Number: 
03-170-102
Type: 
Rule
Policy Steward: 
Director of FA&A
Format Updated: 
University Policy & Standards Converted: 
Status: 
Current
Revision Date: 
Friday, May 26, 2017

This information replaces FIS 703 Administration of Auxiliary Reserve Funds

 

INDEX

 .100 POLICY STATEMENT

Each auxiliary enterprise unit should maintain a long-term building and equipment Reserve Funding Plan for acquiring, replacing and maintaining its depreciable assets.  This policy sets forth basic requirements for administering and accounting for the funds set aside by auxiliary enterprise units for the purpose of acquiring, replacing, and maintaining depreciable buildings and equipment.

.110 POLICY RATIONALE

OSU seeks to ensure that auxiliary enterprise units appropriately plan for the acquisition, replacement, and maintenance of depreciable assets and to ensure the appropriate and consistent accounting for the funds set aside for this purpose.

.130 ENTITIES AFFECTED BY THIS POLICY

Compliance with this policy is applicable to all auxiliary enterprises that own buildings or equipment having an aggregate historical capital asset cost equal to or exceeding $150,000. Auxiliary enterprises that do not meet this threshold and voluntarily establish an asset reserve must also comply with these policy requirements.

.140 APPROVAL AND EFFECTIVE DATE OF POLICY

This policy was approved by the OSU Vice-President for Finance and Administration on May 26, 2017.

.150 KNOWLEDGE OF THIS POLICY

All OSU Auxiliary, Business Affairs, Capital Planning & Development, and Business Center support personnel with financial management responsibilities must be knowledgeable of this policy.

.160 DEFINITIONS

Building and Equipment Reserve Funding Plan (Reserve Funding Plan) – A long-term funding plan that documents auxiliary enterprise management’s intent and expectations for the amount that will be expended on acquiring and maintaining capital assets over a specified future period.

Building Reserves – Monies set aside by auxiliary enterprises pursuant to a Building and Equipment Reserve Funding Plan to acquire, construct, and/or make capital repairs or renovations to buildings used in the operation of the related auxiliary enterprise.

Bulk Purchases – An expenditure to simultaneously purchase multiple assets that individually cost less than $5,000, but in aggregate cost $5,000 or more.

Capital Projects – Projects to construct, renovate, or improve auxiliary-owned buildings with an aggregate cost from all funding sources of $100,000 or more.

Equipment Reserve Fund – Monies set aside by auxiliary enterprises pursuant to a Building and Equipment Reserve Funding Plan to acquire, construct, and/or make capital repairs to capital equipment used in the operation of the related auxiliary enterprise.

.170 RESPONSIBILITIES

A. Auxiliary Management:

  • Submit Reserve Funding Plans to Business Affairs each fiscal year, and to Capital Planning & Development if the Reserve Funding Plan contemplates capital projects or purchases.
  • Ensure that building and equipment reserves are adequate and appropriate for each auxiliary enterprise.
  • Develop the Reserve Funding Plan in conjunction with the unit budgeting process. 
  • Submit revised Reserve Funding Plans to Business Affairs within 30 days of auxiliary management approval.

B. Capital Planning & Development:

  • Review and provide comment on Reserve Funding Plans that include capital projects or purchases to ensure they are included in the university’s 10 year capital plan approved by the board.
  • Advise Business Affairs of issues related to capital projects or purchases and plans as needed.

C. Business Centers:

  • Consult and advise auxiliary management on the development of their Reserve Funding Plans.
  • Coordinate with auxiliary management to ensure Reserve Funding Plan budgets and transactions are appropriately documented, maintained and updated.

D. Business Affairs:

  • Review annual and revised Reserve Funding Plans for clarity and policy compliance.
  • Forward Reserve Funding Plans to the VP for Finance and Administration for approval.
  • Work with units on any Reserve Funding Plans that are deemed insufficient by Capital Planning, Business Affairs or the Vice-President for Finance and Administration.

E. Vice-President for Finance and Administration:

  • Approve auxiliary Reserve Funding Plans.

.200 GENERAL

A combined reserve for buildings and equipment is permitted, but separate funds are recommended for auxiliaries that manage significant numbers of both asset types.

.210 RESERVE FUNDING PLAN DEVELOPMENT

In order to be effective, Reserve Funding Plans must take a long-term view, including anticipated building expenditures over the following 10 year period, and equipment expenditures over the following 5 year period.  Reserve Funding Plans should be developed in conjunction with the development of the auxiliary’s operating budget.  Reserve Funding Plans must include anticipated inflows and outflows of monies in each reserve fund, including the contributions to the reserves as well as the expenditures for buildings, capital equipment, capital repair, and bulk purchases of non-capital equipment and their impact on the reserve balance over the required timeframe.  Some key factors to consider in setting an appropriate annual funding level include the age of existing buildings and equipment, current and prospective operating budgets, anticipated capital projects, and future needs for space and operating capacity.

Reserve Funding Plans must be submitted to the Assistant Director of Financial Accounting and Analysis in Business Affairs by April 30th of each fiscal year after completion of the unit budgeting process.  Reserve Funding Plans are reviewed by Business Affairs and are then forwarded to the Vice President for Finance and Administration for approval.  Modifications to Reserve Funding Plans equal to or greater than 10% or $10,000, whichever is larger, require the submission of a revised plan within 30 days of auxiliary management approval. 

.220 BUILDING RESERVES

Building reserves can be used for multiple purposes as long as they are used in a manner that is directly related to establishing or preserving the condition and serviceability of auxiliary-owned buildings.  Permissible uses include funding new capital construction, renovations, and maintenance of existing buildings.  Reserve funds can be used for both capital and non-capital asset expenditures, but cannot be used for regular auxiliary operating expenses.  To qualify for capitalization, capital asset expenditures for buildings must exceed $100,000.  Additional information can be found in FIS Policy 600 Plant Funds and Fixed Assets.

.230 EQUIPMENT RESERVES

Equipment reserves are intended to be used for the acquisition or construction of new capital equipment or capital repairs to, or replacement of existing non-serviceable or fully-depreciated capital equipment.  To qualify for capitalization, expenditures for equipment must equal or exceed $5,000 per individual item.

Expenditures for minor equipment are normally purchased from the associated auxiliary operating fund.  However, reserve funds can be used for bulk purchases of items that individually cost less than $5,000 if when aggregated the total cost is $5,000 or more and the expenditure is included in the auxiliary’s annual Reserve Funding Plan. 

.240 PURPOSES OTHER THAN BUILDINGS OR EQUIPMENT

Reserve fund balances represent a commitment to fund future expenditures of buildings and equipment in accordance with the provisions of this policy.  Any use or purpose that is not explicitly permitted in this policy must be approved by the VP for Finance and Administration.  Requests of this nature should be forwarded to the Director of Financial Accounting and Analysis in Business Affairs for processing.

PROCEDURES

.300 ACCOUNTING ENTRIES

.301 RESERVE FUNDING

Both building and equipment reserves are established in the 1xx5xx fund series in Banner and are funded by the following journal entry:

Fund Account Code DR CR
Auxiliary Operating 92001 XX  
Auxiliary Reserve 91001   XX

.302    BUILDING-CAPITAL EXPENDITURES

Expenditures for capitalized real property must be made from a separate plant fund in the 841xxx fund series.  Please contact Capital Planning & Development for plant fund information.

Fund Account Code DR CR
Auxiliary Reserve 92005 XX  
Plant Fund (841xxx) 91005   XX

.303 BUILDING-NONCAPITAL EXPENDITURES

When reserve funding will be used for making non-capital building purchases, the related expenditures must be made directly from the 1xx5xx reserve fund.

.304 EQUIPMENT-CAPITAL EXPENDITURES

Capital equipment purchases must be made from the auxiliary operating fund where the assets will be capitalized and depreciated.  Capital equipment expenditures require processing the following JV transaction to transfer funding into the associated auxiliary operating fund before funds can be expended. 

Fund Account Code   DR CR
Auxiliary Reserve 92001 XX  
Auxiliary Operating 91001   XX

.305 EQUIPMENT-NONCAPITAL EXPENDITURES

When reserve funding will be used to fund bulk purchases of non-capital equipment, the related expenditures must be made directly from the 1xx5xx reserve fund. 

.910 CONTACT INFORMATION

Direct questions about this policy to the following offices as indicated:

Subject Contact:
Capital plan construction projects Capital Planning & Development
Plant fund setup Capital Planning & Development
Reserve Funding Plan Business Centers
General policy questions Business Affairs
Reserve accounting procedures Business Affairs
General budgeting Process

Budget and Fiscal Management