This page provides a simplified overview of deficit resolution for non-Contract & Grant (C&G) funds.
Users should refer to the full Deficit Resolution Policy for greater details and before undertaking deficit resolution. The policy also provides information about how to clear deficits and what happens if a deficit is not cleared.
Information about the new Contracts and Grants deficit clearing process (effective June 2016) can be found here: Contracts & Grants Deficit Clearing.
All units are expected to meet their operating needs within their available funding. Units should not carry forward deficit balances and will not be allowed to without an approved deficit waiver and resolution plan in place.
All Non-Contract & Grant (C&G) funds – including gift, endowment, general, revenue, and recharge funds– are subject to the deficit clearing program.
Non-Contract and Grant (C&G) Fund Waiver information can be found on the DFL Concierge webpage.
Units are expected to resolve operating deficits on their own throughout the year. When a deficit remains, the campus implements a technical Deficit Clearing Process (DCP), which will force a resolution of an operating deficit. As best practice, Units are highly encouraged to resolve deficits through their own intervention before the DCP process runs.
Resolving deficits may involve reclassifying expenses or redistributing resources through an operating transfer. The appropriate resolution will differ by fund and circumstance. All deficit remediation should follow procedures established by the controller’s office and can be referenced in the full policy document.
Campus enforces the deficit policy at the Fund-Department (L4) combination. This means that, at a minimum, the ending balance of each Fund-L4 combination may not be in deficit, even if individual chartstrings have surpluses and deficits. Ending balance is the beginning balance plus or minus the net of revenues, operating transfers, expenses, and fund balance transfers (the sum of accounts 30000 through 79999.)
Units can determine which L4-Fund combinations are currently in deficit by running the following deficit report in Cal Answers : "Dashboards>Fund Deficits Reporting>Deficits to be Cleared"
In general, deficits that are not cleared by year-end will be subject to the deficit clearing process. In short, the clearing process reclassifies expenditures from one fund to another (unrestricted) fund. Expenses are credited to the fund in deficit and expenses are debited from another fund with an available balance.
The expense credit and debit will always occur in the lowest numerical Dept ID within the given L4. This will resolve the aggregate deficit at the Fund-L4 combination but may leave lower-level chartstring deficits.
The order of fund(s) used on the debit side of the transaction (the one with the available balance) is pre-determined. The first available fund with a surplus balance in that L4 will be debited.
Waivers can be issued that exempt a Fund-L4 combination from the automated deficit clearing process. Departments may request a waiver if they believe they will incur a deficit in a Fund-L4 combination by year-end and there is a supportable reason to carry-forward the deficit. Waiver requests will not be considered for deficits less than $25,000 and all deficits must be resolved in a three-year period.
Before submitting a waiver request, departments are required to seek approval from their Divisional Finance Lead (DFL) or Chief Administrative Office (CAO). All submissions will then be vetted by the VC Finance’s office in collaboration with the appropriate DFL/CAO to prepare a recommendation. Approval decisions on waivers are made by the Vice Chancellor of Finance, with additional approval required by the Chancellor, where waiver requests exceed $1 million.
If you have further questions regarding the non-contracts & grants deficit clearing process, please contact the Financial Planning & Analysis team at dfl_concierge@berkeley.edu.