OUS Fiscal Policy Manual
Accounting and Financial Reporting
| Section: Accounting and Financial Reporting | Number: 05.780 |
| Title: Accounting for Unexpended Plant Funds |
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POLICY
The policy sets forth certain basic system-wide requirements for administration and accounting for unexpended plant funds.
OUS seeks to ensure that the policies and procedures related to administration and accounting for unexpended plant funds are documented, communicated, clearly understood, and consistently applied.
A. NEED
Unexpended plant funds account for OUS capital construction projects. Expenditures for OUS capital construction exceed $150 million each year. The accounting for unexpended plant funds is complex due to multiple funding sources, a large volume of expenditures, and the crossover of expenditures into multiple fiscal years.
B. OBJECTIVES OF ACCOUNTING FOR UNEXPENDED PLANT FUNDS
- To ensure that the total expenditures of each construction project do not exceed the expenditure limitation authorized by the Legislature.
- To ensure that sufficient but not excessive funds are on hand to pay the expenditures of capital construction projects as those expenditures become due.
- To ensure that funding is in compliance with all applicable laws and regulations.
- To ensure that accounting for unexpended plant funds is in accordance with generally accepted accounting principles, is in compliance with laws and regulations, and provides for sufficient internal control.
- To ensure that unexpended plant funds are adequately monitored
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ORS 351.090 - Standardization of Accounts and Records; Preparation of Budget; Allocation of Funds
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OAR 580-040-0005 - Delegation and Assignment of Responsibility
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IMD 6.001 - Finance and Business Affairs Accounting Policies - Assignment of Responsibility
.130 APPROVAL AND EFFECTIVE DATE OF POLICY
Approved by the Controller on July 11, 2005, with an effective date of July 1, 2005.
All institutional and Chancellor's Office personnel with financial oversight responsibilities and accounting and financial reporting responsibilities related to unexpended plant funds should be knowledgeable of this policy.
Responsibilities related to accounting for unexpended plant funds include the following:
A. OUS CONTROLLERS DIVISION
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Establish system-wide accounting policies and internal controls to ensure uniform and consistent accounting of unexpended plant funds.
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Create project (grant) codes in university Banner FIS for capital construction projects with legislative expenditure limitation.
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Review and approve funding plans of unexpended plant funds.
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Transfer system-wide funds among universities.
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Provide overall monitoring of the unexpended plant funds' accounting records.
B. OUS FACILITIES DIVISION
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Interpret, clarify, and document requirements of legislative expenditure limitations.
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Put forward legislative limitation requests and obtain legislative expenditure limitations.
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Allocate system-wide legislative expenditure limitations among universities.
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Review and approve funding plans of unexpended plant funds.
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Authorize and monitor contingency amounts to legislative expenditure limitations.
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Provide overall monitoring of the financial activity of unexpended plant funds.
C. UNIVERSITY
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Establish university-specific accounting policies and internal controls pertaining to unexpended plant funds.
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Record transactions in the appropriate unexpended plant funds using the correct account codes.
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Create project (grant) codes in university Banner FIS for capital construction projects without legislative expenditure limitation.
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Establish unexpended plant funds and corresponding index codes in Banner FIS.
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Establish and update budgets in the unexpended plant funds.
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Manage the financial activity of unexpended plant funds.
.200 LEGISLATIVE EXPENDITURE LIMITATIONS
Once the Legislature has approved a project, a series of steps must be taken to ensure that sufficient funds are available to pay expenditures as they become due. These steps require a coordinated effort between the University, the Chancellor's Office Facilities Division, and the Chancellor's Office Controller's Division. Sufficient funding must be received timely, deposited and accounted for, and must comply not only with legislative expenditure limitations, but also laws and regulations including Oregon Revised Statutes and IRS Code.A. LEGISLATURE AND EMERGENCY BOARD EXPENDITURE LIMITATIONS
Capital construction projects with expenditures totaling less than $500,000 are exempt from legislative expenditure limitation.
Capital construction projects not previously approved by the Legislature which total $500,000 or more but less than $1 million, inclusive of all fund sources, shall be submitted to the Legislature or the Emergency Board for approval unless appropriate system-wide expenditure limitations exist.
Capital construction projects above the $1 million threshold, inclusive of all fund sources, shall be submitted to the Legislature or the Emergency Board for approval; OUS will not use system-wide expenditure limitation for these projects without legislative or Emergency Board approval.
Bond financed projects require Legislative or E-Board approval regardless of amount. Approval can be either individual or part of a system-wide limitation.
B. AVAILABILITY OF PROCEEDS
Except for planning costs, OUS must obtain legislative expenditure limitation authorization before making expenditures from unexpended plant funds. However, the State Board of Higher Education may enter into contracts necessary for the acquisition of land and improvements to land and the acquisition, planning, constructing, altering, repairing, furnishing, and equipping of buildings and facilities prior to obtaining legislative expenditure limitation.
C. EXPIRATION OF LEGISLATIVE EXPENDITURE LIMITATION
Project approvals and expenditure limitations established by the Legislature or the Emergency Board expire on a given date unless changed by the Legislative Assembly. The project must begin before the expiration date, but the expenditures of the project may go beyond the expiration date.
D. XI-G BONDS
Funds available under the expenditure limitation for XI-G bonds must be matched with a general fund appropriation. The match must be in the bank before the bonds are sold. The match may include general fund appropriations or other funds such as donations or federal grants and contracts that are subsequently designated as general funds by the Legislature. Match may not include gifts in kind.
E. ACCOUNTING RECORDS
Banner FIS is used to demonstrate that total expenditures have not exceeded legislative expenditure limitation.
For additional information about the cash management of capital construction projects, refer to the OUS Debt Management Policy in section XX [not yet available] and the Appendix following this policy.
A. PROJECT (GRANT) CODE
The project (grant) code identifies the project and is the primary basis for ensuring that the total expenditures of a capital project have not exceeded the legislative expenditure limitation. Project (grant) codes allow for inception to date reporting and reporting of multiple funds. Project (grant) codes must meet the following requirements:
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Every unexpended plant fund must be tied to a project (grant) code.
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All unexpended plant funds related to the same project and same legislative expenditure limitation must be tied to the same project (grant) code.
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The numbering of the project (grant) codes must be consistent with the numbering convention developed and communicated by the Controller's Division.
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Project (grant) codes must be sequentially numbered.
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For project (grant) codes with university specific legislative expenditure limitation, the "maximum" amount must equal the total legislative expenditure limitation.
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For project (grant) codes with system-wide legislative expenditure limitation, the "maximum" amount must equal the total legislative expenditure limitation amount distributed by the OUS Facilities Division.
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For miscellaneous project (grant) codes with no legislative expenditure limitation, the "maximum" amount must be less than $500,000.
B. FUND CODE
Unexpended plant funds in Banner FIS record the capital construction expenditures and the funding used to cover those expenditures. Fund codes must meet the following requirements:
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For each project, a separate unexpended plant fund must be established for each type of funding source. For example, a project with four types of funding sources (e.g., XI-F Bonds 2005 Series A, Donations, Auxiliary Enterprise Funds, SELP Loans) would have four funds, and the expenditures would be charged to the appropriate funding source.
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Unexpended plant funds are not established until the Legislature has authorized capital construction expenditures and the university is ready to begin the project.
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All capital construction funds must be set up in fund type 81-unexpended plant funds or fund type 83-renewal and replacement funds.
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The fund code must fit within the OUS Baseline Hierarchy for fund type 81-unexpended plant funds or fund type 83-renewal and replacement funds. See OUS Fund Baseline Hierarchy in the OUS Fiscal Policy Manual at Section 05.110.
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Fund codes must be sequentially numbered.
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Fund codes may only be established in fund type 81-unexpended plant funds if they meet the conditions of the Legislative Expenditure Limitations section of this policy.
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Every unexpended plant fund must be tied to a project (grant) code.
C. ESTABLISHING AND UPDATING BUDGETS
Each unexpended plant fund is required to have a revenue and expenditure budget. Use of budgets helps ensure that (1) total expenditures do not exceed total revenue, and (2) total expenditures do not exceed the legislative expenditure limitation.
Revenue and expenditure budgets must equal, and the total revenue and expenditure budgets of all funds within the same project (grant) code may NOT exceed the legislative expenditure limitation.
D. TRANSFERRING OF FUNDS
Funds to cover capital construction expenditures are recorded as revenue or transfers-in in the unexpended plant funds.
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Different sources of funds may not be commingled in the same fund; a separate fund must be established for each fund source.
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Total revenue and transfers-in in unexpended plant funds may not exceed legislative expenditure limitation or the OUS Facilities Division allocation of each system-wide legislative expenditure limitation.
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Controller's Division distributes funds received centrally. Universities record receipt of funds received directly by the university and transfers from other university funds.
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Universities must consult with Controller's Division in the recording of matching funds required for XI-G bonds, to ensure that the receipt, use, and accounting of matching funds complies with rules and regulations pertaining to XI-G bonds.
E. PAYMENT OF EXPENDITURES
Except for cost-reimbursable projects and projects with documented and formally approved reimbursement resolutions, expenditures may only occur after funding is received.
Some university facility departments initially charge expenditures to clearing funds, but ultimately each expenditure must be charged to the correct unexpended plant fund and to the correct account code within the unexpended plant fund. Expenditure may only be charged to the project to which they pertain.
F. TERMINATING UNEXPENDED PLANT FUNDS
Once a project is complete, the applicable unexpended plant funds should be terminated as soon as possible to eliminate the possibility of mistakenly charging additional expenditures to those projects. A review of completed projects is usually done at the end of each fiscal year. Terminating unexpended funds must meet the following requirements:
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Funds may not be terminated until all expenditures of that fund have been paid.
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Funds may not be terminated until all amounts withheld as construction retainage have been refunded to the contractor.
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Funds may not be terminated until the unexpended plant fund has no remaining fund balance.
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Funds may not be terminated until after terminating the corresponding Banner FIS indexes.
G. TERMINATING PROJECT (GRANT) CODES
A project (grant) code may be only be terminated after the project is complete and all funds of the project have been terminated. Project (grant) codes for university-specific projects are terminated by the university. Project (grant) codes for system-wide projects may only be terminated by the Controller's Division.
A. MONITORING OBJECTIVES
The objectives of monitoring unexpended plant funds are to ensure that
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Actual expenditures have not exceeded actual revenue, thereby resulting in a negative cash balance. Although negative cash balances could occur in cost-reimbursable situations, a negative cash balance in any unexpended plant fund is a "red flag" requiring review and follow-up.
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Total expenditures of all funds comprising the project have not exceeded the legislative expenditure limitation.
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Total expenditures for each miscellaneous project are less than $500,000. If total expenditures are between $500,000 and $1 million, the university must request an allocation of system-wide legislative expenditure limitation. If total expenditures exceed $1 million, the university must obtain legislative or E-Board expenditure limitation.
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The net increase or decrease in the general ledger real property asset accounts for the year agrees to the real property capitalized expenditures less real property disposals for the year. This monitoring is performed at fiscal year-end.
B. MONTHLY PROCESS
Monitoring will occur on a monthly basis as specified in appendix .761, Monthly Monitoring Process.
.400 YEAR-END CLOSING PROCEDURES
Accounting for unexpended plant funds is subject to the year-end closing instructions issued by the Controller's Division and the applicable institution's Business Affairs Office.
The accounting records of unexpended plant funds must also provide documentation of compliance with other OUS policies pertaining to capital construction. Accounting related to other compliance issues is specified in appendix .800, Compliance with Other Objectives Related to Capital Construction.
Direct questions about this policy to the following offices:
Subject Contact General questions from institutional personnel Institution Office of Business Affairs General questions from institutional central administration and Chancellor's Office personnel Chancellor's Office Controller's Division 07/11/05 - Approved
Policy Last Updated 07/15/05
APPENDIX
"Unexpended Plant Funds" within Banner FIS account for revenue and expenditures of capital construction projects, including their acquisition, construction, and repair and maintenance. For fiscal year 2004, capital construction expenditures system-wide exceeded $150 million1.
The Chancellor's Office and the seven institutions within OUS require uniform and consistent accounting policies pertaining to unexpended plant funds. The policies must result in an efficient process while still accomplishing the accounting objectives related to unexpended plant funds.
The planning and administering of capital construction projects require coordinated efforts of many offices, both within the University and the Chancellor's Office. As determined by the University Vice President, university planning and administration of capital construction projects may involve the university facilities department, academic departments, business office, budget office, grants office, and general counsel. Chancellor's Office involvement typically includes the Facilities Division, Budget and Management Division, Controller's Division and Legal Counsel.
The accounting for unexpended plant funds also requires a coordinated effort, generally involving four offices:
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Chancellor's Office Controller's Division
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University Business Office
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Chancellor's Office Facilities Division
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University Facilities Department
At some universities the accounting functions of the business office and facilities department are combined in one office.
The accuracy of the accounting for unexpended plant funds impacts the OUS annual financial statements, fixed asset records and depreciation calculations, reports to the State of Oregon including the Legislature and Department of Administrative Services, facilities and administrative rate proposals presented to the federal government, and support for demonstrating compliance with IRS rules and regulations.
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1 Total Expenditures of Unexpended Plant Funds - Fund Type 81, Account Type 70, for FY2004 was $153,609,498.
.710 GENERAL ACCOUNTING RESPONSIBILITIES
The universities have differing organizational structures, and the accounting responsibilities may vary in terms of where they occur specific to each campus. Regardless of which office performs the tasks below, it is the university business office's responsibility to ensure that adequate controls are in place, including sufficient segregation of duties or other compensating controls.
The following guideline divides the general accounting responsibilities of unexpended plant funds:
Accounting for Unexpended Plant Funds
Office ResponsibilitiesUniversity Facilities Dept. University Business Office Chancellor's Office Facilities Division Controller's Division Establish Accounting Policies for Unexpended Plant Funds X X Legislative Limitations Obtain Legislative Expenditure Limitations
X Create/Update Listing of Legislative Limitations
X Distribute System-wide Limitations
X Identify Likelihood of Project Exceeding Legislative Limitations in a Timely Manner
X Resolve Projects Likely to Exceed Legislative Limitation
X X Authorize Use of Contingency Caps
X Request E-Board Expenditure Limitations
X Cash Management [to be completed] Bond Financing
Requests for Bond Proceeds
Cash Flow for Projects - Bond Funds and Other Funds
Matching Term of Bonds with Depreciable Life of Real Property
Bond Matching Requirements
Bond Premiums and Discounts
Bond Costs
Interest Earnings on Bond Proceeds
Reimbursement Resolutions
Returning Bonds to Source
Bond Sinking Funds
Tracking Private Use of Bonds
Gift Financing
Pledge Schedules
Grant and Contract Financing
COPs Financing
SELP Loan Financing
Capital Lease Financing
Insurance Reimbursement Financing
Other Institutional Resource Financing
Other Financing
Accounting Establish Unexpended Plant Funds
Grant Codes
Establish Uniform Sequence of Grant (Project) Codes to Correspond to Legislative Limitations
X Create New Grant (Project) Codes in Banner FIS for miscellaneous projects less than $500,000
X Create New Grant (Project) Codes in Banner FIS for projects with Legislative Expenditure Limitation.
X Fund Codes
Establish Baseline Fund Codes Structure Within the Unexpended Plant Funds for Categorizing Funds by Source of Funds
X Establish New unexpended Plant Funds in Banner FIS for miscellaneous projects less than $500,000
X Establish New Unexpended Plant Funds in Banner FIS for projects with legislative expenditure limitation but provide a copy of the plant fund request to OUS Facilities Division.
X Bank Codes
Create Bank Codes in Banner FIS
X Assign Bank Codes to Unexpended Plant Funds
X Location Codes
Establish Location Codes
X Establish/Update Budgets in Unexpended Plant Funds
X X Transfer Funds into Unexpended Plant Funds
Funds Initially Received and Distributed by Controller's Division (e.g., bond proceeds, general fund appropriations)
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Funds Received Directly by Universities (e.g., gifts, auxiliary enterprise operating funds)
X Fund Transferred from Other University Resources (e.g., renewal and replacement funds)
X Pay Expenditures
X Terminate Fund Codes
X X
Terminate Project (grant) Codes for miscellaneous projects less than $500,000 and projects with university-specific legislative expenditure limitation
X X Terminate project (grant) Codes for projects with system-wide legislative expenditure limitations
X
Monitoring Ensure Accuracy of Accounting Records
Ensure Recorded Revenues and Expenditures Are Valid
X Ensure Recorded Revenues and Expenditures Are Authorized
X Ensure All Revenues and expenditures Are Recorded
X Ensure Amounts Are Recorded with Correct Dollar Amount
X Ensure Revenues and Expenditures Are Recorded in correct Fiscal Year
X Ensure Use of Correct Fund and Account Code
X Ensure Reconciliations of Accounting Records
X Ensure Use of Correct Bank Codes
X Ensure compliance with IRS Rules on Bond Funds
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Perform Financial Monitoring
Review for Negative Cash Balances
X X X X Review for Legislative Expenditure limitations
X X X X Year-End Procedures Issue Institution-specific Year-End closing Instructions
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Accrue Unpaid Expenses as Year-End Liabilities
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Prepare Worksheets of Expenditures to Be Capitalized in Banner Fixed Assets
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Perform reconciliation of Capitalized Expenditures for the Year to Change in Real Property Assets
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Other Issues Capital Assessment Charge
Charge Assessments to Unexpended Plant Funds
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Verify Assessments at Fiscal Year End.
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Construction Retainage - Retainage Held by OUS
All Functions
X X Construction Retainage - Securities Deposited in Lieu of Retainage
Monitor Securities held by Financial Institution
X Determine Completion of Contract
X Release Interest in Securities
X Retainage Deposited in a Financial Institution
Obtain State Treasurer Approval of Retainage Account
X Establish Construction Retainage Account in Banner FIS
X Deposit Retainage in Bank Account
X Reconcile Bank Statements
X X Release Amount in Bank to Contractor
X X Planning - Loan Advances
Document Planning Advance Agreements
X Record Accounting Entries Related Planning Advances
X Maintain Listing of Outstanding Planning Advances
X X COPs
.715 LEGISLATIVE EXPENDITURE LIMITATIONS FOR CAPITAL CONSTRUCTION PROJECTS
Conceptual Understanding
The following analysis of legislative expenditure limitation is based on the 2003-2005 capital construction bill. Refer to the specific bill for specific information.
Expenditures for capital construction must be authorized by the Legislature. Each biennium, the Legislature approves a series of expenditure limitations for capital construction projects and the allowable sources for funding those expenditures.
Most expenditure limitations pertain to a specific project at a specific university. However, some expenditure limitations are miscellaneous in nature and are considered system-wide projects. For system-wide projects, central monitoring is required to ensure that total expenditures made by the seven universities and the Chancellor's Office do not exceed the system-wide expenditure limitation.
Applying the legislative expenditure limitation requires some clarifications:
- Some capital construction expenditures fall outside expenditure limitation.
- Actual expenditures for projects with expenditure limitations may go over by a stated contingency percentage, so long as the total actual expenditures for all projects do not exceed the
contingency percentage for all expenditure limitations taken together. For all intents and
purposes, the contingency percentage of all projects taken together is minimal and no more than 1%. Article XI-G bonds are not eligible to use any of the contingency percentage. - The expenditure limitations must be used within a certain period of time.
- Obtaining legislative expenditure limitation and bond financing are not the same. A legislative expenditure limitation does not necessarily guarantee bond financing. Obtaining bond financing is discussed in the "cash management" section of this policy.
In the unlikely event that actual expenditures are expected to exceed expenditure limitation, OUS is required to seek legislative authorization for additional expenditure limitation. Since the Legislature only meets once every two years, additional expenditure limitations are submitted for approval to the OUS Board and then to the Legislative Emergency Board ("E-Board").
Definition & Criteria - Oregon Law
Each biennium, an Act of Oregon Law establishes legislative limitations for expenditures on Oregon University System capital construction projects. The major requirements set forth in the Act are described below.
General Fund
A dollar amount is appropriated to the Department of Higher Education, for the biennium, out of the General Fund. This amount must be expended for academic modernization and repair of facilities, and is entirely separate from the "Education and General" general fund appropriations.The State Board of Higher Education shall determine the academic modernization and repair projects to be undertaken with the moneys made available on the basis of the Board's determination of the most critical deferred maintenance needs. Priority shall be given to projects that protect the health and safety of occupants and maintain the structural integrity of facilities. At this time, OUS Facilities allocates the general fund appropriations to each university based on total "Education and General" square footage. In rare occurrences, the state gives general fund appropriation to campus projects.
Maximum Limits for Expenditures
The law establishes the dollar amount which is the maximum limit for payment of expenses from the proceeds of bonds and other revenue sources, including federal funds, by the Department of Higher Education for the acquisition of land and improvements to land and the acquisition, planning, constructing, altering, repairing, furnishing and equipping of buildings and facilities system-wide. Within this total expenditure limitation, established maximum limits for expenditures on specific projects from specific revenue sources are broken down in a table.Availability of Proceeds
Proceeds from bonds and other revenue sources, including federal funds, limited by the Act are not available for expenditure before the effective date of the Act. However, any action taken by the State Board of Higher Education or any contract entered into by the board necessary for the acquisition of land and improvements to land and the acquisition, planning, constructing, altering, repairing, furnishing and equipping of buildings and facilities authorized by the Act prior to the effective date of
the Act is authorized. The intent of the Legislature is to say that the university can enter into contracts but cannot begin the project until the Legislature approves it.XI-G Bonds
The State Board of Higher Education may sell up to a stated par value of Article XI-G bonds with the approval of the State Treasurer (e.g., $56,619,853 for 2003-2005). Moneys realized from the sale shall be appropriated and may be expended for the purposes set forth in the table in the Act, for new projects for which the Emergency Board approves funding during the biennium, and for payment for capitalized interest and costs incidental to issuance of the bonds.Changing Expenditure Limitations
The State Board of Higher Education may increase any limit for expenditures of other revenue sources, including federal funds, but excluding proceeds from lottery bonds, for a specific project if the expenditure limitation for XI-F(1) or XI-G bonds for the project is reduced by the Board in the same amount.Expenditures in Excess of Expenditure Limits - Contingency Caps
Should any individual capital project listed in the Act later require additional expenditure limitation, the State Board of Higher Education may expend amounts in excess of the expenditure limitations established above by the following percentage amounts, depending on the combined
General Fund appropriation and total expenditure limitation:Combined Approved General Fund Appropriation and Total Expenditure Limitation Percentage by Which Expenditures May Exceed Expenditure Limitations for XI-F(1) Bonds $500,000-$999,999
$1,000,000-$4,999,999
$5,000,000-$9,999,999
$10,000,000 or more12%
8%
5%
3%
Combined Approved General Fund Appropriation and Total Expenditure Limitation Percentage by Which Expenditures May Exceed Expenditure Limitations for Other Revenue Sources, Including Federal Funds, but Excluding Proceeds From Lottery Bonds $500,000-$999,999
$1,000,000-$4,999,999
$5,000,000-$9,999,999
$10,000,000 or more12%
8%
5%
3%In addition to the above percentages, the capital construction bill has a maximum contingency amount for the total expenditures of all OUS Legislature-approved construction projects.
Lottery Bonds
For several of the capital construction projects listed in the expenditure limitations table, accounts are set up in the General Fund to receive proceeds from lottery bonds. A dollar limit is set for the total interest and proceeds that may be credited to the account.Emergency Board
Requirements -- Expenditures Exceeding Legislated Limitations and New Capital Construction Projects
Any capital construction project not listed in the Act nor previously approved by the Legislature which totals $500,000 or more but less than $1 million, inclusive of all fund sources, shall be submitted to the Legislature or the Emergency Board for approval unless appropriate 2 system-wide expenditure limitations exist. Any capital project above the $1 million threshold, inclusive of all fund sources, shall be submitted to the Legislature or the Emergency Board for approval; OUS will not use
system-wide expenditure limitation for these projects without legislative or Emergency Board approval.Exempt from Legislative Expenditure Limitation
Capital construction projects with expenditures totaling less than $500,000 are exempt from legislative expenditure limitations. This exemption does not apply to XI-F(1) and XI-G financed projects.
Total Expenditures Exceeding Legislative Expenditure Limitation
The university must establish a process (involving appropriate VP approval) for notifying the OUS Facilities Division in the unlikely event that expenditures of a project are expected to exceed legislative expenditure limitation. Working with the university, OUS Facilities will consider the following alternatives:
- Determining that the expenditures are subject to legislative expenditure limitation.
- Ensuring that all expenditures charged to the unexpended plant funds are appropriately charged to the project and have not been charged to the wrong fund, or reviewing expenditures to see if any can be appropriately charged to other funds.
- Determining if system-wide limitations for academic modernization and repair exist and determining the possibility of charging the project to academic modernization and repair. Such an approach is allowable even if the expenditures were initially charged to a university-specific expenditure limitation. Splitting of a university-specific project in order to charge part of the project to a system-wide expenditure limitation is not permitted. Nevertheless, use of system-wide expenditure limitation is determined by OUS Facilities taking into consideration the project definition and scope of work of the university-specific expenditure limitation.
- Granting the use of contingency reserves allowed by the legislative expenditure limitation.
If none of the above alternatives are feasible, the university and OUS Facilities Division, as approved by the appropriate university vice president, will have to request additional legislative expenditure limitation through presentation to the OUS Board and the Legislature or E-Board.
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2 The project must be in line with the definition of the use of system-wide expenditure limitation.If none of the above alternatives are feasible, the university and OUS Facilities Division, as approved by the appropriate university vice president, will have to request additional legislative expenditure limitation through presentation to the OUS Board and the Legislature or E-Board.
The following outlines cash management issues that affect the accounting of unexpended plant funds. This portion of the appendix will be completed as resources allow.
Request for Bond Proceeds
Cash Flow for Projects - Bond Funds and Other Funds
Matching Term of Bonds with Depreciable Life of Real Property
Bond Matching Requirements
Matching funds must be for same amount as XI-G Bonds
Actual matching funds may not exceed expenditure limitation
Matching funds must be in form of cash
Timing issues pertaining to the expenditure of matching funds
Bond Premiums and Discounts
Bond Costs
Interest Earnings on Bond Proceeds
Reimbursement Resolutions
Reimbursement Resolution must be in place before expenditures are charged
Reimbursement Resolution may not exceed 18 months
Returning Bonds to Source
Bond Sinking Funds
Debt Service on Bonds
Use of Bond Proceeds to Pay Interest Costs
Tracking Private Use of Bonds
Pledge Schedules
.724 GRANT AND CONTRACT FINANCING
.728 INSURANCE REIMBURSEMENT FINANCING
Project (Grant) Code
The Controller's Division determines the numbering convention of the project (grant) codes and creates the project (grant) codes in each University's Banner FIS for projects with legislative expenditure limitation. This step would occur at beginning of each biennium and after each E-Board meeting which meets three to five times per year.
Universities create the project (grant) codes in University's Banner FIS for miscellaneous projects less than $500,000.
Fund Code
Controller's Division creates the OUS Baseline Hierarchy for fund type 81- unexpended plant funds and fund type 83 - renewal and replacement funds.
Universities create unexpended plant fund codes in Banner FIS for miscellaneous projects less than $500,000.
Universities create unexpended plant fund and renewal and replacement fund codes in Banner FIS for projects with legislative expenditure limitation but forward copies of the plant fund request document to OUS Facilities Division.
If a university does not have sufficient controls to ensure sufficient segregation of duties in establishing and administering unexpended plant funds, universities at their option may have the Controller's Division create unexpended plant fund codes in Banner FIS by having university facilities prepare and forward plant fund requests to OUS Facilities. OUS Facilities will review and approve request and forward request to Controller's Division.
Bank Code
Bank codes distinguish interest bearing from non-interest bearing bank accounts. Unexpended plant funds must be deposited into the correct bank account in accordance with the source of funding and Oregon Revised Statutes. The selection of the correct bank code is critical; the selection of the wrong code could result in earning interest in violation of Oregon Revised Statutes or loss of interest that is permitted by Oregon Revised Statutes.
The Controller's Division creates bank codes in Banner FIS. The University Business Offices assign bank codes to the unexpended plant funds and renewal and replacement funds in Banner FIS.
Location Code
The location code identifies the location of the real property construction or purchase. The location code corresponds to the "ptag" number that will identify the real property in the Banner Fixed Assets system. The location code denotes the physical location of the real property and distinguishes between land, buildings, land improvements, improvements other than buildings, and infrastructure.
Universities establish new location codes in Banner FIS. The numbering of the location codes must agree with OUS numbering conventions and they are required for all bond funded expenditures.
Establishing and Updating Budgets
A university has two options related to budgeting in the unexpended plant funds:
- The sum of the budgets of the funds making up the project (grant) code is limited to total revenue received thus far, up to the amount of the legislative expenditure limitation.
- Advantage: Expenditure budget tends to match actual revenues. Closely following the expenditure budget, it reduces the risk of expenditures exceeding revenues, which would result in a negative cash balance.
- Disadvantages: Someone has to update the budget each time the fund receives additional revenue. Another disadvantage is that use of this alternative is meaningless for cost reimbursable grants and contracts.
- The sum of the budgets of the funds making up the project (grant) code equals the legislative expenditure limitation.
- Advantage: The budget is entered only once.
- Disadvantage: Increased risk of negative cash balances if universities follow the expenditure budget and fail to consider the cash balance.
The university must document and communicate to the Controller's Division the university's selection of option #1 or #2.
Regardless of option #1 or #2, the revenue and expenditure budgets must equal, and the total revenue and expenditure budgets of all funds within the same project (grant) code may NOT exceed the legislative expenditure limitation.
Paying Expenditures - Account Codes
Expenditures related to the unexpended plant fund must be charged to the appropriate fund and account codes. The account code specifies the nature of the expenditure and distinguishes costs to be expensed from costs to be capitalized and subsequently depreciated. If capitalization, it indicates type of property (e.g., Land, Building, Land Improvement, Infrastructure, or Improvement Other Than Building).
- The account code classification must be accurate.
- All expenditures in unexpended plant funds must include a location code.
- See Account Code Index in OUS Fiscal Policy Manual for descriptions of account codes.
- See Fixed Assets Policy in OUS Fiscal Policy Manual for capitalization policy.
Further and further distribution of the accounting for unexpended plant funds requires that a university develop and implement internal controls designed to detect problems rather than prevent problems. It is absolutely critical that unexpended plant fund budgets do not exceed project (grant) code legislative expenditure limitations, and that actuals do not exceed budget. If they do, and system-wide limitations are not applicable and not available, then OUS would have no choice but to seek additional legislative expenditure limitation from the E-Board.
.761 MONTHLY MONITORING PROCESS
The following monitoring will occur on a monthly basis:
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The Chancellor's Office runs the FWRBDPJ and FWRBDLR reports, and a listing of all miscellaneous ("less than $500,000") projects after each period close, and distributes reports to universities, including Facility Business Officers. Copies are distributed to the University Business Officer, University Budget Officer, and the Controller's Division.
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Universities will make notations on the FWRBDPJ report of any funds with negative cash balances, negative expense balance, and/or negative resource balances.
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Universities will make notations on the FWRBDLR report of any situations where total expenditure budget exceeds the allocation (legislative expenditure limitation).
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Universities will identify miscellaneous project (grant) codes with expenses over $500,000 and provide a note regarding disposition of those miscellaneous projects.
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Universities will send completed FWRBDPJ, BWRBDLR and listing of miscellaneous projects to OUS Facilities Division, with a copy to the University Business Officer, University Budget Officer, and Controller's Division.
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Chancellor's Office will compile the information of all university charts into their copy of the FWRBDPJ and FWRBDLR reports used for monitoring the unexpended plant funds.
.762 FWRBDLR - BUILDING PROJECTS LIMITATION RESERVE REPORT
Purpose of Report
The primary purpose is to compare the total expenditures of each project to the project budget (i.e., "allocation") and the project legislative expenditure limitation. The report is intended to show if expenditures exceed budget and if budget exceeds legislative expenditure limitation. The report, when run in "detail" mode, also highlights unexpended plant funds with negative cash balances.
How Report Works
The FWRBDLR report includes the following headings:
- Total Limitation: Should agree to the total of the legislative expenditure limitation. University-specific limitations are populated in the project (grant) codes of each university's chart. Each system-wide limitation is initially populated in a project (grant) code in "Chart X" and then allocated to the corresponding project (grant) code in each university's chart.
- Allocation: The total expenditure budget for the unexpended plant fund in Banner FIS. This amount matches the "Expense Budget" of the FWRBDPJ report.
- Reserve: Total Limitation less Allocation. A negative amount indicates that the total expenditure budget (i.e., "allocation") exceeds the legislative expenditure limitation for that project.
- Limitation Balance Available: Amount of system-wide expenditure limitations that can still be allocated to the universities. A negative amount would indicate that OUS has over-allocated system-wide expenditure limitations to the universities.
- Expended to Date: Total actual expenditures recorded in the unexpended plant fund in Banner FIS.
- Unspent Allocation: Allocation less Expended to Date. A negative amount indicates that actual expenditures have exceeded the expenditure budget (i.e., "allocation").
- Expended > Allocation: Contains "***" if total actual expenditures exceed the total expenditure budget.
- Cash Balance: Actual cash balance of the unexpended plant fund. This column will only show if the FWRBDLR report is run in "detail" mode.
Issues to Be Aware Of
- The report is prepared from the OWAG database. The OWAG database is only updated twice a month, once on the last day of the month (e.g., September 30), and secondly right after period close (e.g., October 10 for close of period 3). Therefore, the FWRBDLR report is NOT a daily report.
- The legislative expenditure limitation for each system-wide projects is initially populated in "Chart X". As the OUS Facilities Division allocates system-wide project limitation to each university, the allocation is increased in the university's chart and the allocation is decreased in Chart X. Since all university charts and Chart X use the same project (grant) number for system-wide projects, the total allocation of all university charts and Chart X should agree to the legislative expenditure limitation for that system-wide project.
.763 FWRBDPJ - BUILDING PROJECTS REPORT
Purpose of Report
Primary purposes are to (1) compare actual revenue and expenditures to budgeted revenue and expenditures and (2) identify negative cash balances. The report does NOT compare actual expenditures to the legislative expenditure limitation. For comparing actual expenditures to the legislative expenditure limitation, use report FWRBDLR.
How Report Works
The FWRBDPJ report includes the following headings:
- Expense Budget: Total expenditure budget for unexpended plant fund. The expenditure budget for all unexpended plant funds that make up a project (grant) code must not exceed the legislative expenditure limitation for that project.
- Expense Actual: Total actual expenditures for unexpended plant fund.
- Expense Balance: Total expenditure budget less total actual expenditures. A negative expense balance indicates that actual expenditures have exceeded budget. A negative expense balance could also indicate exceeding legislative expenditure limitation and/or a negative cash balance.
- Resource Budget: Total revenue budget for unexpended plant fund. The revenue budget for all unexpended plant funds that make up a project (grant) code must not exceed the legislative expenditure limitation for that project. Universities may choose for the revenue budget to equal the legislative expenditure limitation (i.e., revenues expected to be received) or recognize the total revenue actually received.
- Resource Actual: Actual total revenue for unexpended plant fund.
- Resource Balance: Total revenue budget less total actual revenue. A negative revenue balance suggests the need for a budget correction and could be indicative of the project exceeding legislative expenditure limitation or a possible negative cash balance.
- Actual Cash Bal: Total actual revenue less total actual expenditures. The report presumes that all revenue and expenditures are cash transactions. Due to accounts receivable and accounts payable, the amount reported reflects remaining funds available to spend, but not necessarily the "actual" cash balance.
Issues to Be Aware Of
- The report is prepared from the OWAG database. The OWAG database is only updated twice a month, once on the last day of the month (e.g., September 30), and secondly right after period close (e.g., October 10 for close of period 3). Therefore, the FWRBDPJ report is NOT a daily report.
- Report does not take into consideration the legislative expenditure limitation. To compare total expenditures to legislative expenditure limitation, use the FWRBDLR report.
- The report presents all actual revenue and expenses as increases or decreases to cash. Due to accounts receivable and accounts payable, the actual cash balance reported reflects remaining funds available to spend, but not necessarily the "actual" cash balance.
- The FWRBDPJ report can be run from institution database, in which case it could be used on a daily basis because it would be using production data.
.770 YEAR-END CLOSING PROCEDURES
The year-end closing procedures close the accounting records for the year and become the basis for preparing the annual financial statements, auditing the annual financial statements, and determining fund balances to be carried forward as beginning balances for the following year. Once the accounting records are closed for the year, they cannot be reopened.
The schedule for completing the year-end closing procedures is coordinated by the University's Business Office. In general, the objectives of the year-end closing procedures pertaining to unexpended plant funds include the following:
- Ensuring that all expenditures for services rendered up to the close of the fiscal year have been paid or accrued as a year-end liability.
- Ensuring that all charges to clearing funds have been cleared and charged to the correct unexpended plant fund.
- Ensuring that all charges in the unexpended plant funds have been assigned to the correct account code and the appropriate fund has been used for the expenditures.
- Ensuring that no unexpended plant funds have negative cash balances.
- Ensuring that total expenditures have not exceeded legislative expenditure limitations.
- Ensuring that the total capitalized expenditures for the year have been added to the appropriate general ledger asset account by recording those expenditures in Banner Fixed Assets.
For additional information, refer to the annual year-end closing procedures issued by the Controller's Division and the University's Business Office.
.800 COMPLIANCE WITH OTHER OBJECTIVES RELATED TO CAPITAL CONSTRUCTION
Normally, five percent of each progress payment to a contractor is retained until the work under a construction contract is complete and accepted. Specific policy pertaining to processing construction retainage is found in Fiscal Policy Manual Section XX [not yet developed].
The contractor has three options for handling the construction retainage:
- Retainage held by OUS
- Securities deposited in lieu of the retainage
- Retainage deposited in a Financial Institution
Sufficient controls must be in place to ensure that retainage amounts on deposit are for the correct amount, safeguarded, reconciled to the accounting records, and not released to the contractor until the work is complete and accepted.
Responsibilities vary depending on the method the contractor selects for handling the construction retainage.
Retainage Held by OUS
- University Business Office and Facilities Department handles all procedures pertaining to construction retainage.
Securities Deposited in Lieu of Retainage
- University Business Office receives notification from bank of securities ("performance bonds") held by the bank in lieu of retainage.
- University Business Office ensures that the value of the securities held equal or exceed five percent of the total amount of progress payments.
- University Facilities Department determines when the work of the contract is complete and accepted.
- Contractor sends request to bank to release the performance bonds.
- Bank sends a letter to the University to request an endorsement of the Contractor's request.
- University Business Office signs endorsement and returns letter to bank to release interest in the securities.
Retainage Deposited in a Financial Institution
The following tasks are required when this form of construction retainage processing is primarily performed by the University Business Office.
- Controller's Division obtains approval of the State Treasurer. University Business Office opens a retainage account at the bank. Retainage account at bank would require two signatures (e.g., University Business Officer and VP for Finance and Administration) for any withdrawal.
- Controller's Division establishes a Banner FIS construction retainage receivable A35XX account code for the University.
- University Facilities deposits the five percent retained from all progress payments into the bank account.
- University Business Office receives and reconciles monthly bank statements.
- University Facilities makes determination of partial or full release of retainage amount.
- University Facilities requests transfer of the retainage amount.
- University Business Officer and designee release amount in bank account (net of OUS service charges) and credit the unexpended plant fund.
- University Facilities pays contractor the retainage amount.
The following tasks are required when this form of construction retainage processing is primarily performed by the Controller's Division.
- Controller's Division obtains approval of the State Treasurer and opens a retainage account at the bank. Retainage account at bank would require two signatures (e.g., Controller and Vice Chancellor for Finance and Administration) for any withdrawal.
- Controller's Division establishes a Banner FIS construction retainage receivable A35XX account code for the University.
- University deposits the five percent retained from all progress payments into the bank account.
- Controller's Division receives and reconciles monthly bank statements.
- University Facilities makes determination of partial or full release of retainage amount.
- University Facilities requests transfer of the retainage amount.
- Controller's Division releases amount in bank account (net of OUS service charges) and credits the unexpended plant fund.
- University Facilities pays contractor the retainage amount.
At the end and during the fiscal year, the amount recorded in the A35xx retainage receivable accounts in fund 804901 should agree or reconcile to the bank balance of the applicable construction retainage account.
.820 CAPITAL SUPPORT ASSESSMENT
OUS charges a capital project support assessment which is 1/10th of 1 percent of the approved budget on all legislatively approved capital construction projects. The assessment is for the administration of programs and projects by OUS Facilities Division, including Minority/Women in Business and Emerging Small Business, the Capital Repair Baseline study, studies of space utilization, five-year rental appraisal for Board-approved housing and other system-wide consulting for capital activities.
The assessment:
- Is applied to the revenue (or transfers-in) budget of capital projects with legislative expenditure limitation. The assessment is applied to unexpended plant funds and renewal and replacement funds that are tied to a 95xxxx or 96xxxx project (grant) code.
- Is NOT applied to unexpended plant funds for miscellaneous projects less than $500,000. As a result, the assessment is not charged to funds tied to a 900xxx project (grant) code.
- Is NOT applied to OSU unexpended plant funds funded by "Building Use Credits". Building Use Credits are the portion of facilities and administrative cost recoveries that, per OMB Circular A-21, must be reserved and expended on research facilities. This requirement is specific to the top 100 research institutes and, therefore, specific to OSU.
- Is NOT applied to budgets of less than $10,000. A budget of $10,000 would result in a $10 assessment. Processing assessments of $10 or less is considered inefficient.
- If actual revenue are less than budget, the differences in the assessment is not returned.
When an unexpended plant fund is established or the budget is increased, the university will charge the applicable unexpended plant fund for the assessment and prepare an inter-institutional journal voucher to transfer the assessment to the Chancellor's Office Facilities Division. The Chancellor's Office Facilities Division will perform periodic monitoring to ensure that all capital support assessments have been recorded and transferred to the Chancellor's Office Facilities Division.
Capital support assessment is charged to the unexpended plant fund through the use of an inter-institutional journal voucher. Following account codes are used:
- For default program codes "93000 - Plant Improvement" and "97000 - Renewal and Replacement:"
28103 OUS Capital Support Assessment
This ensures that the capital support assessment amount is expensed in the current fiscal year, and not capitalized and depreciated in subsequent fiscal years.
- For default program code "90001 - Plant Construction:"
40318 Land - OUS Capital Support Assessment
40418 IOTB - OUS Capital Support Assessment
40518 Buildings - OUS Capital Support Assessment
40718 Infrastructure - OUS Capital Support AssessmentThis ensures that the capital support assessment is included in the capitalized cost of the project and depreciated in subsequent fiscal years.
The credit is recorded in Chancellor's Office Chart K, Index CENTAC, Fund 001005 with account code "09390 Admin Services Internal Sales."
At the end of each fiscal year, the sum of the charges to account codes 28103 and 40X18 should equal 1/10th of 1 percent of the increases to the revenue and transfer-in budgets for that year. The Chancellor's Office Facilities Division performs this monitoring periodically throughout the year.
Chancellor's Office Facilities Division maintains a fund available to universities for architectural and engineering planning advances. The monies are used in the initial planning phases before the capital construction project is presented to the Legislature or E-Board for approval. The advance is in the form of a loan and is repaid to the Chancellor's Office Facilities Division once the Legislature has provided expenditure limitation authority and the proceeds from the funding have been received.
Planning advances must include a loan agreement on file with OUS Facilities Division, in accordance with the Inter-Institutional and Inter-Fund Loan Policy in section 05.271. If the project is not approved by the Legislature and does not proceed, the amount loaned to the university is written-off and not repaid to the Chancellor's Office.
Responsibilities include the following:
- Chancellor's Office Facilities Division completes and obtains university signatures on planning advance agreements and forwards copy of agreement to Controller's Division.
- Controller's Division records the accounting entries related to issuance and repayment of planning advances.
- Controller's Division maintains a listing of the detail of outstanding planning advances.
Accounting includes the following:
- Accounting transactions are indicated in the Inter-Institutional and Inter-Fund Loan Policy in section 05.271.
- The university receiving the advance from Chancellor's Office Facilities Division will record proceeds in fund 804999 - Fund Bal Arch/Eng Plan using a Due to Other OUS Entities account code B7019 - Liab Arch/Eng Plan.
- In Chart K for the Chancellor's Office, the advance is recorded in fund 804999 Fund Balance Arch/Eng Planning as a Due from Other OUS Entities account code, as follows:
A7001 - Adv Arch/Eng Plan EOSC
A7002 - Adv Arch/Eng Plan OIT
A7003 - Adv Arch/Eng Plan WOSC
A7004 - Adv Arch/Eng Plan OSU
A7005 - Adv Arch/Eng Plan SOSC
A7006 - Adv Arch/Eng Plan UO
A7009 - Adv Arch/Eng Plan PSU
A7010 - Adv Arch/Eng Plan OCATEAt the end of each fiscal year, the sum of the Due to Other OUS Entities account code B7019 in fund code 804999 within the Universities' chart should equal the total of the A70xx account codes in fund code 804999 in Chart K of the Chancellor's Office.
At the end of each fiscal year, the total of the listing of outstanding planning advances should agree to the fund balance of fund 804999 in Chart K of the Chancellor's Office.
.840 CERTIFICATES OF PARTICIPATION (COPS)
The State of Oregon Department of Administrative Services (DAS) issues certificates of participation (COPs), which OUS universities generally use for equipment and systems purchases, such as computer and telecommunication systems. COPs have been used by other state agencies to fund capital construction projects and may be used for a variety of purposes as approved by the Department of Administrative Services and the state agency. Proceeds from COPs are initially deposited with a trustee, and then distributed to the universities on a reimbursement basis. The proceeds must be repaid, generally over a five year period. Sufficient controls must exist to ensure that expenditures in the COPs funded unexpended plant funds are within the DAS authorization and have been reimbursed by the COPs trustee.
Although COPs are tax-exempt government securities (not debt), they have many characteristics of debt and are therefore accounted for as debt. Once COPs are issued and sold, the COPs have an interest rate and typically a five year repayment schedule. The proceeds are invested by a trustee until the proceeds are used.
The OUS Budget and Management Division administers the COPs program for OUS universities; the following policies are limited to the accounting for the issuance of the COPs and the use of the proceeds. The following does not directly address the planning, requesting, biennial budgeting, spending plans, or repayment of COPs. Additional information of administering and accounting for COPs can be obtained from OUS Budget and Management Division.
All COPs-funded projects must be requested through the OUS Budget and Management Division and receive Legislative expenditure approval through the biennial budget process.
COPs-funded projects are on a reimbursement basis, and must include a spending plan filed with OUS Budget and Management Division.
A "Declaration of Official Intent to Reimburse Capital Costs with Oregon Certificates of Participation" document must be in place before COPs-funded expenditures may occur and be recorded in Banner FIS.
Responsibilities include the following:
- Controller's Division creates the additional account codes pertaining to each COPs series in the Banner FIS baseline charts.
- Controller's Division creates the COPs unexpended plant funds in the applicable university's Banner FIS system.
- Controller's Division establishes COPs revenue and expenditure budgets in the unexpended plant funds.
- Universities make expenditures from COPs funds.
- Universities prepare and submit reimbursement packets to OUS Budget and Management Division, which then forwards them to the Controller's Division.
- Controller's Division records reduction of funds held by the Trustee. The university records receipt of COPs funds to reimburse the COPs unexpended plant funds.
Expenditures to the COPs unexpended plant funds are recorded with 2xxxx and 4xxxx account codes. Reimbursements to the unexpended plant funds are recorded using a 05260 - COP Trustee Reimbursements account code.
At the end of each fiscal year, the expenditures in the COPS unexpended plant funds should (1) not exceed the total amount authorized by Department of Administrative Services, and (2) be fully reimbursable by the COPs trustee.
Appendix Last Updated: 09/13/06
