The NACUBO Defense
How Administrative Choice is Masked as Accounting Necessity
Portland State University has declared retrenchment, placing faculty positions across multiple departments at risk of elimination. The administration frames the crisis as a structural deficit requiring permanent cuts to the academic workforce. The question of university reserves is therefore not an accounting technicality; it represents an existential threat to the institution’s academic core.
During the April 2026 Faculty Senate meeting, a senator posed the question that should have framed the entire discussion: whether the formula governing the university’s reserve buckets remained appropriate and required periodic review as conditions change. The senator observed that institutional failure would spare no department, making it necessary to examine whether the reserve buckets are funded sustainably. The administration provided no answer.
The Senate received instead a prepared address on the inviolability of fund accounting, tied to an organization most faculty have never heard of: the National Association of College and University Business Officers (NACUBO). President Ann Cudd described NACUBO as “the primary authority for higher education financial management.” She stated that the university “relies on standards set by” the organization, invoking its name to explain why non-Education and General (E&G) reserves could not be redirected to cover academic operations. This framing presented fund segregation as a matter of strict institutional compliance rather than administrative choice. The claim carried weight. It was delivered with the cadence of settled law. And it was misleading.
The Illusion of Authority
NACUBO is a membership trade association founded in 1962. It represents more than 2,500 colleges, universities, and higher education service providers by publishing the Financial Accounting and Reporting Manual, running professional development programs, conducting endowment surveys, and lobbying Congress on behalf of campus finance officers.
NACUBO is not a regulatory body, a standard-setting authority, or an enforcement agency. It does not issue binding rules, audit institutions, or possess the power to sanction a university that departs from its recommendations. The actual standard-setting authorities for a public university like Portland State are the Governmental Accounting Standards Board (GASB), which governs accounting standards for state and local entities, and the state legislature and Board of Trustees, which set governance and fiscal policy.
Within the Generally Accepted Accounting Principles (GAAP) hierarchy for public institutions, NACUBO guidance is classified as nonauthoritative literature. The University of Colorado’s Controller’s Office, for instance, lists NACUBO alongside several other nonauthoritative sources, noting that the appropriateness of such literature depends on its relevance, specificity, and the general recognition of the issuer. Calling NACUBO “the primary authority” for university financial management is akin to calling the American Medical Association the primary authority for federal drug regulation. The AMA publishes guidelines. The FDA makes rules.
The Prepared Text
The Senate record captures an abrupt shift in register. In the minutes preceding the NACUBO passage, President Cudd spoke in a conversational mode, noting that tuition revenue and state appropriations fund the E&G reserves. Without transition, the language changed: “The university relies on standards set by the National Association of College and University Business Officers, often referred to as NACUBO, which serves as the primary authority for higher education financial management.”
That statement is not extemporaneous speech; it is a prepared text read into the record. It was deployed to answer a question no one asked. Senator Peters had inquired about self-support courses as an alternative revenue source for departments. President Cudd dismissed the idea as “not best practice” and immediately pivoted to the NACUBO address, which concerned fund transfers rather than revenue generation. The script awaited a prompt, but it did not wait for the right one.
The Buried Admission
The NACUBO statement constructed a layered argument against using non-E&G reserves for academic operations. According to the administration, NACUBO standards prohibit it. Fund accounting methodology prohibits it. Clifton Larson Allen (CLA), the external auditor, prohibits it. Student Fee Committee guidelines, the Board’s reserve management policy, and the January 2025 Executive and Audit Committee memo all ostensibly prohibit the action.
Then, in a single subordinate clause near the end of this litany, President Cudd stated: “While no specific law forbids a one-time reallocation, it is the judgment of the administration and the board that doing so would be fiscally irresponsible.”
After several minutes of constructing the impression that external authorities, professional standards, and legal constraints foreclosed the option, the president conceded that no law actually forbids the transfer. The entire preceding structure was erected to make an administrative preference sound like a regulatory prohibition.
The Internal Concession
The administration’s own finance officer offered a second concession. Before President Cudd launched the NACUBO address, she asked the Vice President for Finance to speak to the risk management reserve. The Vice President confirmed the reserve is funded primarily through a charge on the general fund and volunteered: “That is the one reserve that we can absolutely revisit how we do it.” She noted the risk management fund is the smallest reserve, totaling $2.5 million.
Minutes later, President Cudd characterized any reallocation of non-E&G reserves as “a breakdown of that integrity and a diversion of resources from the specific services they were intended to support.” The university’s finance officer had just told the Senate that one of those reserves could absolutely be revisited. The president then told the Senate it could not.
The Purpose and the Weaponization
Governmental Accounting Standards Board and GAAP frameworks require public universities to segregate funds to prevent fraud, ensure restricted funds are spent for their intended purpose, and maintain accountability to revenue sources. Student fees collected for health services should fund health services, just as housing revenue should fund housing. Bond covenants and state law create genuine statutory firewalls between certain categories of funds.
The issue at Portland State is not whether fund accounting is legitimate, but whether the administration uses the practice as a shield against scrutiny of its own allocation decisions. E&G reserves are generated by tuition and state appropriations; using them to cover E&G operations such as faculty salaries is legally permissible, even if fiscally imprudent, as a recurring practice. Non-E&G reserves, including auxiliary funds and designated student fees, are subject to restrictions that may limit their use for general academic purposes.
However, President Cudd did not argue that statutory restrictions prevented reallocation; she conceded that no law forbade a one-time transfer. The Vice President for Finance volunteered that the risk management reserve, a non-E&G fund, could be revisited. If statutory firewalls were the actual barrier, neither official would have made those concessions.
The true barrier is administrative judgment. The unanswered question is whether the formulas governing the flow into each reserve bucket are appropriate or whether they create artificial scarcity in the academic budget while padding non-E&G accounts that the administration then declares untouchable.
The Circular Authority
President Cudd’s argument rested on multiple ostensibly independent sources: NACUBO guidelines, CLA audit opinions, the Board’s reserve policy, the January 2025 Executive and Audit Committee memo, and the Student Fee Committee charter. These citations created the impression of convergent external oversight.
In practice, these sources lack independence. The Board sets its own reserve policy and hires its own auditors. The administration drafts the memos the Board reviews. CLA audits the financial statements the administration prepares. NACUBO provides best-practice literature the administration selects and interprets. Five apparent external checks on a single decision functioned as a single administrative apparatus citing itself through different institutional voices—a closed loop of self-authorization.
Furthermore, the external authority President Cudd cited most forcefully, CLA, does not say what she claimed it says. CLA’s published guidance on reserve policies states that deploying reserves “does not imply spending without discipline,” that organizations should consider using reserves for “risk management,” including “restructuring efforts for sunsetting programs,” and that the deciding factor is whether “leadership can clearly articulate the why behind them.” President Cudd cited CLA as prohibiting the use of reserves to cover operating deficits. CLA’s published position remains conditional: reserves can be deployed if the rationale is sound, the drawdown is planned, and the governing body exercises informed judgment.1
The Selective Principle
The Board has already approved the use of $12.3 million from E&G reserves to support the E&G operating budget. This drawdown will bring the projected reserve balance below the Board’s required 25 percent minimum by June 30. Using E&G reserves for E&G operations is a categorically different action from transferring non-E&G funds across fund boundaries.
However, the underlying principle President Cudd invoked was not limited to the fund’s boundaries. She argued that “ongoing expenses such as salaries and benefits require ongoing revenue,” that “reserves are a one-time bucket of funds,” and that using them to pay recurring costs “merely delays the point at which funding runs out.”
That principle applies with equal force to the $12.3 million E&G drawdown. The administration applied the principle selectively: reserves cannot cushion retrenchment, but reserves can cover the operating deficit the administration has already authorized.
The Questions Ignored
Throughout the meeting, senators asked about financial flexibility, and the administration answered with bureaucratic roadblocks. A senator asked whether the university could evaluate contribution margins across all revenue streams, noting that all departments sink or swim together. President Cudd deflected to capital funding and housing revenue without engaging the concept. Senator Peters asked about self-support courses; President Cudd dismissed the idea and launched the NACUBO address. The senators asked whether the current financial structure served the university’s mission. The administration responded by explaining why the current arrangement is non-negotiable.
The Verdict
NACUBO is a professional association that publishes guidance; it does not set binding standards for public universities. Invoking the organization as “the primary authority” to foreclose a policy option overstates its institutional role and obscures that reserve allocation at Portland State is governed by Board policy and administrative discretion, not external regulatory constraints. The president’s own finance officer confirmed as much on the record, minutes before the president’s prepared text stated otherwise.
The NACUBO defense is not a financial argument. It is a governance failure dressed in the language of fiduciary responsibility. The administration has chosen to protect reserve balances over faculty positions and has invoked a trade association manual to avoid accounting for that choice. Faculty facing elimination are entitled to know that the supposed authority cited against them is a trade association’s recommendation, the legal prohibition cited against them does not exist, and the principle invoked against them was waived when the administration found it convenient.
The CLA quotations are drawn from "Operating Reserve Policies: Finding the Right Balance" (Clifton Larson Allen, Feb 12, 2026). While this guidance addresses nonprofits generally, President Cudd cited CLA’s specific communications with the PSU Board of Trustees. If that PSU-specific guidance is as categorical as the administration represents, the full text remains shielded from public view. A public records request is required to clarify whether the auditor’s position truly matches the administration’s rhetoric.