Ask SSC . . .
Where Is There a Code Provision Governing Internal Borrowing?
Q. In your recent article on “Cash Flow Issues Grow with Delay of State Budget,” in the August 29, 2008 Community College Update, you mentioned internal borrowings—temporary cash transfers between funds—as one option to choose from in bridging a cash shortage. You didn’t provide an Education Code reference for that option, and I could not find any Education Code provision authorizing internal, as opposed to external, borrowing.
A. We are not aware of any provision governing internal borrowing by a community college district in either the Education Code or Title V. However, the 2000 Edition (most current) of the Budget and Accounting Manual does provide some guidance on this. We quote from one of the provisions on page 4.6 of that manual:
7300 Interfund Transfers-Out
Interfund transfers are money that is taken from one fund and added to another fund without an expectation of repayment. Generally, moneys can be transferred only when the use of the moneys in the receiving fund is not inconsistent with any restriction on its use in the sending fund. An example of an interfund transfer would be the required match for scheduled maintenance that is transferred from the General Fund to the Capitol Outlay Projects Fund.
It should be noted that moneys held in any fund may be temporarily transferred from one or more funds to another fund to be used for the payment of obligations, provided no provisions to the contrary exist. Such transfers are not reported here, but are reflected in the balance sheet accounts “Due to Other Fund” and “Due from Other Funds.”
—Deborah Harmon