Fiscal Operations Manual
Section 700: Reserves and Investment Management
Effective: 01/01/2003
Revised: 03/19/2012

Self-sustaining organizations such as Auxiliary Enterprises and Service Centers should be financially prudent and set aside funds for equipment replacement per OUS 55.100 Fixed Assets Accounting Policies.

An equipment reserve fund is required for every proprietary fund carrying capital asset balances greater than $150,000. The reserves are to be used to repair or replace the capital assets or functionality of those assets used in the operation of the Service Center or Auxiliary.

The reserve fund’s balance and cash should be sufficient to promote the efficient and effective operation of the related operating unit.  The accumulated depreciation balance is used as a guide to determine sufficient funding.  

Funding of reserves should be performed in a timely manner.  Ideally the entry would be performed after the monthly postings of accumulated depreciation. This is accomplished by a manual journal entry as follows (cash inter-fund will flow with these entries):

  Debit Proprietary Fund _____ Account Code F0002 Fund Deductions to Reserves

    Credit Equipment Reserve Fund _____ Account Code E0002 Fund Additions from Proprietary Funds

Note: If funding of reserves would put the proprietary fund’s cash or fund balance in a deficit, reserve deficiencies can be recovered over the next ten years using current deficiency recovery methodology (only the accounting entries and timing of posting entries would differ.)

Replacing equipment that was fully depreciated and removed from inventory requires an additional transaction from the reserve to the proprietary fund to cover the cost for the replacement asset. The amount of funds removed from equipment reserves may not exceed the value of the replacement asset being purchased.

  Debit Reserve Fund _____ Account Code F0001 Fund Deductions to Other Funds

    Credit Proprietary Fund _____ Account Code E0001 Fund Additions from Other Funds.