These guidelines are to be followed by the Capital Accounting department when funding capital projects, as well as by schools and departments when managing a capital project
The purpose of the guidelines is to 

  • Encourage departments to plan ahead and identify funding sources that are necessary to complete a project.
  • Provide a framework from which Capital Accounting can manage the funds used to construct assets, and efficiently track and manage funds and assets through the financial systems.

Exceptions to the policy must be requested and approved in writing as part of a project's funding agreement. Project funding agreements or department agreements approved by the Provost, will supersede the guidelines listed below. Funding agreements that include the use of debt and supersede the guidelines below must also be approved by the chief financial officer (CFO), vice president of Business Affairs. Refer to Capital Project Funding Plans and Agreement Policy and Capital Project Approval Process and Related Funding Documentation for more details.

  • Use of debt funds must be approved in advance by the Board of Trustees or Form 1.  
  • University debt may only be used for capital purchases (capital projects and financed equipment), and “Faculty Staff Housing” loans, unless otherwise approved by the CFO.
  • Please refer to Administrative Guide Policy 5.2.1: Financing of Purchases for more information.
  • For more information about using debt for your project, refer to Debt Considerations and Manage Debt
  • Once a project is approved
    • A PTA (Oracle Project-Task-Award) setup form is given to Capital Accounting for each funding source.
    • Once the PTAs are identified, the appropriate funds are transferred to Capital Accounting (unless otherwise stated in the project's Funding Agreement), up to the level of project approval.
    • The project approval process may have several stages, with varying levels of funding. The funding level should not exceed the approval level, but the funding may be less than the approval level if the project manager is not planning to commit 100% of the funding. However, 100% is required at “Construction Approval.” At “Construction Approval,” all funds are transferred to Capital Accounting unless otherwise indicated in the funding agreement. Any gift funds not in hand must have an alternate funding source identified in the funding agreement.
  • Use of Funds
    • Unless the hierarchy of funding sources are arranged in advance: 
      • Or are based on gift donation schedules
      • Or are specifically indicated otherwise in the funding agreement with regard to the project savings plan
    • The following funding order, and use/commitment of funds, will apply:
      • Government Grants
      • Restricted Funds (gifts or non-government grants)
      • Unrestricted Funds School or Department Reserves
      • University Reserves (President or Provost reserves)
      • University Debt
  • Upon completion of the project, the remaining budgets are reduced to match expenditures, and any remaining departmental funds are transferred back to the source funds. Remaining debt funds are removed from that project (and remain in the debt award).
  • Unless stated in the Funding Agreement, any project cost savings is applied in the following order:
    • University Debt
    • University Reserves (President or Provost reserves)
    • School/Department Reserves
    • Unrestricted Funds
    • Restricted Funds (gifts or non-government grants)
    • Government Grants

Projects should be responsibly estimated to allow the proper amount of debt to be allocated. Do not transfer debt funds to incomplete projects, resulting in a transfer of budget savings and/or debt allocation from one year to the next, unless approved by the Provost. Although budgeted debt funding may cross budget years (on construction projects that cross fiscal years), budget savings may not, unless approved by the Provost. If a project budget savings reduces the amount of debt required to be expended, then that debt allocation is returned to the university and must be reassigned through the capital budget process. Exceptions exist for:

  • Written agreements between the Provost and school(s)/department(s)
  • Debt allocation is made to a department (e.g., Utilities) for use on a number of projects during that fiscal year. If this occurs, debt savings on a project using current year debt allocations may be used on another project during that fiscal year. If the project is completed after the budgeted fiscal year, those funds are considered debt savings and returned to the university for use in future debt allocations, unless approved otherwise.

Fund substitution is defined as moving expenditures made on one fund to another fund, thereby replenishing the cash available in the first fund, or replacing the funds used for an expenditure with another funding source, making the initial funds available again. Once a fund (debt and/or non-debt) is used, substitution of funds is generally not permitted unless previously agreed upon in writing (or in the Board of Trustee Write-up or funding agreement). That is, once existing funds are used and new funding is received, expenditures are not reallocated from the existing awards to the new Award. However, the department may request to use the new award prior to other existing awards for future expenditures.

Once university debt is used and a new funding source is received, substitution of gift/reserve funds for debt are only made if:

  • Capital Accounting determines reallocation of debt is necessary for debt compliance and/or debt management.
  • Requested by the department/school, however, once debt is expended and removed, the amount removed will no longer be available to the project.
  • University Reserves (e.g., Facilities Reserves) are used as seed money for a project that is later debt or gift funded.

Bridge financing is the temporary use of either an unrestricted fund or debt fund, prior to receiving a gift. Debt bridge financing must be arranged prior to “Construction Approval,” have approval from both the Provost and CFO and must be outlined in an approved funding agreement. Refer to Administrative Guide Policy 5.2.1: Financing of Purchases for more information.

If backstopping is permitted, it is the responsibility of the project manager and/or the school/department sponsoring the project to notify the project accountant when the funds are received and available for substitution. The project accountant has two monthly-close cycles to make the fund substitution. Fund transfers and/or expenditure transfers may be done at anytime during the year, but should be scheduled so that they occur no more than once a quarter per project, unless (a) previously agreed upon, (b) the project is being closed and the close-out process requires additional transfers, or (c) at the discretion of Capital Accounting. The following guidelines apply:

  • The Capital Accounting manager will decide on the best method of replacing funds used for backstopping other gift or non-gift awards.
  • If the expenditures used on the backstopping award were incurred in a prior year and/or the project has been placed-in-service, Capital Accounting may choose the best method:
    • Fund transfer between funds with detailed journal description indicating purpose of transfer.
    • If the award used for backstopping is debt, an accelerated amortization payment may be made, drawing upon the gift funds for payment.
  • If the project was not placed-in-service, Capital Accounting may elect to transfer expenditures between funds/awards.
  • If a gift is scheduled after construction begins or after a project is completed, it is recommended that the gift pledge state something to the effect that “The gifts may also be used to repay, replenish, and/or substitute funds already used towards the construction of a project.”

Funds transferred to cover a project's overdraft will not be returned. Permanent funding must be provided.

  • Funds (debt or non-debt) transferred from another project to cover expenditures at year-end, will not be returned to the originating project unless previously agreed upon.
  • If a debt allocation is used from another project (e.g., Project “B”), to cover project expenditures on Project “A,” Project “B's” debt allocation is reduced proportionally and will require non-debt funding to cover the amount transferred. The amount in question may not be covered by a debt allocation of a third project.

A project may not have a fund substitution after the project is placed in-service and capitalized to the Fixed Assets System. An asset is placed in-service upon substantial completion, and often coincides with the (Temporary) Certificate of Occupancy.

  • Debt for financed equipment is applied to the Budget Fiscal Year in which the requisition is approved (not when the asset is received or the invoice is paid).
  • The capitalization policy that should be used for financed equipment is determined by the date the asset is received. For example, to determine if an expenditure item is capital or non-capital, apply the capitalization rules that are in effect on the day the asset is received.

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