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University of Nebraska Internal Lending Program Policies, Procedures, and Statement of Investment Objectives and Guidelines

The Internal Loan Program (ILP) has been established to support the long-term stewardship of the University's financial resources. The ILP allows the University to manage these financial resources holistically across the system. The ILP seeks to decouple external financings and internal lending such that the University can strategically reinvest in future projects and initiatives. This policy outlines the framework that will govern the program and the process for internal lending.

1. Program Overview

   The ILP is established within the Office of the Vice President for Business and Finance (VPBF). The ILP will provide funding for approved capital projects and programmatic initiatives across the University and its campuses. The program will be managed in a manner consistent with University policies regarding the incurrence of obligations related to external financing and approval of capital projects. Benefits of the ILP include a stable borrowing rate to campuses and reduced institutional financing costs.

   Commencing January 1, 2020, all new internal loans for approved capital projects and programmatic initiatives will be between the Office of the VPBF and specific campus units. Interest rates and terms on each loan will be documented in a loan acknowledgment and will not be dependent upon the timing or terms of the University's external financings.

2. ILP Management

   1. Roles and Responsibilities: The ILP will be administered by the Office of the VPBF. The Office of the VPBF will have responsibility for setting rates, terms, and other internal lending guidelines. The Office of the VPBF will also provide periodic reports to the Board of Regents' Business and Finance Committee as described herein.
   2. Available Uses: The ILP can only be utilized for internal loans as described within and to cover administrative costs of the program.
   3. ILP Assets: The ILP's assets will consist of outstanding internal loans and funds received from campus units to repay outstanding internal loans. Funds will be invested per the Statement of lnvestment Objectives and Guidelines.
   4. ILP Liabilities: External University financings will be pursued primarily through incurring obligations to the University of Nebraska Facilities Corporation, which will issue bonds, short-term notes, and other instruments

   External financings will be structured separately from ILP loan structures and will seek to match the useful life of the assets being financed with the tenor of its liabilities.

3. Internal Loan Approval Process

   1. Approval Process: Campuses, including the University of Nebraska Central Administration (UNCA) and University Technology Development Corporation (UTDC) subsidiaries or institutes, are eligible to participate in the program. Campuses will request internal loans according to the following steps. Formal requests as described below should be made on a quarterly basis of each fiscal year (January 1, April 1, July 1, October 1). The Office of the VPBF also reserves the right to receive requests for internal loans outside the normal quarterly cycle.
      1. Campus Approval: Units (i.e. colleges, departments, centers, etc.) will request campus approval from their respective Chief Business Officer (CBO) and Chancellor. The campus approval request will be documented with an Internal Loan Application that includes the following information:
         1. Project/program description or business plan;
         2. Relationship to University/campus strategic plans;
         3. Total project/program cost and description of funding source(s);
         4. Source of debt service repayment;
         5. Financial risks and mitigation measures; and
         6. Other internal loans outstanding.

      Please refer to Appendix A of this policy for the Internal Loan Application form.

      2. Formal Request: After campus approval is obtained, the campus will forward the request including a completed Internal Loan Application signed by the Chancellor or CBO to the Office of the VPBF.
      3. Final Approval: Internal loans may be approved by the President or the VPBF. Internal loans will a total par amount of $5 million or more should be included and identified as a funding source in the capital project program statement provided to the Board of Regents for approval.
   2. Loan Acknowledgment: Upon final approval, the terms and conditions of each internal loan will be documented in a Loan Acknowledgement which will be executed by the borrowing unit and either the President or the VPBF. The Loan Acknowledgement will include a schedule of principal and interest payments due over the life of the loan.

4. Internal Lending Guidelines

   A. Legacy Internal Loans: Total campus obligations related to projects financed prior to October 1, 2019 will remain unchanged (i.e. outstanding housing, parking, and other historical Master Trust Indenture (MTI) debt). These legacy internal debt service obligations will be converted to equal monthly principal and interest payments for the remaining life of the loans. However, the total debt service paid over the life of the loans will not change.