Vice-President, Finance and Resources
Authorization: Board of Governors
Approval Date: Dec 17, 2004
Amended: Jan 1, 2010
Organizational units are expected to manage unit expenditures within limits specified by their Approved Operating Budget or as specified by other revenue sources for those activities where a budget has not been approved. There may be circumstances where expenditures for capital in a given year exceed the funds available to the organizational unit. A mechanism is required whereby units can finance capital purchases and still operate within authorized expenditure limits.
The purpose of this policy is to outline the requirements for financing equipment and capital purchases by means of internal loans.
This policy is not intended to apply to internal loans of less than $100,000. This policy does not apply to financing for the on-going costs of operations.
Approval of an internal loan does not provide a guarantee. Responsibility for repayment of the loan and related financing costs will remain with the borrower organizational unit.
The University should manage its resources to ensure that financing costs are kept to a minimum. Departments must evaluate the cost and benefits of financing purchases by internal university loans.
The University may provide financing to a college or administrative unit for the purpose of funding capital projects. Qualifying capital projects include, but are not limited to, capital renovation projects and capital equipment purchases including computers. Where the University has authorized an internal loan for these purposes, to enhance accountability, a unique loan fund will be established and the loan proceeds will be transferred to the organizational unit requesting the financing assistance. The University may also provide financing via a loan arrangement to subsidiary companies with authorization of the Board of Governors.
Amount Eligible for Loans
Internal loan terms may not exceed the useful life of the asset. Generally, the maximum loan terms are:
The loan term may vary depending on the useful life of the asset or in special circumstances.
In order to ensure that organizational units know the applicable financing costs, and to ensure that the university is not exposed to interest rate risk, the rates are intended to compensate for the opportunity cost of lost investment revenue, and are based on the University's cost of financing.
These rates are as follows:
Recognizing that the opportunity cost of lost investment earnings is a real cost to the Operating Fund, interest assessment will not be waived. However in cases of undue financial hardship, upon application by the borrower, a grant-in-lieu of interest assessment may be approved by the Provost's Committee on Integrated Planning (PCIP).
For any internal loan greater than $100,000, the following procedures will apply:
FSD ensures that an annual report is provided to the Board summarizing any loan agreements and activity for the period.
There are no other documents associated with this policy.
Contact Person: Director, Student Accounts and Treasury, Financial Services Division