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Accounting for Capital Projects

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Section:  Accounting and Financial Reporting Number:  05.780    
Title:  Accounting for Capital Projects

 

Index

POLICY

APPENDIX

 

POLICY

.100 POLICY STATEMENT 

The policy sets forth system-wide requirements for the administration and accounting for capital projects.  

.110 POLICY RATIONALE

OUS seeks to ensure that the policies and procedures related to administration and accounting for capital projects are documented, communicated, clearly understood, and consistently applied. 

The accounting for capital projects is complex due to multiple funding sources, a large volume of expenditures, and the crossover of expenditures into multiple fiscal years.

A. OBJECTIVES OF ACCOUNTING FOR UNEXPENDED PLANT FUNDS

  • To ensure that the total expenditures of each capital 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 projects as those expenditures become due. 
  • To ensure that funding is in compliance with all applicable laws and regulations. 
  • To ensure that accounting for capital projects is in accordance with generally accepted accounting principles and provides for sufficient internal control. 
  • To ensure that the financial activity of capital projects is adequately monitored.

.120 AUTHORITY

.130 APPROVAL AND EFFECTIVE DATE OF POLICY

Approved by the Controller on July 11, 2005, with an effective date of July 1, 2005. Revisions and updates approved by the Associate Vice Chancellor for Finance & Administration/Controller on January 14, 2010.

.140 KNOWLEDGE OF THIS POLICY

All institutional and Chancellor's Office personnel with financial oversight responsibilities and accounting and financial reporting responsibilities related to capital projects should be knowledgeable of this policy.

.160 RESPONSIBILITIES

Responsibilities related to accounting for unexpended plant funds include the following: 

A. OUS CONTROLLERS DIVISION

  • Establish system-wide accounting policies and internal controls to ensure uniform and consistent accounting of capital projects.
  • Create project (grant) codes in university Banner FIS for capital projects with legislative expenditure limitation.
  • Review and approve funding plans of capital projects accounted for in unexpended plant funds.
  • Establish unexpended plant funds and corresponding index codes in Banner FIS as requested by the universities.
  • Establish and update budgets in unexpended plant funds set up by the Controller's Division.
  • Transfer system-wide funds among universities.
  • Provide overall monitoring of the unexpended plant funds' accounting records and expenditure limitations.

B. OUS CAPITAL CONSTRUCTION DIVISION

  • Interpret, clarify, and document requirements of legislative expenditure limitations.
  • Put forward legislative limitation requests and obtain legislative expenditure limitations.
  • Allocate system-wide legislative expenditure limitations among universities.
  • Review and approve funding plans of capital projects accounted for in unexpended plant funds.
  • Authorize contingency amounts to legislative expenditure limitations.

C. UNIVERSITY

  • Establish university-specific accounting policies and internal controls pertaining to capital projects.
  • Record transactions in the appropriate capital project funds using the correct account codes.
  • Create project (grant) codes in university Banner FIS for capital projects without legislative expenditure limitation.
  • Establish capital project funds and corresponding index codes in Banner FIS.
  • Establish and update budgets in the capital project funds.
  • Manage the financial activity of capital project funds.

.200 LEGISLATIVE EXPENDITURE LIMITATIONS

A. LEGISLATURE AND EMERGENCY BOARD EXPENDITURE LIMITATIONS

There are three types of legislative expenditure limitation for use on capital projects as defined below:

  1. Capital Improvement Expenditure Limitation
    Capital improvement expenditure limitation is used for general improvements less than $1 million to real property used by the Education and General (E&G) and Statewide Public Services programs. These projects are funded by the revenue of these programs and are expended against the capital improvement expenditure limitation approved each biennium by the legislature.
  2. System-wide Capital Construction Expenditure Limitation
    System-wide capital construction expenditure limitation includes the biennial expenditure limitation for capital renewal, code compliance and safety. This limitation is also used for capital projects involving the acquisition, construction, or improvements of real property which totals $1 million or more, but less than $3 million. Any capital project not listed in the Capital Construction Bill nor previously approved by the Legislature and which totals $1 million or more but less than $3 million, inclusive of all funding sources, shall be submitted to the Legislature or the Emergency Board for approval unless appropriate system-wide expenditure limitations exists.
  3. Project-specific Capital Construction Expenditure Limitation
    Project-specific capital construction expenditure limitation is used for all capital projects involving the acquisition, construction or improvements of real property with total $3 million or more. any capital project equal to or above the $3 million threshold, inclusive of all funding sources, shall be submitted to the Legislature or Emergency Board for legislative expenditure limitation, unless appropriate system-wide expenditure limitation exists.

The attached table illustrates legislative expenditure authorization requirements by dollar amount and funding source.

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 the required legislative expenditure limitation authorization, if any, 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 and end before the expiration date. System-wide and project specific expenditure limitations expire in six years with a six-month trail-out period. Capital Improvement limitations expire in two years.

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 for capital projects 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.

.250 CASH MANAGEMENT

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 OUS Capital Construction Division, and the OUS Controller's Division. Sufficient funding must be received timely, deposited and accounted for, and must comply not only with legislative expenditure limitations, but also with laws and regulations including Oregon Revised Statutes and IRS Code.

For additional information about the cash management of capital construction projects, refer to the OUS Debt Management Policy in section 35.200 "Debt Management".

.300 ACCOUNTING

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:

  • Every capital project fund must be tied to a project (grant) code. 
  • All capital project funds related to the same project and same legislative expenditure limitation must be tied to the same project (grant) code.
  • The numbering of the project (grant) codes must be consistent with the numbering convention developed and communicated by the Controller's Division.
  • Project (grant) codes must be sequentially numbered.
  • For project (grant) codes with project-specific legislative expenditure limitation, the "maximum" amount must equal the total legislative expenditure limitation.
  • 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 Capital Construction Division.

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:

  • 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.
  • Unexpended plant funds are not established until the Legislature has authorized capital construction expenditures and the university is ready to begin the project.
  • All capital construction funds must be set up in fund type 81-Unexpended Plant Funds or fund type 83-Renewal and Replacement Funds.
  • 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  05.110 "Chart of Account Administration" .
  • Fund codes must be sequentially numbered.
  • 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.
  • Every unexpended plant fund must be tied to a project (grant) code.
  • Capital improvement funds for capital projects funded by budgeted operations funds must roll-up to 004000 - Repair and Remodeling. The institution has the choice of creating a separate fund for each capital improvement project or one fund for each biennium for the capital improvement expenditure limitation. Capital improvement funds are not required to be tied to a project (grant) code.

C. ESTABLISHING AND UPDATING BUDGETS

Each capital project 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

Funding to cover capital project expenditures are recorded as revenue or transfers-in in the capital project funds.

  • Different sources of funding may not be commingled in the same fund; a separate fund must be established for each funding source.
  • Total revenue and transfers-in in unexpended plant funds may not exceed legislative expenditure limitation or the OUS Capital Construction Division allocation of each system-wide legislative expenditure limitation.
  • Total transfers-in to capital improvement funds may not exceed the institutions share of the capital improvements expenditure limitation, as distributed by the OUS Budgets Division.
  • Controller's Division distributes funds received centrally. Universities record receipt of funds received directly by the university and transfers from other university funds.
  • 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 capital project fund and to the correct account code within the capital project fund. Expenditure may only be charged to the project to which they pertain.

F. TERMINATING CAPITAL PROJECT FUNDS

Once a project is complete, the applicable capital project 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. Capital project funds may not be terminated until the following requirements are met:

  • All expenditures of that fund have been paid.
  • All amounts withheld as construction retainage have been refunded to the contractor.
  • The capital project fund has no remaining fund balance.
  • The corresponding Banner FIS index has been terminated.

G. TERMINATING PROJECT (GRANT) CODES

A project (grant) code may 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. 

.350 MONITORING

A. MONITORING OBJECTIVES

The objectives of monitoring capital project funds are to ensure that

  • Actual expenditures have not exceeded actual revenue, thereby resulting in a negative cash balance. Although negative cash balances do occur in cost-reimbursable situations, a negative cash balance in any capital project fund requires review and follow-up.
  • Total expenditures of all funds comprising the project have not exceeded the applicable legislative expenditure limitation.
  • 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 occurs on a monthly basis as specified in appendix .741, Monthly Monitoring Process.

.400 YEAR-END CLOSING PROCEDURES

Accounting for capital project funds is subject to the year-end closing instructions issued by the Controller's Division and the applicable institution's Business Affairs Office. 

.450 RECORDS RETENTION REQUIREMENTS

The following retention requirements apply to records related to bonds, COP and Lottery proceeds.

The IRS requires that all records related to the sale, expenditures and use of bond- funded facilities be retained for three years beyond the final maturity date. For OUS, the retention period would be approximately 33 years, depending on the final maturity of the bond sale. This would include at a minimum the following records:

  • Basic records relating to the bond transaction (including the trust indenture, loan agreements, and bond counsel opinion-bond sale transcript);
  • Documentation evidencing expenditure of bond proceeds (both internal and external);
  • Documentation evidencing use of bond-financed property by public and private sources (i.e., copies of management contracts and research agreements);
  • Documentation evidencing all sources of payment or security for the bonds; and
  • Documentation pertaining to any investment of bond proceeds (including the purchase and sale of securities, SLGs subscriptions, yield calculations for each class of investments, actual investment income received the investment of proceeds, guaranteed investment contracts, and rebate calculations).

.500 OTHER COMPLIANCE ISSUES

The accounting records of unexpended plant funds must also provide documentation of compliance with other OUS policies pertaining to capital projects. Accounting related to other compliance issues is specified in appendix .800, Compliance with Other Objectives Related to Capital Projects.

.690 CONTACT INFORMATION

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

 

.695 HISTORY

07/11/05 - Approved
07/15/05 - Updated
01/14/10 - Revised
09/03/10 - Updated - added section .450

Policy Last Updated 09/03/10

APPENDIX

.700 CONTEXT

The following context is specific to unexpended plant funds but also relates to capital improvements funded by and accounted for in budgeted operating funds.

.701 BACKGROUND

"Unexpended Plant Funds" within Banner FIS account for revenue and expenditures of capital construction projects, including their acquisition, construction, and repair and maintenance.

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 Capital Construction 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:

  • Chancellor's Office Controller's Division
  • University Business Office
  • Chancellor's Office Capital Construction Division
  • 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.

.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 attached table shows the general guidelines for accounting responsibilities of capital project funds.

.715 LEGISLATIVE EXPENDITURE LIMITATIONS - ADDITIONAL INFORMATION

Conceptual Understanding

Expenditures for capital projects must be authorized by the Legislature. Each biennium, the Legislature approves a series of expenditure limitations for capital 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:

  • Expenditures of some capital projects 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%. Contingency limitation amounts are limited to XI-F bonds and "Other" funding as defined by the legislature in the capital construction bills each biennium.
  • 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 fiscal policy 35.200 "Debt Management". 

In the unlikely event that actual expenditures are expected to exceed expenditure limitation, OUS is required to seek legislative authorization for additional expenditure limitation. Additional expenditure limitations are submitted for approval to the OUS Board and then to the regularly assembled Legislature or the 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.

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. The contracts should contain an escape clause rendering the contract null and void if the project is not approved by the Legislature.

Changing Expenditure Limitations
The State Board of Higher Education may increase any limit for expenditures of other revenue sources, including federal funds, 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.

Emergency Board

Requirements -- Expenditures Exceeding Legislated Limitations and New Capital Construction Projects
Any capital construction project not previously approved by the Legislature which totals $1 million or more but less than $3 million, inclusive of all funding sources, shall be submitted to the Legislature or the E-Board for approval unless appropriate 2 system-wide expenditure limitations exist. Any capital project above the $3 million threshold, inclusive of all funding sources, shall be submitted to the Legislature or the E-Board for approval; OUS will not use system-wide expenditure limitation for these projects without legislative or E-Board approval. 

Exempt from Legislative Expenditure Limitation

Capital construction projects with expenditures totaling less than $1 million are exempt from legislative expenditure limitations. This exemption does not apply to projects financed by bonds or to capital improvements funded by Budgeted Operations.

Gift-in-kind donations do not require expenditure of OUS funds and are therefore exempt from legislative expenditure limitation. The gift-in-kind may relate to a current capital project (i.e. foul poles for a baseball stadium) or be an entirely separate project (i.e. donation of a new building). The gift-in-kind should be accounted for as described in Fiscal Policy Manual 55.100, section .714 .

Total Expenditures Exceeding Legislative Expenditure Limitation

The university must establish a process (involving appropriate VP approval) for notifying the OUS Capital Construction Division in the event that expenditures of a project are expected to exceed legislative expenditure limitation. Working with the university, the OUS Capital Construction Division will consider the following alternatives:

  • Determining that the expenditures are subject to legislative expenditure limitation.
  • Ensuring that all expenditures charged to the capital project 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 capital repair, code compliance and safety exist and determining the possibility of charging the project to such system-wide limitation. Such an approach is allowable even if the expenditures were initially charged to a project - specific expenditure limitation. Splitting of a project - 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 Capital Construction Division taking into consideration the project definition and scope of work of the project - 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 Capital Construction Division, as approved by the appropriate university vice president, is required to request additional legislative expenditure limitation through presentation to the OUS Board and the Legislature or E-Board.

____________________
2 The project must be in line with the definition of the use of system-wide expenditure limitation.

.720 CASH MANAGEMENT

For policies related to cash management and debt financing of capital construction, please refer to Fiscal Policy Manual 35.200 "Debt Management." For policies related to returning unused bond proceeds, please refer to Fiscal Policy Manual 35.100 "Returning Excess Bond Proceeds."

.730 ACCOUNTING

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 occurs 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 $1 million.

Fund Code

The OUS Controller's Division creates the OUS Baseline Hierarchy for fund types 11 - Budgeted Operations, 81- Unexpended Plant Funds and 83 - Renewal and Replacement Funds.

Universities create unexpended plant fund codes in Banner FIS for miscellaneous projects less than $1 million. They also create capital improvement funds in fund type 11 - Budgeted Operations.

Universities create unexpended plant fund and renewal and replacement fund codes in Banner FIS for projects with project-specific legislative expenditure limitation which do not require a transfer of funds from OUS Controller's Division (i.e. auxiliary funds, COPs, SELP, gifts and grants).

The OUS Controller's Division creates unexpended plant fund codes in Banner FIS for projects which require system-wide limitation. They also create the unexpended plant fund codes for centrally controlled funding sources (i.e. bonds and general fund appropriations).

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 request that the Controller's Division create unexpended plant fund codes in Banner FIS by having university facilities prepare and forward plant fund requests to OUS 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 bank code is assigned by the office (University Business Office or Controller's Division) that creates the capital improvement funds, 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 general purposes of the location code are to denote the physical location of the real property and to distinguish 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. Location codes are required for all bond funded expenditures.

Establishing and Updating Budgets

A university has two options related to budgeting in the capital project funds:

  1. 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 matches actual revenues. Closely following the expenditure budget, it reduces the risk of expenditures exceeding revenues, which would result in a negative cash balance.
    • Disadvantages: The budget must be updated each time the fund receives additional revenue. Another disadvantage is that use of this alternative is meaningless for cost reimbursable grants and contracts.
  2. 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. The budget can be used to reserve limitation within a project for a specific funding source. This gives facilities managers a clear picture of how much limitation remains for other funding sources within a project.
    • 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 capital projects 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 capitalized, 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 capital project funds must include a location code.
  • See Account Code Index in OUS Fiscal Policy Manual for descriptions of account codes.
  • See OUS Fiscal Policy Manual 55.100 "Fixed Assets Accounting Policies" for capitalization policy.

.740 MONITORING

Distribution of the accounting for unexpended plant funds requires that the universities develop and implement internal controls designed to detect problems rather than prevent problems. It is absolutely critical that 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 or available, then OUS would have no choice but to seek additional legislative expenditure limitation from the E-Board.

.741 MONTHLY MONITORING PROCESS

The following monitoring occurs on a monthly basis:

  • The Controller's Division runs the FWRBDPJ and FWRBDLR reports after each period close. The reports are analyzed for the following issues:
    • Actual expenditures exceed actual revenue (negative cash)
    • Revenue budget less than actual revenue
    • Revenue and expenditure budgets do not equal
    • Total revenue or expenditures for a project exceed the legislative limitation for the project.
    • The total budget for a project exceeds the legislative limitation for the project.
    • Funds with zero cash balance (may be ready to close)
    • Miscellaneous projects where actual or budget exceeds $1 million
  • Identified issues on the FWRBDPJ and FWRBDLR are color coded for easy identification.
  • The reports are sent by the Controller's Division to the university Facilities and Business Offices.
  • Universities will make notations on the FWRBDPJ report of any funds with negative cash balances, expenditures greater than budget, and/or actual revenue greater than budget
  • Universities will make notations on the FWRBDPJ for miscellaneous projects (grant) codes where expenses exceed $1 million.
  • Universities will make notations on the FWRBDLR report of any situations where total expenditure budget exceeds the allocation (legislative expenditure limitation).
  • Universities will send completed monitoring reports to OUS Controller's Division, with a copy to the University Business Officer.
  • Chancellor's Office will compile the information of all university charts into their copy of the FWRBDPJ and FWRBDLR reports used for monitoring the capital project funds and follow-up on any compliance issues not taken care of in a timely manner.

.742 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 capital project funds with negative cash balances.

How Report Works

The FWRBDLR report includes the following headings:

  1. Total Limitation: Should agree to the total of the legislative expenditure limitation. Project-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.
  2. Allocation: The total expenditure budget for the capital project fund in Banner FIS. This amount matches the "Expense Budget" of the FWRBDPJ report.
  3. 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.
  4. 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.
  5. Expended to Date: Total actual expenditures recorded in the capital project fund in Banner FIS.
  6. Unspent Allocation: Allocation less Expended to Date. A negative amount indicates that actual expenditures have exceeded the expenditure budget (i.e., "allocation").
  7. Cash Balance: Actual cash balance of the capital project 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 once a month, after the close of the period. Therefore, the FWRBDLR report is NOT a daily report.
  • The legislative expenditure limitation for each system-wide project is initially populated in "Chart X". As the OUS Capital Construction Division allocates system-wide project limitation to each university, the allocation is increased in the university's chart and 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.

.743 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: 

  1. Expense Budget: Total expenditure budget for capital project fund. The expenditure budget for all capital project funds that make up a project (grant) code must not exceed the legislative expenditure limitation for that project. 
  2. Expense Actual: Total actual expenditures for capital project fund.
  3. 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. 
  4. Revenue Budget: Total revenue budget for capital project 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.
  5. Revenue Actual: Actual total revenue for capital project fund.
  6. Revenue 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.
  7. Actual Revenue-Expense: 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 once a month, after the close of the period. 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 the institutions' Banner FIS, in which case it could be used on a daily basis because it would be using production data.

.750 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 capital project 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 capital project fund.
  • Ensuring that all charges in the capital project funds have been assigned to the correct account code and the appropriate fund has been used for the expenditures.
  • Ensuring that no capital project funds have negative fund 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

.810 CONSTRUCTION RETAINAGE

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 references to construction retainage are found in OAR 580-040-0007 and OAR 580-063-0045.

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 works with the contractor, bank and Department of Justice to establish an acceptable agreement and opens the securities account.
  • Controller's Division and the University receive notification from bank of securities ("performance bonds") held by the bank in lieu of retainage.
  • Controller's Division reviews securities on deposit to verify that they meet the requirements of the statutes or have an approved exception.
  • University 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.
  • University sends request to the bank to release the performance bonds.
  • University sends a letter to the bank to release interest in the securities.
  • Bank releases the securities to the contractor.

Retainage Deposited in a Financial Institution

  • Controller's Division obtains approval of the State Treasurer and opens a retainage account at the bank. Retainage account at bank would require two authorized signatures from the Controller's Division 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 1/4th of 1 percent (.0025) of the approved budget on all legislatively approved capital construction projects. The assessment is for the administration of programs and projects by OUS Capital Construction 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 96xxxx project (grant) code.
  • Is NOT applied to unexpended plant funds for miscellaneous projects less than $1 million. As a result, the assessment is not charged to funds tied to a 900xxx project (grant) code or to capital improvement projects funded by budgeted operations.>
  • 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 initial budgets or budget adjustments of less than $10,000. A budget of $10,000 would result in a $25 assessment. Processing assessments of $25 or less is considered inefficient.
  • If actual revenue is less than budgeted, the difference in the assessment is not returned.

When an unexpended plant fund is established or the budget is increased, whichever office entered the budget jv will charge the applicable unexpended plant fund for the assessment and prepare an inter-institutional journal voucher to transfer the assessment to the OUS Capital Construction Division. The OUS Controller's Division will perform periodic monitoring to ensure that all capital support assessments have been recorded and transferred to the OUS Capital Construction 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 Assessment 

This 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 CAPSUP, Fund 001015 with account code "79392 Miscellaneous Service Reimbursement."

At the end of each fiscal year, the sum of the charges to account codes 28103 and 40X18 should equal 1/4th of 1 percent (.0025) of the increases to the revenue and transfer-in budgets for that year. The OUS Controller's Division performs this monitoring periodically throughout the year.

.830 PLANNING ADVANCES

The OUS Capital Construction 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 OUS Capital Construction 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 Controller's 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:

  • OUS Capital Construction 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.
  • Proceeds for the university receiving the advance from the OUS Capital Construction Division will be recorded 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 EOU
    A7002 - Adv Arch/Eng Plan OIT
    A7003 - Adv Arch/Eng Plan WOU
    A7004 - Adv Arch/Eng Plan OSU
    A7005 - Adv Arch/Eng Plan SOU
    A7006 - Adv Arch/Eng Plan UO
    A7009 - Adv Arch/Eng Plan PSU

At 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' charts 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 and to fund capital construction projects. 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 Controller's 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 Controller's 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. 

.995  HISTORY

7/11/05 - Approved
09/13/06 - Updated
03/20/09 OAR References added to Section .810
8/17/09 - Updated
01/14/10 - Revised

Appendix Last Updated: 01/14/10

Posted Tue, 01/11/2011 - 11:18am