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ROWAN UNIVERSITY POLICY

 

 

Title: Debt Management Policy
Subject: Financial Management: Guidance for the Use and Management of Debt
Policy No: FIN: 2008:01                                                           
Applies: University-Wide                  
Issuing Authority:   President
Responsible Officer:   Senior VP for Finance and CFO
Adopted: 6/4/2008
Last Revision: 12/23/15
Last Reviewed:

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I.    PURPOSE

This Debt Policy serves to articulate Rowan University’s philosophy regarding debt and to establish a framework to help guide decisions regarding the use and management of debt.  As the University establishes institutional priorities through its strategic planning processes, including its campus master planning, the University will consider utilizing an appropriate mix of financing and funding sources, including State funding, gifts, internal reserves and investments, and external debt.  This policy will help ensure that an appropriate mix of funding sources are utilized, that the University’s debt capacity is allocated strategically, and that Rowan University’s debt levels and types of debt are appropriate and responsible, given the University’s financial strength and risk tolerance levels.  

II. ACCOUNTABILITY   ACCOUNTABILITY

Under the direction of the President, the Senior VP for Finance and CFO shall ensure compliance and implementation of this policy.

III.  APPLICABILITY

This policy applies to all that are involved with the Debt Issuance and Management process. 

IV.  DEFINITIONS

  1. Primary Reserve Ratio = Expendable Net Assets/Total Expenses – This ratio provides a snapshot of financial strength and flexibility.  A positive ratio or increasing trend over time may indicate increasing strength in financial condition. 
  2. Viability Ratio = Expendable Net Assets/Long Term Debt – This ratio measures the availability of expendable net assets to cover debt.  A strong viability ratio is one measure of the University’s ability to respond to adverse conditions, attract capital from external sources, and maintain flexibility to fund new objectives.
  3. Return on Net Assets Ratio = Change in Net Assets/Total Assets –This ratio measures total economic return and can be used to indicate whether the University is financially better or worse over time.
  4. Net Income Ratio = Change in Unrestricted Net Assets/Total Unrestricted Revenue – This ratio measures success of financial operations for a given year.
  5. Actual Debt Service to Operations = Debt Service/Total Operating Expenses - Measures the ability to pay debt service associated with all outstanding debt and the impact on the overall budget.
    1. These ratios exclude the impact of GASB 68

V. POLICY   POLICY

  1. Debt is a valuable source of capital project financing, and its use should be limited to projects that relate to the mission and strategic objectives of the University.  
  2. The amount of debt incurred impacts the financial health of the University and its credit rating.   The University will consider other funding opportunities (e.g., joint ventures, real estate development, public private partnerships, grants, etc.) when appropriate and advantageous to the University. 
  3. Opportunities and financing sources will be evaluated within the context of the Debt Policy.

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