Subject: System Internal Loans
The purpose of this APL is to establish the policy by which University of Maine System Governance and University Services (UMSGUS) may provide loans to campuses to fund all or a portion of costs of plant, real property, renovations/additions, or other approved purposes.
B. Requirements and Process
- Internal borrowing will be considered only after all other sources of funds have been reviewed and when compelling reasons are present. Typical uses include covering a construction project deficit, taking advantage of a special opportunity, or funding a project pending receipt of a committed gift.
- The campus Chief Business Officer (CBO) will submit a request for an internal loan to the System Treasurer along with supporting information. The campus President must be aware and supportive of the internal loan, including the proposed amount and the intended use prior to the request.
- Supporting information to be submitted with the request should include anticipated:
- total project costs or other financial need, various funding sources and amounts, and the anticipated internal loan amount,
- project cash flow by quarter,
- loan repayment period, and
- a debt service schedule, which the Controller’s Office will provide upon request.
- Any loan request of $500,000 or more must be approved by the Board of Trustees.
- Estimated debt service payments must be included in future budgets.
- The loan term will vary depending on the circumstances with preferred repayment over five years or less. The Treasurer will consider requests for longer terms based on individual facts and circumstances except that the term of the borrowing will not exceed the estimated useful life of the asset that is being financed.
- Payments will be due on July 1st; however, for loans made in anticipation of pledge collections, payments will be due on the 1st day of each calendar quarter coinciding with collections as detailed in the internal loan agreement. The System Controller’s Office will automatically debit the payment from the account specified in the agreement.
- The interest rate will be fixed when the internal loan is executed, or as otherwise agreed, and will be tied to the Treasury rate (External Site) that corresponds with the loan repayment period.
- At least a month before needing a loan advance, the campus CBO will provide the Controller’s Office with the project’s updated quarterly cash flows. The Controller’s Office and the CBO will then work on the timing of the advance(s), the internal loan agreement, and the repayment schedule. The agreement will be signed by the campus President, CBO, and System Treasurer. Upon receiving the executed agreement, the Controller’s Office will transfer the loan proceeds to the specified account.
- The outstanding balance of total loans issued by UMSGUS may not exceed 40% of UMSGUS’ available unrestricted net position determined in accordance with GASB Statement No. 35 Basic Financial Statements – and Management’s Discussion and Analysis – for Public Colleges and Universities except that this balance shall first be adjusted for any negative balance remaining from the implementation of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions.
- APL Section III-H: Debt Policy
- Board Policy Section 712 Debt Policy
- Board of Trustees Policy Section 701: Operating and Capital Projects
Approved by the Treasurer of the University of Maine System. Official copy on file in the Treasurer’s office.