University Contingency Framework

  1. Background

Effective July 1, 2018 Sonoma State established a University Operating Fund Reserve Policy to help guide reserve planning efforts in addition to the University Designated Balances and Reserves, the University also has an annual contingency that is base budgeted in the University Wide division. The contingency allows flexibility for the campus to cover unexpected costs each year. This framework will provide guidelines on spending practices for these sources of funds in conjunction with and in support of the University Operating Fund Designated Balances and Reserves Policy.

  1. Definitions

Contingency: An ongoing, base budgeted source of funding that is set aside annually yet is not committed for a specific purpose. The contingency may be used on an exception basis, as approved by the president, to cover unexpected costs or revenue decreases within a given year. Unspent contingency at year-end will be allocated to reserves. (Note: The contingency is part of the annual operating budget in the University Wide division and is not covered within the Reserve Policy).

Reserve: An accumulation of unrestricted funds set aside for economic uncertainties, unexpected expenses, losses, cash flow shortages, large repair or renovation projects, the acquisition and development of new facilities, and/or for future planning purposes. Reserves are a one-time source of funding. Once reserves are spent, they are gone, unless replenished from an alternate funding source.

  1. Contingency Framework Principles

It is important to set guidelines around spending contingency funds to ensure resources are utilized appropriately and ensure contingency funds are not being spent on an ongoing basis for items that should themselves be base funded.

  1. Contingency Budget Goal

Contingency budget goal: 2%-3% of Base Operating Budget

  1. Contingency Framework Guidelines

Contingency funds are to be utilized based on the following guidelines:

  • Expenses which affect the University on a holistic level or when Divisions have limited funding for essential needs.

  • Allocations made on a yearly basis should have a plan to identify funding for future financial stability.

  • Contingency funds should be utilized before Operating Reserves when possible.

  • Funds should be utilized in alignment with campus strategic priorities and goals.

Approved by Judy Sakaki, President, 5/25/2021