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Negative STIP

Learn about negative Short Term Investment Pool (STIP) balances, their consequences, and how to avoid them.

STIP calculation is based on the average daily cash balance of individual funds. A fund with a positive average daily cash balance produces STIP earnings, or positive STIP. A fund with a negative cash balance produces STIP charges, or negative STIP.

Understanding negative STIP

  • Recorded income doesn't mean cash has been received.
  • Financial balances, not budgetary balances, are used to calculate STIP.
  • Advancing cash for travel, human subjects, or petty cash purposes can result in negative STIP.

Negative STIP is similiar to overdraft protection offered by banks. When a fund with a negative cash balance, STIP "loans" it money from a fund with a positive cash balance. Negative STIP is the cost of this "loan". Negative STIP occurs most often when spending money before expected (awarded) income is received.

  • Example of negative STIP due to pre-spending

    A UCSD researcher received a $100,000 grant from a charitable foundation for a project period of 1/1/08 – 12/31/08. When the grant was awarded, UCSD established a new fund for the grant, established a $100,000 accounts receivable, and recorded $100,000 in fund income. The project incurred $25,000 in payroll and other expenses from 1/1/08 – 3/31/08. But the $100,000 check from the foundation didn't arrive until 4/30/08. This resulted in 3 months of negative STIP on the $25,000 since cash was expended for expenses before cash was received.
  • Example of negative STIP due to travel advance

    On 10/1/07, a researcher received a $2000 travel advance from the department. The award check arrived on 1/1/08. By 1/1/08, the fund incurred 3 months of negative STIP because of the $2000 travel advance, which was outstanding from 10/1/07 through 12/31/07.

Avoiding negative STIP

Two primary campus tools in FinancialLink help you manage the critical timing of cash receipts, expenditures, and other transactions:

  1. General ledger trial balance: Use this report to see the current cash balances for a fund in account 110000. A credit balance in account 110000 indicates a fund has negative cash. If this credit balance remains for any duration, the fund will likely generate negative STIP. You can also see all other current balances which affect a fund's cash balance, including revenue (account 305000), expenditures (account 306000), transfers (account 307000), accounts receivable, and advances.

    Example: The report would show these balances at 3/31/2008:
    • Interfund cash $25,000 cr
    • Accounts receivable $100,000 dr
    • Revenue control $100,000 cr
    • Expenditure control $25,000
  2. Fund summary: This report is also helpful, but its fund summary includes only revenue, expenditure, and, if applicable, transfer activity for a fund. It doesn't include accounts receivable, advances, and similar balance sheet activity. A debit fund summary balance may indicate the likelihood of negative cash, and thus, negative STIP.

Consequences of negative STIP

Occasional negative STIP on a fund may not be a significant problem if there is enough positive STIP to offset what is received. Negative STIP becomes problematic if it causes permanent fund overdrafts or is unallowable per the terms of the funding agency. Departments must come up with alternative funding for net negative STIP.

Departments

General Accounting