Borrowing Controls and Debt Management Policy

Responsible Unit: Finance | Executive lead: CFO 
Created: 2008 | Reviewed/Revised: 5/2011; 6/2016; 1/27/2023 | Effective: 1/27/2023 
Compliance: NWCCU 2.E.1, 2.E.2, 2.E.3
Approving Body: Board | Classification: Institution-wide 

Policy:  

  1. Financing agreements: Following review by the Finance Committee, the Board of Trustees shall approve all financing agreements, amendments, or modifications. The Board of Trustees may delegate authority to the president or chief officers of the university to execute approved financing agreements within stated parameters. 
  2. Long-term debt accounts: Long-term debt account balances shall be monitored monthly to ensure the proper interest and principal payments are reconciled 
  3. Capital leases: All leases shall be analyzed upon signing to determine whether they are operating or capital leases and to comply with Generally Accepted Accounting Principles (GAAP) regarding the classification of leases. 
  4. Debt covenants: Debt covenants shall be calculated as required by the terms of the debt agreement, at least annually. 

Definitions: 
Capital leases are classified as fixed assets and depreciated over the term of the lease. 

Procedure: 

  1. Financing agreements: The Finance Committee reviews the terms and conditions of all financing arrangements and recommends the agreement to the board. The Board of Trustees approves these agreements via board resolution. 
  2. Long-term debt accounts: All balance sheet accounts are reconciled monthly by the controller and reviewed and approved by the CFO for accuracy and validity. 
  3. Capital leases: The CFO shall analyze all leases and determine whether capital or operating. 
  4. Debt covenants: The CFO, or assignee, prepares the debt covenant schedule to determine compliance with the debt covenants. The president and Finance Committee are notified of any anticipated non-compliance. 

Related documents: 
Fixed asset accounting policy 
IC6 – n/a for PNWU: Security agreements are maintained properly 
C1 – Financing agreements are properly approved. 
IC3 – The Board of Trustees approves all financing agreements, amendments or modifications after review by the finance committee. 
IC2 – Financing agreements are restricted so that only designated individuals may borrow funds.
IC4 – Are subsidiary records (such as amortization schedules) for financing arrangements routinely and frequently reconciled to the general ledger, and are interest accruals appropriately made? 
IC5 – Capital leases are appropriately identified and recorded. 
IC7 – Compliance with terms/covenants is adequately monitored, and performed on a frequent and routine basis. 
Property and Equipment Management policy 

Policy Resources

For assistance with policies and procedures contact:

Lori Fulton
lfulton@pnwu.edu