Doc. T18-026, as amended, Passed by the Board of Trustees on September 19, 2018 (as Reserves Policy & Presidential Standards) Latest revision: June 2, 2026, Purpose, The purpose of this Fiscal Health Policy ("Policy") is to manage financial risk to ensure the fiscal health of the University of Massachusetts ("University"), including the establishment and use of reserves, fiscal health metrics, and associated reporting requirements., I. Introduction, The ability of the University to fulfill its mission to provide affordable, accessible, high-quality education and conduct leading-edge research is highly dependent upon fiscal health, including the maintenance of adequate University reserves, manageable debt levels, and strong operating performance. This policy provides the framework for managing financial risk by establishing, maintaining and…, II. Definitions, The University's Fiscal Health Metrics are defined as follows:, Debt Service Coverage Ratio:, Measures the ability of the University to make debt service payments from annual operations. Higher ratios indicate capacity for new capital investments, flexibility during economic downturns, and lower risk to lenders., Operating Margin:, Measures whether and by how much the University’s annual operating revenues cover its annual operating expenses. Operating Margin is the annual surplus or deficit as a percentage of operating revenue. Consistent positive operating margins support fiscal health., Total Cash and Investments to Adjusted Debt Ratio:, Measures the University’s coverage of adjusted debt against assets that generate investment return. The ratio highlights the University’s ability to repay debt and other debt-like obligations, such as P3 debt/equity and pensions, from wealth that can be accessed over time or for a specific purpose. Higher ratios support borrowing capacity., Total Cash and Investments to Operations Ratio:, Measures the size of the University’s financial resources and liquidity relative to its annual operating expenses, indicating how many months or years of operations the University could fund using its available cash and investments without relying on new revenue. Higher ratios mitigate short-term volatility or unexpected revenue and/or expense challenges., III. Policy, The University shall establish targets for Fiscal Health Metrics to ensure responsible, long-term fiscal management and resiliency and mitigate current and future risks to the University’s financial sustainability. The University shall build, maintain, use, and replenish reserves in accordance with this Policy and individual campus strategic plans. The University shall account for, and campuses…, IV. Responsibilities, The President and Chancellors shall implement and manage to the Policy and Administrative Standards., V. Administrative Standards, The President, in consultation with the Senior Vice President for Administration & Finance and Treasurer and Chancellors, shall promulgate Administrative Standards to define: calculations for each Fiscal Health Metric; reserve targets; funding sources; designations; and to otherwise implement this Policy., VI. Related Policies and Reports, This Policy should be implemented in conjunction with, and any proposed changes should be reviewed along with, the following University policies and reports: University Debt Policy – T09-050 Capital Planning, Land and Facility Use Policy – T93-122 Quasi-Endowment Policy – T07-018 Report – 5-year Financial Forecast Report – University’s Annual Operating Budget Report – University’s Annual Audited…
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