Tracking Expenses in Facilities

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Thomasine Fleming
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1 Tracking Expenses in Facilities Requirements for Tracking Expenses when maintaining, building or improving a facility Minnesota State Colleges and Universities The Minnesota State Colleges and Universities system is an Equal Opportunity employer and educator.

2 Overview Planning guidance Key data and information elements Project Snap Shots Proposed program integration and analysis Recommendations

3 Each campus has funds to improve its facilities: Operating Funds: this is for annual operations as well as the Repair and Replacement category. Operating Funds may also support major capital projects that add new program spaces. Capital and HEAPR Funds: legislative appropriation bond proceeds Other People s Money (revenue sources): grants, gifts, foundation, etc. While the money (revenue) COMES IN from different sources: it needs to be coded correctly. General Operations Fund 110 Program Code 710: (Assignment to Operations that reflects Physical Plant expenses) Capital Projects from Bond Proceeds: Fund 820 HEAPR and Capital Projects Repair & Replacement (R & R) Fund 830 Capital Projects from Campus or Other People s Money (Revenue) for Improvements or New Programs Contact Campus Assistance

4 Reinvestment Plan and Reporting Expectation per Board May 2006 to budget and spend on campus $1 a square foot a year. This $1/sqft is the dollar amount campuses need to code correctly to assure accurate reporting Office of Chancellor Facilities Unit will run reports from Fund 830 R & R to monitor and report campus expenditure.

5 Fund and Object Codes differ. Object Codes are not fund specific: they can be attached to any Fund Code Reporting and analysis will be done by reviewing Fund Code 830 and the Object Code to identify : how much campuses are spending to maintain their facilities. Fund Code: A fund is a fiscal entity that has a self-balancing set of accounts. A fund contains all assets, liabilities, fund balances and changes to fund balance. A fund segregates activity for legal compliance, for the purpose of attaining Board of Trustees objectives or for financial management. In lay terms - the Fund Code separates specific financial activities, and resources within that fund can only be used for those activities. This is like separate checking accounts Object Code: Object codes are four-digit expense and revenue codes established and maintained by the Office of the Chancellor. In lay terms the Object Code identifies the nature of a particular expense (i.e. salaries, services, supplies, equipment, etc). The same Object Code can be used in many different Fund Codes.

6 It is imperative for finance and facilities staff to correctly code both the Fund and Object Codes for facilities expenses to be accurately reported. Operations Fund 110 Program Code 710 : is used to record general operations of the institution (i.e. instruction, academic support, physical plant, etc). This fund mainly contains state appropriations, tuition, instructional fees, and other revenues that support the general operations of the institution. Program Code 710 (Physical Plant) captures expenses within the general operations fund related to physical plant operations, It includes activities related to the custodial care of buildings, building systems, and attached equipment such as heating and utilities, ordinary repair and upkeep of buildings, and plant equipment, grounds maintenance, equipment rentals, nonprogrammatic hazardous waste removal, refuse removal, building leases, safety and security activities, debt services, services required for daily, annual, repetitive functional uses of facilities and grounds, and scheduled repetitive work, programmed scheduled maintenance and unscheduled repairs. Repair & Replacement Fund 830: Repair and/or in kind replacement of physical elements of facilities, systems and fixed equipment. Capital Projects Fund 820 & various other funds: Usually new projects, but can be additions and renovations that both remove backlog, address renewal and add new program issues or improve obsolete space. Funds can be initiated from sources such as the legislature, private donors, campus funds, etc. The source of revenue will determine in which fund the activity should be recorded. For example, a capital project funded from G.O. bond proceeds is recorded in Fund 820. Ask Campus Assistance which fund to code for other sources of funding.

7 Physical Plant Operations Fund 110 Fund 110: General Operations Program Code 710: Physical Plant Cost Center Various object codes (identifies type of expense) HVAC maintenance & operation, plumbing services, general maintenance, custodial services, grounds maintenance, physical security, debt service

8 Repair and Replacement Fund 830 Fund 830: Repair & Replacement Program Code 710: Physical Plant Cost Center Various object codes (identifies type of expense) Renovation projects, tuck-pointing, carpet/flooring replacement, repair or replacement of systems or subsystems, electrical or mechanical replacements

9 Examples of Facilities Funding: type of object code may fit in some or all of the Fund categories Object Codes Operations 110 Program Code 710 Survey Site plan Renting Equipment Salary: staff working on project Consultant Unlikely, but there may be a condition that warrants a site survey for on-going operations of some type. Don t automatically assume! Funds R & R 830 Capital 820, 825 and others Unlikely to be an appropriate use of bond funds. Review with Director of Construction to confirm. MAY be an appropriate use of internal operations funds that are building a new program space. Unlikely, but there may be a condition that warrants a consultant or on-going operations

10 Specifics each project requires analysis, review, confirmation to accurately reflect your good work! The following pages indicate the variety of Object Codes and types of activities that can be correctly entered for a Fund Code. If an expense is originally coded in one fund and it is confirmed that it should have been in a different Fund, then the CFO should correct the transaction in ISRS. Review these definitions carefully; the amount of dollars each campus spends to maintain its facilities will be critically evaluated; and lack of spending may limit the dollars for future HEAPR or capital projects! Shaded areas are questionable and must be reviewed carefully to accurately report the proper Fund Code and Object Code

11 Additional info on Specific Problems campuses may have.these could be in the grey shaded areas. 1. How to code Furniture Fixture and Equipment? If it is attached to the structure and is replacement, then it should be coded in Fund Code 830 R & R. If it is loose table and chairs and/or improvements and not replacements, it should be in Fund Code Operations 110 (Program Code 710) 2. Example of Academic Program area that is spending funds to improve the flooring in their lab space. This activity should be reported in Fund Code 830 R & R. However, it was originally coded in the Academic Program area (General Operations Fund 110), so this expense must be moved from Fund 110 to Fund 830. This expense will then be reflected in the data pulled by the Facilities Unit. The CFO will need to correct the transaction in ISRS, moving it from General Operations Fund 110 to R&R Fund 830. If this correction is not done; then the campus is not correctly coding their R and R expenditures. 2. Craftspeople and staffing: Campuses MAY code staff to Fund 830 R&R if they are actually performing R & R related duties. However, if they are just changing light bulbs, that is not an acceptable R & R expense. Verify staff issues with us! If a staff person is 80% daily or annual maintenance, then it is possible that 20% is spent on replacing doors, changing out flooring, etc. Be accurate in assessment. Call the Facilities Unit to discuss. 4. Major improvement or program change: $100,000 from general operations is scheduled to improve offices. But upon close review, $10,000 of it is for R & R electrical and lighting replacement: so the campus should transfer $10,000 out of general operations and place it in Fund 830 R & R so that is coded correctly.

12 FUND CODE GENERAL OPERATIONS FUND CODE REPAIR AND REPLACEMENT PROGRAM CODE PHYSICAL PLANT General Definition for Operations: The physical plant services required for programs support and other functional uses of campus facilities and grounds Architect/Engineering/Design services attributed to new capital construction and campus planning/development (Facilities Master Plans and Predesigns) Generation and maintenance repair of steam, hot water, chilled water generating equipment. Stationary Engineers (202) and Steam Boiler Engineers All Utilities (electric, natural gas, fuel oil, purchased hot water/steam, water, sewer) services Improvements or program changes (may also be coded to Capital Fund 825) General Definition for Repair & Replacement: Repair and/or in-kind replacement of physical elements of facilities and fixed equipment (Boiler, pumps etc.) Architect/Engineering/Design services attributed to specific R & R projects Replacement of all electrical and mechanical components. Including major projects not funded by HEAPR or Capital appropriations Construction Management attributed to specifc R and R projects Repair and replacement of utilities Renovation Projects : (same general use) Building Automation/Energy Management Building Hardware repairs/replacement: Voice Mail, Blue Light Phones, Call Boxes, Radio, Telephones. Changing fluorescent light ballast and relamping Equipment operations (vehicle drivers and equipment operation and maintenance) Communication System Maintenance - Install/moving lines General Maintenance Work and Custodial services (Including Space Event Services) Building Services Supervisor, maintenance foremen (Bargaining unit 216 & 218) Plumbing and Steam Fitting Services HVAC Maintenance and Operation Hazardous Materials Management and Storage/Removal Costs Leasing physical plant equipment Grounds Maintenance: Lawns, Landscape, Snow Removal (Roads Sidewalks) Locksmith daily repairs Refuse Collection & Disposal Maintenance Contracts: Custodial/Elevator/Boiler/EMS/Security/Grounds Physical Security (Parking Lots not included) Supplies and materials attributed to facilities maintenance and repair Debt Service Consultants (relative to the Phsyical Plant) Land/Building Purchases Tuckpointing masonry walls Window and door replacements Carpet and Flooring Replacement Sidewalk replacement, permanent water control or grounds repair that is not annual or montly Major re-key projects Examples of tasks and where they should be coded

13 Specifics each project or activity requires analysis, review, confirmation to accurately reflect your good work! If an expense is originally coded in one fund and it is confirmed that it should have been in a different fund, then the CFO should correct the transaction in ISRS. This will assure accurate reporting at year end. Review these definitions carefully as the amount of dollars each campus spends to maintain its facilities will be critically evaluated, and lack of spending may limit the dollars for future HEAPR or capital projects! Code correctly. Expense data will be reviewed for accuracy and level of spending. i.e. If the Object code for Land Acquisition is used it could NOT be coded to the 830 R&R Fund. so code correctly! Contact Facilities Unit if questions!

14 Repair and Replacement Budgeting and Reporting Fund 830 Budgets are established and can be adjusted as needed Expenses that meet repair and replacement definitions are accurately recorded Facilities Unit within the Office of the Chancellor will monitor budget and expenses by extracting data from Fund 830. Each campus repair and replacement spending will be evaluated and lack of spending may limit the dollars for future HEAPR or capital projects.

15 Repairs & Maintenance From a Financial Reporting Perspective Facilities uses the term Repair and Replacement (R & R) to describe repairs and/or in kind replacement of elements of facilities, systems and fixed equipment. Financial Reporting uses the term Repairs and Maintenance to report both 1) general operating repair and maintenance expenses and 2) other capital acquisition or improvement expenses that do not meet our minimum capitalization criteria. This is a line item that is presented on the MnSCU Annual Financial Statements. These two amounts will never be the same. We use similar terms for different purposes.

16 Operating Statement from the MNSCU Annual Financial Statements (includes all institutions) MINNESOTA STATE COLLEGES AND UNIVERSITIES CONSOLIDATED STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE YEARS ENDED JUNE 30, 2012 AND 2011 (IN THOUSANDS) Operating Revenues Tuition, net $ 538,547 $ 539,018 Fees, net 67,692 71,784 Sales and room and board, net 118, ,088 Restricted student payments, net 107, ,368 Other income 17,002 16,496 Total operating revenues 848, ,754 Operating Expenses Salaries and benefits 1,203,159 1,249,299 Purchased services 210, ,838 Supplies 149, ,292 Repairs and maintenance 33,299 34,606 Depreciation 104,102 97,297 Financial aid, net 34,931 56,887 Other expense 47,057 46,217 Total operating expenses 1,782,511 1,867,436 Operating Loss (933,970) (1,015,682) Nonoperating Revenues (Expenses) Appropriations 551, ,382 Federal grants 369, ,175 State grants 74,346 65,481 Private grants 30,338 22,377 Interest income 5,463 6,418 Interest expense (22,526) (20,862) Grants to other organizations (11,231) (15,687) Total nonoperating revenues (expenses) 996,822 1,091,284 Income Before Other Revenues, Expenses, Gains, or Losses 62,852 75,602 Capital appropriations 56,361 65,480 Capital grants Donated assets and supplies 2,302 1,515 Gain (loss) on disposal of capital assets (496) 3,189 Change in net assets 121, ,341 Total Net Assets, End of Year $ 1,991,610 $ 1,870,107

17 Components of Repairs & Maintenance on the Financial Statements The activity in the following 5 ISRS object codes crosswalk to Repairs & Maintenance on the annual financial statements: 1210 Repairs to equipment and furniture ($3.8M in FY12) 1240 Repairs & alterations to buildings ($12.0M in FY12) 1241 Service Center Telephone services ($46K in FY12) 1260 Maintenance contracts ($6.4M in FY12) 1280 Other repairs ($2.6M in FY12) The remaining $8.2 Million of the $33.3 Million on the financial statements comes from project expenses funded by GO Bond proceeds that did not meet the capitalization criteria or did not extend the useful life of the asset.

18 Capitalization is the financial accounting term whereby capital acquisitions (buildings, building improvements, equipment, etc.) are accounted for as either an asset or expense. The asset may then be depreciated over a period of time. MnSCU s capitalization policy includes the following minimum requirements. Buildings and building improvements expenses over $250,000 are capitalized as an asset, whereas those expenses below $250,000 are shown as repairs and maintenance expense. Financial reporting reviews all of the college/university expenses in Fund 820 to determine which amounts will be capitalized versus expensed. Financial reporting works with the colleges and universities directly for other capitalized assets in other funds. The minimum requirement for capitalization of equipment is $10,000, for those purchases beginning in FY2009 (Prior to this date our minimum requirement was $5,000). Equipment purchases that do not meet this requirement are reported as supplies expense.

19 3 Examples Site Drainage Repair Project cost of $300,000. This project exceeds the $250,000 minimum requirement for capitalization but does not extend the useful life of the asset. It will be expensed. Performing Arts Stage Lighting Project cost of $115,000. This project doesn t exceed the $250,000 minimum requirement. It will be expensed. ABC Commons Remodel Project Cost of $600,000. This project exceeds the $250,000 minimum requirement for capitalization. It will be capitalized and will become an asset on the financial statements.

20 If you have questions on how a requisition or contract should be coded - - please call us to discuss!

Current Funds Unrestricted used to report resources that are expendable for any purpose in performing the primary objectives of the entity

Current Funds Unrestricted used to report resources that are expendable for any purpose in performing the primary objectives of the entity MnSCU Fund Codes Definition: A fund is a fiscal entity that has a self balancing set of accounts. A fund contains all assets, liabilities, fund balances and changes to fund balance. A fund segregates activity