The Internal Bank (IB) integrates the three primary functions of treasury management: (1) cash management, (2) limited term investment management (i.e., management of non‐endowment assets), and (3) debt management (both short‐ and long‐term). The IB manages about $765M in assets as of June 30, 2018 from a combination of activities involving operating cash, bond proceeds, and loan payments while utilizing external consultants to assist with the management of the investment and debt portfolio.
Internal Bank Central Loan Program
The Internal Bank (IB) distributes funds for capital projects and strategic initiatives through the Central Loan Program. Funds available for lending include the following:
- Proceeds from new debt issuance.
- Proceeds from repayment of internal loans via the Central Loan Program.
IB liquidity, to be provided through university cash or external borrowing, after considering:
- Anticipated external debt service requirements
- Operating cash flow needs
- Operating costs of the Internal Bank
- Adequacy of IB reserves, such as an interest rate reserve (The IB may build and maintain an Interest Rate Reserve to hedge future volatility in debt and investment markets.)
The Central Loan Program can provide lending to departments or units for:
- Interim/bridge financing in anticipation of philanthropy or other external sources of funds.
- Financing options for projects with an identified internal/operations repayment source accompanied by an amortization schedule consistent with the useful life of the project.
Internal Bank Funded Loan Types
Temporary loans are used to provide funding on an as‐needed basis during project construction. Temporary loans pay monthly interest on the total balance outstanding plus any current negative balance. Internal Bank funds are advanced, up to the maximum loan amount, as the project requires. Principal payments are typically not made on temporary loans with the exception of gift funded loans where principal amounts may be paid during the construction process as gift funds are received.
Permanent loans are used for asset purchases or when a construction project is substantially complete. Debt service payments on permanent loans to amortize the project’s cost over the stated loan term are made on a semi‐annual basis.