Internal Loan ProgramWVU employs a debt philosophy used by many other universities to strategically use its balance sheet resources. WVU reviews the need for financing capital items in relationship to the whole balance sheet. At times, external debt will be used and at others times internal sources will be used to finance university and departmental capital expenditures.
WVU has consulted with other universities in constructing this concept and have implemented industry best practices. One such practice is the semi-annual setting of rates for internal loans based on the university’s external ‘cost of capital’ or the rate at which the university would likely borrow in the market. This rate is charged to all departments to acquire capital assets.
WVU Treasury Operations oversees the debt structure for the university including the internal loan program. When an internal loan is approved, a formal agreement is signed by the ‘borrowing’ department’s vice president as well as the Associate Vice President of Planning & Treasury Operations. The agreement includes an amortization schedule for the full payback period. Internal loans are also executed between the departments and Treasury when external debt is used to finance an asset so that all external debt has an identified internal funding source.
Through this process, WVU utilizes the full resources of its balance sheet to make investments in its capital assets as well as operations.
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