Most could operate less than a month on reserves. The National Association of College and University Business Officers recommends that sound business practices be applied to the management of institutions. They further suggest that operating reserves are a characteristic of good management. National accreditation agencies also recognize the importance of reserves in best management practices. Loss of accreditation results in the loss of faculty positions, inability to attract new faculty, decreased value of diplomas.
Lost accreditation puts student loans in jeopardy.
Loans account for more than half of the students enrolled. The items characterized as fund balances include many non-liquid assets. Among the assets counted in fund balances are textbooks in libraries and fuel for fleet cars. The dollars that are encumbered for expenses already incurred are not available for expenditure. Fund balances include receivables and prepays, which are not available for operating expenses.