A5000.60 Management of Financial Reserves

Operating Standard

Type: Administrative
Responsible: Vice President of Admin Services
Related Policies: B3006 Financial Condition, A5100 Budget Excellence
Linked Procedures: A5000.00….A5000.125
Related Laws: ILCS 805/3-20
Related Standards: GASB Statement No. 54, GFOA Guidance, Moody’s Investor Service “Scorecard” Rating System 2014
HLC Criterion: 5B5B The institution’s resource base supports its educational offerings and its plans for maintaining and strengthening their quality in the future.

A5000.60 Management of Financial Reserves



In keeping with recommendations from the Government Finance Officers Association (GFOA) and National Advisory Council on State and Local Budgeting (NACSLB), this policy establishes parameters that guide the management of financial reserves, which are to be maintained as “financing bridges.” Further, this policy prescribes how fund balances are to be used and replenished.

Fund balances maintained at levels prescribed in this policy protect taxpayers and employees from unexpected changes in financial condition, protect the college against financial instability and help in meeting future needs.  To those ends, the following factors are considered:

  1. The predictability of revenues and the volatility of expenditures;
  2. The perceived exposure to significant one-time outlays (i.e., disasters, one-time capital facility needs, capital equipment, state budget cuts);
  3. Potential drain upon general fund resources from other funds, as well as availability of resources in other funds;
  4. Liquidity of funds;
  5. The potential impact on the entity’s bond ratings and the corresponding increased cost of borrowed funds; and
  6. Commitments and assignments of funds for other purposes.

The Vice President of Finance and Operations is responsible for monitoring reserve levels and reporting current and projected reserves annually in the budget document.  The Vice President of Finance and Operations shall report whether considerations have been identified that would warrant consideration of a change in recommended fund balance threshold(s).



Minimum Threshold

Maximum Threshold


Four (4) Months Operating Expenditures

Eight (8) Months Operating Expenditures

Working Cash

Three (3) Months Operating Expenditures

Six (6) Months Operating Expenditures

Liability, Protection & Settlement

Six (6) Months of Fund Expenditures

Twelve (12) Months of Fund Expenditures

Capital Projects


No Maximum


Prioritization in Use of Fund Balance

When an expenditure is incurred for purposes for which both restricted and unrestricted (committed, assigned, or unassigned) funds are available, the College will use restricted funds first, unless determined otherwise in the professional judgment of the Vice President for Financial and College Operations.


Use of Funds

Fund balance in excess of the levels set in policy may be used to create and/or fund reserves established by the Board of Trustees for specifically identified uses (i.e. capital investment in facilities, retirement of debt, liability accruals, etc.).  Excess unrestricted fund balance may also be used to replenish other funds which may are below established policy parameters.  These include, but are not limited to, Capital Project funds.  Further, fund balance may be used to pay operating expenditures when necessary to maintain the quality or a defined level of services.


Replenishment of Funds

If a particular fund, or series of funds, is predicted to fall below the parameters established in this policy, within six months of budget adoption, the President shall present a plan to the Board of Trustees that will replenish fund balance(s) to the policy level within three (3) years, depending upon the economic realities at the time.  Factors influencing the replenishment time horizon include:

  1. The budgetary reasons behind the fund balance targets;
  2. Recovering from an extreme event;
  3. Political continuity;
  4. Financial planning time horizons;
  5. Long-term forecasts and economic conditions;
  6. External financing expectations.

Resources to be used for replenishment include nonrecurring revenues, budget surpluses, and excess revenues from other sources in other funds (if legally permissible and there is defensible rationale).  Year-end surpluses are an appropriate source for replenishing fund balance.


Change Log
Date Description of Change Governance Unit
04.05.21 Initial Adoption VP of Admin Services
06.13.24 Converted to new template