No. The Days Cash on Hand situation is not an operational liquidity issue. The university has no issues making payroll or meeting debt obligations. The Days Cash on Hand shortage, however, is a warning sign resulting from the university's expenditures outpacing its revenues, and the institution making up the difference with reserves.

Yes. A structural deficit is created when expenditures exceed revenues. For the past several years the university's expenditures have exceeded revenues, and this overspending accelerated in fiscal year 2023. In addition to short-term strategies to improve the university's cash position, the university is working to resolve the structural budget deficit.

Over the past several years, the university used its surplus in reserves to make investments in key areas that advance the Strategic Plan; support students, faculty and staff; and elevate the university's impact. That plan has proved effective. However, it has become clear that this level of investment cannot be sustained.

The longer-term issue is that the university's expenditures are outpacing its revenues.

Learn more about the background of the University of Arizona financial situation, including external and internal factors.

For fiscal year 2023, which ended June 30, 2023, the Arizona Board of Regents required the three state universities to have, at minimum, 140 Days Cash on Hand. The University of Arizona ended fiscal year 2023 with 110 Days Cash on Hand, or $704.5 million.

Cash is the common term for how much unrestricted liquid funds, cash and short-term investments, are "in the bank" right now.

• Cash can change significantly throughout the year given the inflow and outflow of revenues and expenses. For example, the University has an outflow of cash 26 times a year for payroll while there are three significant inflows of cash due to tuition payments in fall, spring and summer.
• Cash is typically at its highest point at the beginning of the academic year, when tuition payments are received, and again in early spring for the same reason. Conversely, cash is typically at its lowest point at the end of each fiscal year.
• A snapshot of cash, combined with total expenditures, taken on June 30 each year, is used in the calculation of Days Cash on Hand.

Days Cash on Hand is one of several measures that can reflect an institution's financial health.

• Days Cash on Hand is a once-a-year snapshot taken at the end of every fiscal year on June 30.
• Days Cash on Hand is calculated at the end of the fiscal year. It takes approximately one month for final accounting entries to be submitted and another month or two for the annual financial audit to be completed by the Arizona Auditor General. The university typically receives the final official figure somewhere between mid-October and mid-November.
• Days Cash on Hand is a formula. Basically, that formula is: June 30 Cash Snapshot divided by Final Actual Expenditures multiplied by 365 (days).
• This formula represents the average number of days the university could continue to operate without additional revenue based on the cash available in reserves on that day. Another way to describe Days Cash on Hand is unrestricted cash and investments that can be liquidated.
• This formula is estimated at the beginning of each fiscal year as a projection of what cash balances are believed to be at the end of the fiscal year. The actual figure is then calculated with audited values from the financial statements.
• ABOR currently requires universities to have, at the end of FY 2023, a minimum of 140 Days Cash on Hand.
• Days Cash on Hand is not a comprehensive measurement of the university's financial health. It is one key directional indicator of some systemic financial issues that need to be addressed and is a factor in the University's credit rating.

No. As a result of accelerated spending from FY 2022 to FY 2023, the university experienced a decline of $140 million in cash and investments, when comparing the university's cash position snapshot in June 2022 to its cash position snapshot in June 2023. Because the university both increased expenditures and spent down cash balances, at the end of fiscal year 2023 a combined increase in cash or reduction of expenditures of $240 million would have been required to return the university to the standard of Days Cash on Hand.

No. On June 30, 2023, the university had $704.5 million in unrestricted cash and short-term investments, which translated to 110 Days Cash on Hand. While this has left the university 30 days short of the minimum number of Days Cash on Hand required by ABOR, it is not a cash problem for the university. Because of the trend of expenditures outpacing revenues, the university is working to resolve the structural budget deficit.

The university uses a forecasting tool to predict the final position of the Days Cash on Hand snapshot. For the last decade, the tool produced accurate results.

The financial forecast process for FY 2023:

• In March 2023, it was reported to ABOR that the University would have an estimated 156 Days Cash on Hand on June 30, 2023.
• In November 2023, following the annual audit of FY 2023, the university confirmed the amount of Days Cash on Hand was 110 on June 30, 2023 – 30 days short of the ABOR-required minimum. The financial forecasting tool overestimated by 46 days because it did not account for collective accelerations in spending.

The forecasting tool has been replaced and additional budget controls are being implemented.

As part of its regular operations, the university lends funds to colleges and units that need an investment, particularly when revenue is reasonably assured but the unit needs a bridge to proceed with immediate needs. Units repay these funds at a low interest rate.

• Due to the extraordinary circumstances of the last few years, including those resulting from the pandemic, the university supported its athletics operations through one-time bridge loans in the amount of $40.2 million in FY 2021, $14.8 million in FY 2022 and $31.6 million in FY 2023. Prior to the pandemic, Athletics was essentially a financially self-supporting unit.
• The university provides scholarships for student-athletes. Other than scholarships, prior to the pandemic the university's athletics program had been essentially self-sustaining.

The University of Arizona is independently audited every year by the State Auditor General. The university's audited FY 2023 financial statements earned a clean opinion.
 
The university's financial statements are published on the Financial Services website and can be accessed online.

The university's total reserves include centrally and non-centrally managed funds. While the university has tight controls on centrally managed funds, it has not had the same level of control over the funds that are not centrally managed.

Going forward, leaders will intervene more proactively and earlier using further-improved management and oversight tools.

The university's bond rating could have an impact on the costs of borrowing funds for capital projects, such as major construction. The rating does not affect daily operations, as state law does not allow for the university to take out bonds for its operations. The "negative" outlook is based on its understanding – at this point in time – of the university's ability to adjust expenses and its relatively narrow liquidity (cash reserves) compared to the size of its operations. This new outlook could, but is not certain to, increase the university's borrowing cost if and when it issues bonds for construction projects. 

The ongoing implementation of the financial action plan will assure the University of Arizona can stand on solid financial footing for decades to come. The current actions being taken as part of the plan are ensuring the university will continue providing outstanding educational experiences for our students, research that drives economies and improves lives, and outreach that benefits millions.

The University of Arizona Foundation is a nonprofit organization and is separate from the university. Generally speaking, donations are either restricted or unrestricted. Restricted gifts are for a particular purpose and cannot be used for anything else. The overwhelming majority of the gifts that come through the Foundation are restricted and therefore cannot be used to offset the shortfall.

No. Granting agencies award money for specific projects and the university cannot legally allocate the money to other areas.