial policies have been approved for the purpose of guiding and directing the financial affairs of the College:
A. The College will operate with a balanced budget presented annually by management to the Board of Trustees (Board) for approval prior to the beginning of the fiscal year. Draws from unrestricted reserves to balance the budget will be approved in advance by the Board. Adjustments to the budget can be made during the fiscal year as needed to maintain the budget in a balanced state. Budget revisions will be required if in aggregate the budget adjustment(s) varies more than one percent of the operating budget and the revision will be approved by the Board.
B. Budget estimates for enrollment and gifts will be made based on a minimum of three years of historical data. Other lines within the budget will be projected based on historical data and reasonable analysis.
C. A contingency will be built into the operating budget. This amount is to provide a margin of comfort for unexpected revenue shortfalls and expenditures over budget.
D. The budget committee of the College will develop a rolling five-year comprehensive budget which will be updated annually. This multi-year budget, which includes operational and capital expenditures, will be made available to the property & finance committee in its fall meeting.
A. Debt service for all borrowing will be a part of the multi-year comprehensive budget. Debt service on unplanned borrowing during a fiscal year must be funded within the budget for that fiscal year and thereafter.
B. Borrowing between the unrestricted and endowment funds is allowed within the following guidelines:
1. Borrowing must be approved by the Board.
2. A note must be signed indicating repayment terms.
C. New borrowing within a fiscal year for normal operations will be permitted without Board approval within an aggregate principal total of one percent of the operating budget. Any borrowing in excess of the one percent will require Board action.
Capital projects in excess of $100,000, that are not budgeted, will be approved by the Board in advance. In the event of an emergency for which more than $100,000 of expense is incurred, the president and vice president for finance will approve the expenditure and inform the chair of the board as soon as prudently possible. Funding for the project must be composed of liquid assets in hand, collectible pledges in hand and/or approved borrowing. Debt service on borrowed funds will be a part of the construction budget until the project is complete and the operating budget when complete. A plan for covering operating expenses resulting from new construction will be developed prior to beginning construction.
A. Endowment funds shall be invested in accordance with the Investment Policy reviewed by the property & finance committee and approved by the Earlham College Board of Trustees and the Earlham Foundation Board.
B. The spending policy for endowment is a part of the investment policy and is consistent with UPMIFA regulations. This policy will address both earnings to be recognized as income and earnings to be distributed to temporarily restricted funds.
C. The College will remain fully in compliance with the terms of endowment, gift and annuity agreements.
V. Gift procurement
Gifts will be accepted within the gift procurement policy reviewed by the advancement committee and approved by the Board.
VI. Investment policy
College investments other than endowment will be maintained within the guidelines of an investment policy reviewed by the Property & Finance committee and approved by the Board.
A. Reporting for budget operations comparing budget to actual will occur monthly to management and department conveners, and to the full Board at all regular meetings. Significant variances from budget will be explained to the Board. The multi-year comprehensive budget projection (five-year rolling projection) will be presented to the property and finance committee at its fall meeting.
B. A current Statement of Financial Position will be provided quarterly to lenders as required and to the full Board at all regular meetings.
VIII. Audit committee
On behalf of the full Board, the audit committee will operate in compliance with the charter as developed by the audit committee and approved by the full Board.
IX. Asset protection
Adequate insurance protection for property and casualty risk, worker’s compensation, director and officer’s liability coverage will be in effect at all times.
A. The budget advisory committee of the College will be composed of faculty, staff and students per the committee’s charge. They will meet on a regular basis and as needed to deal with the comprehensive budget of the College. Their responsibilities include review of the multi-year comprehensive budget, recommending tuition, room and board rates to the Board and recommendation of a budget for Board consideration at its spring meeting.
B. The College financial records will be audited annually by an external audit firm as designated in the winter meeting by the Board. Evaluation of the audit firm will be done annually by the audit committee and a recommendation made to the board. A report will be made by the external auditing firm to the audit committee at its fall meeting. As required, a 403b audit will also be conducted annually and results of that audit will be reported to the audit committee.
C. Any designation of unrestricted surplus and/or major unrestricted gifts to designated purposes will be recommended by the President and approved by the Board.
D. Covenants in loan documents will be kept at all times.
E. Department of Education financial ratios will remain within the zone or above (1.5 to 3.0).
F. Compliance with governmental regulations for filing of form 990, form 990T, submitting of payroll withholding and student financial aid audit reporting and all other governmental reporting will be done as required by law.
G. Contractual agreements will be signed by officers of the College or as otherwise designated in the bylaws.
H. The College will operate within generally accepted accounting principles and report its financial condition within those same standards.
I. Competitive bids for externally contracted work will be required for amounts in excess of $50,000.
Exceptions to this financial policy may be granted by the full board as deemed prudent.