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Accounting Policy 22401 on Capital Assets

This procedure covers guidance for construction and related activities on projects managed by campus facilities operations and defines the project coding, accounting and funding, reimbursement process, and reporting within Unity Construct (formerly e-builder) and PeopleSoft.  The focus of the process design is centered around the recording of capital and non-capital expenses within facilities chartfields to align with the management of contracts in Unity Construct and the financial system of record of PeopleSoft. 

Project Number Coding

Project codes are utilized in both Unity Construct and PeopleSoft for segregation of activity.  The project numbering scheme is designed to facilitate the contract management needs within Unity Construct as well as the chartfield design in PeopleSoft.  Additionally, the structure allows for a “roll-up” of costs by board approved project to meet reporting needs.

The numbering design is as outlined below for each system:

Unity Construct: the driving force for project definition within Unity Construct is to allow for management of contracts/agreements where expenses can be monitored and scrutinized by contractor.  In this system, the project numbering system will allow for a parent/child relationship, which will use a segment of the project number to feed over to PeopleSoft as the project ID.

• The first 8 digits of the project number will correspond to a PeopleSoft project ID.  This represents a consolidated project.
• Child projects will be identified by the last five digits of the project number, which corresponds to class chartfield within PeopleSoft.
• Each project within Unity Construct will use one facilities chartfield string for the cost pool to record expenses as outlined within this procedure.  At a minimum, the cost pool chartfield must have a facilities deptID, projectID and class.   It is at the discretion of the campus on whether additional segregation is desired for purposes of tracking expenses by building.  If desired, deptID or program code could be used to identify the building that the project is related to.  This chartfield can then be used to aggregate costs in the ledger and would be used in conjunction with the parent/child project numbering to allow for the segregation while maintaining one chartfield string/mocode per project in Unity Construct.
• The first 8 digits of the project number from Unity Construct will correspond to a PeopleSoft project ID.  This represents the rolled-up project.
• DeptID or program code may be used in the facilities cost pool to indicate the building, if desired.
• Additional roll ups that may be individual to a business unit’s needs, can be utilized through the project tree structure.  This roll-up requires a lot of maintenance and is not recommended for the purposes of tracking by building.  Additionally, due to the integrations between PeopleSoft and Workday Planning, the tree roll-up would not be able to be utilized to track board approved projects.

PeopleSoft: the reporting needs within PeopleSoft allow for accounting of funding sources and reporting by board approved project and building.  In this system, the project numbering methodology will utilize project ID to track the consolidated project.  For those consolidated projects that are board approved projects, an attribute on the project ID will be utilized to separately report on board approved projects.

Accounting Process

The accounting process is designed to accommodate constraints within Unity Construct which allows for one chartfield per purchase order line.  As a result, a single facilities unrestricted chartfield string will be utilized as a cost pool for all expenses on each project ID. 

After payments are made, the facilities chartfield will be reimbursed in PeopleSoft on a regular basis. The reimbursement process is structured to use accounts which records revenues in the facilities chartfield (i.e. construction cost pool) and records an expense in the chartfield that is funding the project.  The funding sources, which may include restricted and unrestricted, are identified using separate accounts.  This approach aids in the tracking the various funding sources that support the project. 

The illustration below shows the concept of the facilities construction cost pool.  All project expenditures (i.e. capital expense and non-capital expense accounts) reside in the cost pool.  Journal entries to capital expense or repair/maintenance accounts should not occur in relation to funding of the project.  This keeps the original expenses in the construction cost pool, with funding sources entering the pool as revenues. The resulting reporting allows for visibility of all expenses in one location and identifies the funding source types in the same chartfield by utilizing separate accounts by funding type.

PeopleSoft chartfield structure utilized consists of the following:

• Project ID to identify board approved project or other parent/child relationships.  Project ID will group together parent/child projects from Unity Construct and board approved projects would be identified with the use of an attribute on the project ID.  For related projects that have separate board approvals, separate project numbers in both Unity Construct and PeopleSoft are necessary.      This could occur when an enabling project also requires board approval.
• For projects above $500,000, Project ID to be utilized on the facilities cost pool side (revenue or “in” side) of the transfer transaction to aid in tracking of sources within the ledger.      This will allow for an income statement view that includes funding sources coming in and capital expenses going out of the chartfield string.  Project ID cannot be used on the expense or “out” side of the transfer as this chartfield element must be utilized on grant funded projects to track the grant on the detailed grant project ID.  As such, it is recommended for consistency and balanced income statement views to only use the project ID on the “in” side of the transfer.
• Project IDs may be used for funds set aside for future spending purposes.  This can be done for either internally funded projects or for gifts.  For example, if construction has not started and fundraising has already begun, cash received from the fundraising efforts could be deposited using the project ID designated for the related construction. However, transfers into the construction cost pool from a restricted source, such as gifts, should not result in an ending positive balance in the unrestricted construction cost pool at fiscal year-end.
• Class chartfield feeds over from Unity Construct to PeopleSoft for the child project.  However, reports can be pulled either with the class chartfield or without as needed for reporting and PeopleSoft entries.
• Optional: deptID and/or program chartfield could be used to track the building that the project relates to.  This would allow for multiple project IDs per building with a field that could be queried to get expenses by building for capitalization of the asset.
• Funds to be utilized:
  • Construction Cost Pool / Unrestricted Facilities chartfield: 1000 – for unrestricted plant
  • Funds providing reimbursement to cost pool could include:  
    • Unrestricted funds: multiple funds could be used or could come from capital reserves in funds 1025 (plant fund reserves) or 1050 (capital pool)
    • Restricted funds: Only allowed to reimburse the unrestricted construction pool if the restricted source allows for spending of the funds for the purposes of the capital project.  This could include reimbursement of expenses to the construction cost pool that are either a capital expense or non-capital expense in the unrestricted facilities chartfield.
      • 2000 for restricted gifts that are designated for a specific department or program usage, but not restricted for capital purposes.  Capital transfers can occur in restricted gift funds when the gift allows for capital spending but is not required to be spent on capital related projects.
      • 2050 for restricted state appropriations.  This includes appropriations that are restricted for a specific purpose but is not required to be spent on capital projects.
      • 23XX for restricted plant – gifts, capital state appropriations and external debt (two-step process through UBANK)
      • 2100-2299 for restricted grant funds
      • 4000 for internal debt (two-step process through UBANK)  
• Accounts:  
  • Unrestricted Capital Project Transfer In/Out:  – 392400/862400
  • Gift - Capital Transfer In/Out:   392500/862500
  • Grant - Capital Transfer In/Out:  392600/862600-1
  • State Appropriation- Capital Transfer In/Out:  392700/862700
  • Debt Funded Capital Transfer In/Out:  392800/862800

The combination of fund/account usage is outlined in the below grid.

Note: If errors occur in the movement of funding into the construction cost pool, corrections must be made as a “reversal” of the original transaction that has the error. Reversal means the opposite debits and credits on the journal entry compared to the original transaction rather than the reversal feature in journal entries applications.

Reimbursement Process

There are multiple methods that could be used to move the funds from their funding source into the cost pool.  Options for reimbursing the construction cost pool are as follows:

1. Monthly transfers: this approach could be accomplished through an automated process to transfer funds once a month as expenses hit the cost pool by utilizing the journal entry allocation feature in PeopleSoft.      For the allocation process to be used, the funding sources must be secured and order of priority set at the beginning of the project to avoid multiple movements between sources.      If funding sources are anticipated to move around during the span of the project or external funding is anticipated, but not secured, a manual approach may be more appropriate until such time that funding is set.
2. Upfront funding: in this funding approach, all funding is known at the beginning of the project and the funding is available for movement into the cost pool.  This likely applies to unrestricted funding (internal reserves) where there is no external funding expected.  This could also occur with bond funded projects. If the funding is from externally funded debt and the cash is moved into the cost pool before spending is set to occur, then the construction cost pool must be placed in a restricted fund.  This is the only exception for the use of restricted funds within the cost pool chartfield string.
3. Spend directly from chartfield:  this approach would not use the cost pool method and could potentially be used when there is one funding source that is known to completely cover the cost of the project.  This method should not be used for board approved projects.  Movement of the expense between chartfields is not allowed.  If there is a possibility of multiple funding sources, the cost pool approach should be used and funds transferred into the pool to cover the cost rather than spending directly from the funding chartfield.

At the end of the year, the balance in the construction cost pool should net to zero, meaning that all spending in that chartfield must be appropriately funded.  Ideally, it would be cleared on a monthly or quarterly basis, as it would provide information on the progress of capital and where the spending was sourced from.  The construction cost pool will have a zero-ending balance for the fiscal year. If a deficit balance remains in the construction cost pool at year end, facilities accounting must work with the funding department to clear the deficit and zero out the balance in the construction cost pool.  Balances should not be cleared against restricted funding sources if there is not sufficient net position in the restricted funding source to cover the deficit of the construction cost pool without the prior approval of the Campus Accounting Office.  The Campus Accounting Office should be careful not to create any negative net position in restricted funds.

It is the responsibility of the funding department to reconcile the funding sources reimbursing the cost pool and ensure that there are no deficit balances in each restricted chartfield that is funding the project.  If a deficit balance remains in the construction cost pool at year end and facilities accounting requests funding, the department must first determine if there are any restricted funding sources available to cover the deficit balance.  If there are no restricted funds available, unrestricted funds must be used to cover the deficit balance.  �������� must also monitor the restricted funding source chartfield strings to ensure there is no deficit balance.  If a deficit balance remains at year-end, it is the responsibility of the department to reconcile the deficit.  The only reason a restricted fund deficit balance can remain at fiscal year-end at a detailed chartfield level is when a pledge receivable or other accrual is recorded in an amount sufficient to cover the deficit but is recorded at the campus level.  In this case, the pledges or other accruals covering the deficit should be identified and the purpose of the accrual must match the purpose and/or building of the construction project.

Year End Accounting

Fiscal year-end automated accruals (aka “MAC” entries) are recorded at the same chartfield as the voucher being paid.  Following the automated accrual, the remaining AP accruals will occur on a high level chartfield to avoid errors in the recording of capital expense and the associated CIP asset.  However, the general ledger accrual will not feed back into Unity Construct for reporting on the project as the expense is already reflected in Unity Construct as invoices are approved and paid.

PeopleSoft Reporting

The process as outlined, will create an income statement view for both the facilities construction cost pool and the department funding chartfield that aligns the construction expense and funding source type. The facilities construction cost pool includes the expense detail and the revenue sources as seen in figure 1 which could be pulled by either the project ID and class or just project ID depending on the reporting or monitoring need.  Second, the external funding source income statement will show the actual receipts and/or accrued revenue coming in and the “expense” recorded to the external funding source through the use of the associated account as seen in figure 2. 

Figure 1 – Example Facilities Construction Cost Pool Income Statement with Multiple Funding Sources:

Figure 2 – Example External Funding Source Income Statement: