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Formalizes the connection between the university’s strategic plan and the issuance of debt including coordinating debt management decisions with asset management decisions to optimize the overall funding and portfolio management strategies.
One of the objectives of the Internal Bank is to facilitate the long-term financial stability of the university through effective asset liability management.
Focuses on meeting financial cash needs during the operating cycle (sources and uses limited to five years).
Provides guidelines for suitable investments while maximizing the efficiency of the university’s cash management program. Operating assets are invested in the Public University Fund (PUF) managed by the Oregon State Treasury and governed by the Public University Fund Investment Policy. Endowment assets are managed by the Oregon State University Foundation (OSUF) governed by the Oregon State University Fund Management Agreement and Board-approved OSUF Endowment Fund & Pooled Investment Policy.
The university monitors five financial ratios to assist the Board in evaluating debt capacity and affordability, as described below.
1. Viability Ratio (balance sheet leverage ratio) Expendable Resources (inclusive of Foundations) / Debt measures the ability to repay debt with financial resources and the ability to use debt to strategically advance the university’s mission
2. Primary Reserve Ratio (income statement leverage ratio) Expendable Resources (inclusive of Foundations) / Total Expenditures measures whether financial resources are sufficient and flexible enough to support OSU’s mission
3. Debt Burden Ratio (affordability ratio) Debt Service / Total Expenditures Minus Depreciation plus Principal Payments measures OSU’s dependence on debt to finance its mission and the relative cost of borrowing to overall expenditures Guideline maximum debt burden ratio = 7%
4. Debt Service Coverage (affordability ratio) Three-Year Average Net Operating Income plus Non-Operating Revenues plus Interest and Depreciation / Debt Service measures the sufficiency of operations on a cash flow basis to cover debt service
5. Debt / Revenues (income statement leverage and affordability ratio) measures the amount of leverage relative to the size of operations